Voices of Experience: Health Care Investors and CEOs Discuss How They Make Deals Work
The critical factor in assessing any health care deal, from a venture perspective at least, is management. However, from an acquisition perspective, if the acquiring company has strong management, management may not be the most important factor.
The Make versus Buy decision. Do you possess the capabilites to do it yourself? What is the size of the investment (to build or buy)?. What is the amount of time to get return on investment? Strategic decision as well. What if a well financed competitor acquires the target company. What does this do you your position in the market. A company has to ask itself where is the market going? Where do we fit in to the new market?
Investors / Acquirors are looking for technology that will overtake the existing technology on the market. How do you validate the technology? Is it leapfrogging the existing technology, or is it just slightly better than what is on the market.
Customers
Hospitals, as customers, want to know how much something is going to cost. What is the value proposition and cost of a product to the final customer? What will this product do to enhance clinical outcomes or decrease the length of hospital stay or take costs out of the system? Hospitals want quality and value.
When you sell into life sciences and academic research communities, the questions are different. What are the trasnforming trends and what impact can the vendor have on those trends? E.g. PCR impact on the health care system or RNAi technology (human health care impact technology). Monoclonal Antibodies are becoming hugely important because products are moving from discovery to development. Macroeconomic drivers are trends in discovery and development technologies.
From a CEO perspective, what separates good health care investors from the rest?
Hands-off (because management still has to run the day-to-day operations), but management has to be transparent, factual and straight-talkers in relation to investors. Investors should know that you have an action plan.
A venture investor should understand their role, but not try to play outside their role. The ones that are honest and tell you what they do AND don’t understand. Are honest, understand what you’re trying to do.
Moderator
Jon D. Lemelman
Riverside Partners LLC
Jon D. Lemelman has more than 12 years of experience in private equity, financial services, and technology companies. He joined Riverside in early 2004.
Previously, Mr. Lemelman worked at Fidelity Strategic Investments, the private equity division of Fidelity Investments. Prior to this, he was director of business development at Reciprocal Inc., a software company that was acquired by Microsoft in 2001.
From 1995 to 1999, Mr. Lemelman was a vice president in Fidelity’s Institutional Sales group. He currently serves on the board of MicroDental Laboratories.
Mr. Lemelman holds a bachelor of business administration, with distinction, from Emory University and a MBA from the Wharton School of Business at the University of Pennsylvania.
Richard K. Brown
MicroCal LLC
Richard K. Brown is president and chief executive officer of MicroCal. Prior to MicroCal, Dr. Brown was at Isis Pharmaceuticals where he served as vice president of business development and president of the GeneTrove division. Dr. Brown and his business development team were responsible for initiating, negotiating and managing collaborations with pharmaceutical industry partners such as Abbott, Amgen, Eli Lily, Merck, Pfizer, GSK, and multiple others.
Prior to joining Isis, Dr. Brown was president of Irori, a company that develops, manufactures and markets combinatorial chemistry and medicinal chemistry products to the pharmaceutical industry. He joined the then start-up Irori in 1996 as vice president of marketing and business development and successfully led their product commercialization programs. In 1998, he became president of Irori. As president, Dr. Brown developed strategic alliances with multiple leading pharmaceutical organizations for drug discovery technology development, expanded the company’s product and service offerings, and developed the company’s operations in the US, Europe and Japan. To facilitate an initial public offering of the company, he merged Irori into the Discovery Partners International (DPI) group and participated in the successful July 2000 IPO of DPI.
Dr. Brown received his PhD in chemistry at the University of Massachusetts at Amherst. After completing his doctoral work, Dr. Brown completed a two-year postdoctoral position in x-ray and neutron diffraction crystallography at Argonne National Laboratory.
Roderick G. Johnson
Former Senior Industry Executive
Roderick G. Johnson was a director of Bio-logic Systems Corp. since he joined the company in 1999 as its president and chief operating officer. Mr. Johnson led the sale of Bio-logic to Natus Medical in 2006.
In 1994 he founded the NeuroCare Group, which acquired and integrated several neurosurgical equipment and disposable supply companies, and served as its chairman, president and chief executive officer until 1999, when it was sold to Integra LifeSciences.
From 1992 through 1994, Mr. Johnson served as chief executive officer in residence at Weiss Peck & Greer and the Continental Illinois Venture Corporation.
From 1988 through 1991, Mr. Johnson was president and chief executive officer of Domino Amjet Inc.
Earlier in his career Mr. Johnson progressed through 10 positions in 12 years in planning, international finance, and division management at Baxter Inc. headquarters and in the UK. During two of his four years in London, he was vice president finance for Ecolab Europe.
Mr. Johnson is currently on the Board of General Kinematics, Inc. and a member of Vistage (TEC) CEO organization.
He holds an MBA from Tulane University, a BSEE from the University of Houston, and a CPA.
Timothy D.C. McInerney
Kol Bio-Medical Instruments Inc.
