An informative weekly newsletter that shares insights into building a medical device business, in the hopes to inspire and educate others. It also explores new innovations in the field of obstetrics & gynaecology, how these products were developed, and the inventors behind them.

In this week’s newsletter, I share practical tips to help answer an important question - as a medical device business planning for a future exit, what preparations can you start making now for a successful sale?

A brief note on the author - Nish Varma

After several years working in finance, I partnered with my father, an obstetrician who invented a medical device (Fetal Pillow) to solve an important clinical problem in his field (detailed in issue one).

After initially launching into the UK market in 2011, several years later, Fetal Pillow was cleared by the FDA in 2017. We then focused our efforts on bringing Fetal Pillow to the US market.

I spent the next few years building our US business and in early 2021, our company (Safe Obstetric Systems) was acquired by CooperSurgical, a leading global player in Women’s Health. I spent one year post completion working for the company during an earnout period to support the national launch strategy.

In this week’s newsletter, I focus on one important topic - preparing your medical devices business for a successful exit. I share practical considerations from our personal experience, some of which you can put into place long before an exit takes place.

Practical considerations for a successful exit

On reflection, our company sale was an incredible learning experience. If you’re planning for a future exit, I share a few practical considerations below.

Start Preparations Early

We knew there might be interest from potential acquirers once we started gaining traction in the US market. Given the size of the market and concentration of leading industry players - many of which have clearly been growing their presence in women’s health either organically or through M&A activity, we would soon garner their attention with a new innovative device that could be added to their product portfolio.

You never know when formal interest from an acquirer might come your way. I would suggest preparing early and certainly ahead of this, if possible. If an offer comes your way, or if you decide to go to market, it’s a hugely time consuming process. By having your affairs in order ahead of time, you can continue to focus on your business objectives. It’s important that your growth trajectory doesn't slow when you enter into a sale process.

Practically, this might include engaging with a corporate finance advisor early (as we did) to start reviewing your company structure, financial projections, potential market size, and several other areas of your business that would become the focus of due diligence at a later date. For instance, you might reference the potential market size as a function of utilization of your product, but does your historical sales data support this?

These would become focal points for a potential acquirer and should be supported by robust assumptions and underlying data. An advisor can help with this analysis, as well as start discussions around valuation, and your expectations as shareholders. An advisor will also navigate the due diligence process efficiently, allowing you as a management team to not lose sight of your business objectives.

Build Relationships Now

If you’re operating in a niche part of the industry, as we were - women’s health, but specifically medical devices related to childbirth, how many of the industry leaders would truly understand your business and the potential value behind it?

You can start unpacking this now by developing relationships with key players in the industry who might one day be interested in acquiring your technology. If for instance they’re building a portfolio of innovative obstetric medical devices, this would clearly have been a fit for us. Strategically, this could benefit both parties longer-term. It was always important for us we had the right partner on-board to take the product forward globally, and one who’s vision aligned with ours. This was just as important as the financial aspect of any potential deal.

From a practical point of view, narrow down the key players in your industry, and further drill down to those that are operating in your niche market already or those that have an interest in entering your market. Could your innovative technology be their entry point?

We built many of these relationships by attending national conferences, engaging with the industry, and through introductions within our network. We built a relationship over several years with the company that would eventually acquire us. They kept a close eye on our business over the years and monitored our progress.

There’s nothing to lose in building these relationships - you can make some great connections and learn a lot from them as you continue to scale your business.

Bring the right Advisors onboard

This is critical for success. Meet with as many potential advisors as you can. We met with several before deciding who would be best placed to support our objectives as shareholders. As you do your due diligence, consider the following questions:

Do they understand your vision?

Do they understand your specific market?

What deals in the industry have they advised on previously?

Do they have relationships with potential acquirers?

Look at some of the previous transactions they’ve worked on and ask for introductions to previous clients to obtain direct feedback.

Your corporate finance advisor will lead the process but there will be several others involved - you will need a lawyer, an accountant, and potentially tax experts on board too. Apply the same level of diligence to all advisors you plan to work with.

The sale process is very time consuming - in the end, you’ll be spending a lot of time working very closely together and simply getting a good feel for the advisors might be the deciding factor. It certainly was for us. I can make an introduction to our advisor if you’re interested.

Ensure as a Management Team you’re aligned on Objectives

This is likely to be the biggest milestone in your company’s history, but also in your personal and professional life (one for a separate newsletter!). You need to ensure that as shareholders you’re aligned on objectives - there’s a host of areas to consider here:

Is now the right time to sell for everyone?

Is everyone committed to on-going involvement in the business (during an earn-out for example?)

Where do your valuation expectations sit?

If these are not consistent, depending on the offer, all shareholders might not be in agreement or willing to sell at the offered price.

It’s also important to discuss your plans if the exit doesn’t take place now. There might be acquisition interest but nothing is guaranteed. You need to focus on building your business and generating value. The sale process shouldn’t distract you from this. If it didn’t work out for us, we were confident we would continue to expand globally.

These are just a few examples of questions to consider and should be discussed in depth as a team before entering into an exit process. Fortunately in our case, we were aligned on our goals as shareholders - at the right valuation, we would be committed to an exit.

Ultimately, we always knew we were limited as a small team in how far we could take the business ourselves. With the right partner onboard, the product could reach many more mothers and their babies, the overarching goal and the reason why our company was formed in the first place.

I appreciate you taking the time to read this week’s newsletter and look forward to sharing more insights into the innovative technologies being developed, the companies and individuals at the forefront of these advances, and how we were able to make a lasting impact on the field of obstetrics.

Any questions or comments, feel free to mail me at: [email protected]

If you enjoyed this week’s newsletter and know of anyone that might be interested in reading it, please feel free to share.

Have a great weekend!

Nish Varma

Cofounder - OBSolve Ltd

Consulting Services - OBG Access Ltd

Previously - Safe Obstetric Systems (Fetal Pillow)