Bay Bio Events - December 2009
December 8: Medical Device Breakfast Series | Company Valuation for M&A
The valuation of a medical device company for merger or acquisition is not an exact science. Some of the many variables to be taken into consideration include the company’s management, market share, prospects for growth, and potential market size. Tangible and intangible assets and financial track record will be evaluated, as well as the company's reputation in the business community. The motivation and goals of key players also come into play, and current market conditions and timing are factors. A panel of industry veterans will explore the valuation process for medical device companies, discuss case studies and provide practical answers to help you increase your company’s valuation. Detailed Information
December 9: CEO & CFO Roundtable: What’s Ahead for the Biotech IPOs
The latest biotech headlines are contradictory at best: some hail fresh signs that biotech IPOs are beginning a long-awaited revival and declare that IPO activity in the biotech arena is starting to heat up, others are more cautious in their observations, stating that IPO markets have become more challenging and Mergers and Acquisitions – not IPOs - are the most viable exit strategy for most companies. Join BayBio in an interactive session to learn firsthand from “bulls†and “bears†of their thoughts, war stories & insights.
Detailed Information
For more information, go to www.baybio.org
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Medical Device Breakfast: Company Valuation for M&A
Despite the long odds on getting down 101 on time in for this event, I made it! Lucky for me and you because it was worth the effort. So the highlights that I took away from this panel discussion are:
1. All the panelists feel lucky to be in Med Tech - Why? Stability and the opportunity to help others. You don't get the big valuations like in tech but then you don't get the big bubbles either. You have to work a little harder to make the big bucks, but in med tech you get to help people live healthier, longer lives. Now what's better than that?
2. Things are going to get better. There will be more IPOs of mature companies within the next 12-18 months. The first out will be those that have positive earnings and cash flow, followed by those that are breaking even and if those do well, the markets will open up for early stage companies too.
3. VCs and acquiring companies are behaving badly because they can. Negotiating for cash when you have none, rarely if ever, turns out in your favor. Although Jeff Gold, Partner with Longitude Capital, told a story about how their patents saved the day during the sale of CTSI. It just happened to be a patent that could threaten the survival of part of the acquiring company. However, as Frank Rahmani reminded us, relying on IP is not a great strategy but if you're out of cash you might want to think about what else might be of value.
4. Contingent payments based on mile stones are popular now. They can be good for everyone but get as much as possible (at least 25%) upfront. Be sure to evaluate the overall structure of the transaction as well as the details. Model the what-ifs that threaten your success and look for ways to extract more value (getting credit by packaging complimentary products).
5. Working with a good banker is worth it. The number one reason given is their contacts. They can generally get you in front of the BD people with companies that would be a good fit for your product. They also minimize distractions and keep you (entrepreneur)focused on hitting key milestones. If the deal falls apart, you'll be further along which makes it easier to raise more money.
6. Spend wisely, but spend so that you hit your milestones. It's tempting to cut way back in this market, but don't cut too far. Jeff Gold talked about making it easy for an acquiring company by having solid financial systems, quality controls and procurement processes.
7. Deals are getting done. The performance bar is higher and the valuation bar is lower but the deals being done are good for everyone. The best have at least a 5x multiple or $150 million valuation. There are some outliers but they are far and few between. If physicians and/or patients want the product, the deal will get done and command a higher value.