Timothy D. C. McInerney is CEO, chairman of the board of directors and major stockholder in KOL Bio-Medical Instruments Inc. He has been in the healthcare device business since 1970.
In 1975, he joined Kol Bio-Medical Instruments Inc., a then $400,000 per year medical distributor, as a minority partner. Today, the company yearly does $20M in sales. Mr. McInerney is responsible for all aspects of corporate direction, growth, finance, operations, strategic planning and product Branding. Kol Bio-Medical Instruments is a veteran-owned company, as Mr. McInerney is a combat-decorated United States Marine who served in the Republic of Vietnam.
His career started with Medtronic Inc., in their cardiac pacemaker group as an East Coast Sales Representative. Over a five-year span, he was promoted into various sales and marketing positions, then moved to corporate headquarters in Minneapolis, Minnesota as a divisional national sales manager.
He is a member, and past board director of, the Independent Medical Distributor Association. This organization is a coalition made up of other specialty medical distributors throughout the United States.
William J. McLaughlin
J-Pac LLC
William J. McLaughlin has been president and CEO of J-Pac LLC, a leading outsourced manufacturer for medical device OEMs, located in Somersworth, NH, and Medipharm Manufacturing Group for the past six years.
Previously Mr. McLaughlin held the positions of chief operating officer in various business endeavors. He began his professional career at Arthur Young & Co.
Mr. McLaughlin graduated with a bachelor’s degree in accounting and economics magna cum laude from Boston College, is a CPA and received his master’s degree in finance cum laude from Bentley College.
This panel discussion was a part of a day long health care Masterclass by the Capital Roundtable, the leading Venture and Private Equity Seminar organizer.
BUYING OUT & EXPANDING
MEDICAL DEVICE & PRODUCT COMPANIES –
Where is the Smart P.E. Money Hunting?
- Why the surge of interest in buyouts of medical device & product companies??
- What sectors are hot, & which are alluring but probably too risky??
- How is new technology impacting existing companies ??
- What’s been the impact of the changing IPO & venture capital markets ??
Featuring 20 Expert Speakers.
To purchase the entire DVD series, or access to the Capital Roundtable Masterclass multimedia web site, please contact us.
More and more buyout firms are getting excited about acquiring and consolidating companies in the medical device/product/technology industry.
And no wonder –
- It’s big, and it’s fragmented. It’s a $182 billion segment of the whopping $2 trillion overall healthcare industry. Its manufacturers operate in dozens of submarkets, from cardiology to orthopedics to neurology.
- Innovation combined with the need for more cost-effective healthcare is creating significant end-market growth in many sectors.
- Off-the-shelf technologies are increasingly finding their way into exciting new applications.
Take all these trends together, and you can see why big questions are being raised by savvy middle-market healthcare P.E. professionals –
- What sectors of medical devices are going to be most successful?
- How do you navigate the reimbursement and regulatory and intellectual property issues?
- What are the key industry-specific debt-financing issues?
- Who do you turn to for state-of-the-art due diligence?
- What are the valuation trends?
- How much longer will these good times roll?
At this special MasterClass, you’ll learn from a faculty of 20 experts who work in the trenches how they’re responding to the enormous activity in the medical device/product/technology arena, what they’re doing right when they’re successful, what they did wrong when they screwed up, and how they see the market evolving over the next year or two.
The program is being led by investor Jon Lemelman, a general partner in Boston-based middle-market private equity firm, Riverside Partners LLC.
The program was produced by The Capital Roundtable, the country’s only educational information organization focused exclusively on the information needs of middle-market and smaller-market private-equity communities.
If you are a private equity or hedge fund manager, or if you are a senior or junior lender serving private equity sponsors, or if you provide professional services to the private equity community, this essential program is designed to give you information you need to make successful investment decisions, as well as numerous opportunities to build new valuable relationships with a host of expert speakers and inquisitive attendees.
When you finish this MasterClass, you’ll have the answers to these questions –
- How are medical device/product/technology companies different from those in other industries?
- How do the sales and marketing channels differ from other businesses?
- What are the legal and due-diligence issues you most often encounter?
- How does the political landscape change the outlook for medical device/product/technology buyouts?
- How do rising healthcare costs impact these investments?
- How does the introduction of new technology impact these companies?
- How should you manage technological innovation?
- How has the medical malpractice market impacted the industry?
- What are the five most promising sectors for medical device/product/technology buyouts in 2007?
- Where are the mine-fields, and how do you avoid them?
- What are the valuation trends for medical device/product/technology buyouts?
- What impact if any will the industry see from hedge funds? From venture capitalists?
- Which kinds of sectors and business models have acquirers targeted so far and why?
- What criteria are used in identifying investment candidates?
- How often are strategic buyers competing on deals? What is the impact on price?
- Is sector specialization necessary in order to do successful investing ?
- What are the key valuation metrics?
- Where do you look for management for medical device/product/technology companies?
- What kinds of deal structures are most common?
- And much much more …
Discussion
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