Spring clean your medtech business for fresh investment or sale – Med-Tech Innovation
For many medtech business owners, 2022 will involve securing that first (or further) investment, or it could be the year that you pass your business on to the next pair of hands.
Working towards a successful investment or sale can be a stressful process, likely to put a strain on the business itself. Whether an external investment or sale is a priority or something you are mulling over, thorough early preparation is vital – it will undoubtedly alleviate some of the pressures later down the line.
First steps
It is crucial to put the right advisory team in place at the outset. Your solicitors and other professional advisors should have some sector familiarity, they should get to know the commercials and operation of your business and understand its short and longer-term goals.
Working with your accountants, financial planners and corporate finance advisors from an early stage is vital. Whether preparing for a sale or seeking an investment, valuing the business accurately means that you should neither be short-changed nor see the business left behind on the shelf. Due to the impact of the COVID-19 pandemic, be prepared for the inevitable questions from potential buyers or investors about business impact. Some business owners may prefer to wait until their business has ‘bounced back’ or returned to pre-pandemic growth but it may well be that you have enjoyed record demand, as has been the case for many medtech sector businesses.
If planning an exit, consider your personal tax situation (and what tax reliefs are available) in addition to working out when you can afford to leave the business in terms of achieving your personal finance goals and short-term cash flow.
Your employees are crucial to the success of your business and will be vital in securing an exit or investment – the buyer or investor will be banking on the continued performance of your staff. Consider whether you want to lock-in your key employees with financial incentives such as share options. Strategically, decide when you want to bring your senior employees into the circle. The timing of such disclosure is important; too early and this may cause unnecessary anxieties as the key terms of the transaction are not yet known, too late and you may undermine trust and confidence relationships with your management team.
Prior to opening up your business to examination, as a priority, have your legal and financial advisers conduct a due diligence exercise on the business. Addressing any ‘red flags’ prior to a due diligence process has a number of key advantages, including:
Common issues discovered in due diligence
We tend to see the same issues crop up in due diligence, issues which can often be easily resolved if discovered early. Here are five such issues:
Key takeaways
If you are planning for an exit or investment in 2022, put your business on a solid foundation to achieve the best possible deal terms and price: put your legal and financial advisory team in place early, arrive at a sensible value for the business, plan for tax and act on the results of your housekeeping. Undertaking thorough preparation will be well rewarded.