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Lessons in M&A

BONEZONE: How specific is the criteria that you set?

Reali: The strategy that we put in place a few years ago when we were Trans1 was very specific to growing beyond our one technology, AxiaLIF, to other minimally-invasive technologies that appeal to the spine surgeon performing minimally-invasive spine procedures. One of the criteria is, ‘Do the technologies that the company we’re interested in fit within our portfolio, and fit with the vision, mission and direction of the company?’ That is a very important filter. Then it comes down to the economic feasibility both on our side and theirs, meaning do they want to be acquired, what is their financial situation, how can we structure a deal that will fit into our financial situation. All of those things need to be fully understood.

BONEZONE: What advice do you have for others on evaluating the potential of each M&A opportunity?

Reali: Certainly the classic business school definition, as you look at adjacencies. You have to be careful and realistic. We did a lot of our own homework, researched the market, talked to surgeons and understood whether this new portfolio of products that we have with the acquisition of Baxano was indeed synergetic. We were careful to qualify and quantify that through surgeon interviews.

I think companies can get too ambitious and look too far beyond where they are today. You have to be realistic, thoroughly understand your current customer base, know what an acquisition can do for you in terms of being able to cross-sell new products to current customers and know how it can expand your customer base.

Berry: If the acquisition is heavily product-driven, you want to understand whether it’s the technology that you think it is. Is it the intellectual property that you think it is? Frequently with medical devices, regulatory plays an important role both inside and outside of the U.S. Compliance with healthcare laws is important, too, inside and outside of the U.S. Then, it depends if the company has a meaningful amount of revenue, how that distribution network fits with your current distribution network. Those are examples that vary from deal to deal.

Davis: Areas that can make a deal easy or hard to do are the quality systems and document controls that are required. These touch regulatory approvals inside and outside the U.S. When you look at some of the smaller companies, single acquisitions, it’s pretty straightforward to revamp it. If you’re acquiring a larger entity that has its own quality system, you have to figure out the path to operate in their quality system until you’re fully integrated. That’s an area where, depending on the size of the asset, it dictates the amount of time you spend in that area. At the end of the day, it’s not just doing the deal, but integrating afterward.

BONEZONE: What lessons have you learned from completing acquisitions? What might you have done differently?

Reali: It always takes longer than you think it does. If you think it’s going to take a certain amount of time, double it. Integration—no matter if it’s two small companies or two larger companies—is always challenging and harder than you think it’s going to be.

Finally, you make a lot of decisions in the fog of integration. You can’t be afraid to go back when you have more information a couple months later and make changes or correct decisions that you realize were probably the wrong ones.

Berry: Your communication plan is critical to your success. Have that in place and ready to go the minute you make an announcement and focus on executing that right away. I believe our communication team here has done a fantastic job since the announcement of the MicroPort transaction, and that really has made everything go much smoother.

There is a lot of work to be done between announcement and close, which is the case typically with any transaction. You need everyone to be engaged and working together to get things done. I think it goes back to well-thought-out and well-executed communication.

Davis: We’ve done more than 30 deals on the buying side. When we bought BioMimetic, it was the exact same strategy and communication plan: What’s our communication plan to the sales team? What’s our communication plan internally to our team? Again, we had a pretty good view of what we needed to do to make it a successful announcement, and we learned a lot from the previous deals we’ve done.




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