Medtech M&A: Navigating Challenges Before and After the Closing Dinner | LSI USA ‘23

Transcription

Robert Kieval  0:06  

Good afternoon, everybody. Hopefully people aren't too tired right after lunch, but we have what we hope will be an engaging panel for you on medtech m&a. So we get to hear a lot about medtech m&a From a corporate development perspective. Today, we have an opportunity to hear from r&d leaders with experience on all sides of m&a transactions, including some more fundamental and operational considerations and perspectives. So we've segmented this out into essentially three themes, pre deal, diligence and preparation, getting the deal closed, and post closure integration and success. So we're joined here I'll ask my panelists to introduce themselves in just a second Ye from GE Healthcare, Tal from Genesis medtech group who I saw in the gym before 6am Today, good job, Tesh from BD and Anna from Medtronic. So Ye, would you please introduce yourself and please feel free to mention any notable transactions that you've participated in?

Ye Bu  1:11  

So my name is Ye Bu. I joined GE Healthcare about a year and a half ago to lead the strategy for our imaging business which is about half of GE Healthcare. Before I joined GE Healthcare, I was a medtech m&a banker on Wall Street for about 30 years since I've seen both world in terms of transaction and how it gets done. You know, before I got into corporate development that was more on the large deal side in our team was part of the St. Jude Medical sale to Abbott. In the in in IG, we're more focused on now at the attacking acquisition so it's good to see all different kinds of transactions at different stage. So looking forward to the conversation. Thank you.

Tal Wenderow  1:59  

Hey everyone, I'm tell window. I'm a venture partner in Genesis medtech had been there for 18 months. Genesis is kind of a new strategic based in Asia. Before that, the luxury of being a CEO of a company in digital health. And prior to that founder  that I stayed almost till the acquisition I kind of left a couple of months before the acquisition but site from both sides and you know, it's hard to follow the panel before us because the room was not that full but we'll get through that.

Teshtar Elavia  2:30  

Good afternoon everybody Testar Elavia VP of r&d for surgery at Becton Dickinson, BD often mistaken as bizdev no BD is in Becton Dickinson. Most recently, I helped spin off the diabetes division from an r&d perspective into its own standalone company which is Impactor. prior prior to that I led the due diligence from the perspective of being acquired by Medtronic I worked at Covidien and that was part of the due diligence team on the medical supplies, minimally invasive surgery side and multiple kind of other asset acquisitions and divestitures over the years through J&J, as well as Medtronic. So glad to be here and looking forward to the conversation.  

Robert Kieval  3:11  

Thank you, Tasha.

Anna Szafranski  3:12  

And hi, my name is Anna Szafranski. I am the Vice President of Marketing for the peripheral vascular health business at Medtronic. Well, I started my career actually on the engineering and startup side. I've now been at Medtronic, Medtronic Covidien Medtronic for a little over 17 years in marketing leadership roles. I've had the opportunity to be part of the acquisition and integration teams for a number of acquisitions Medtronic has done starting with Chromecast and ablation frontiers on our atrial fibrillation side Sathyan, which is the venous Hill product we sell for a superficial venous disease. And more recently, I led the integration of Avenue Medical into Medtronic. They are the innovators of a minimally invasive percutaneous Fishel accretion technology for dialysis patients. 

Robert Kieval  4:03  

Thank you. And I recently learned that you're active in med tech women's organizations I want to give a shout out to

Anna Szafranski  4:09  

Absolutely I'm the co chair of Medtech Women Minnesota we have a very active group. 

Robert Kieval  4:14  

Thank you. Okay, so starting with you know, pre deal, diligence Tesh the first question I would ask you and certainly everybody chime in I certainly from an entrepreneur or startups perspective, during the due diligence process, it seemed like the entire company just got you know, turned entirely inside out and all of our secrets were, were laid bare those that we had, but from from your perspective, can an acquirer learn everything it needs to know during the due diligence process? Are there surprises or are there just certain things that you you just can't learn until you take the ribbon off and open the box and see what you bought? 

Teshtar Elavia  4:53  

Yeah, I mean, I think the answer here is no. So you can't learn everything but the good part here is you don't need to learn everything right? I kind of viewed this as a little bit like the start of a courtship. Right? When somebody, you're starting courtship, you want to make sure that from your perspective, you see the potential to have a long standing Alliance. And that's how I look at it is, are you able to determine in the period of time that you have that you have a good base, a good skeleton on which you could build your house. Now, as you build that house, you may encounter surprises, you may encounter issues on your land permits and things like that. But it's important to know that the basis solid around which you can, you know, build that house, I don't think I've been a part of any deal that has gone exactly as they edged it out. Right. And there will be surprises. More specifically, the things that I look for, from my perspective are, you know, hey, has the market opportunity been clearly defined? Do you have a technical solution to capture that market opportunity? And from from the from the last perspective, is the is the differentiated outcome possible with your solution? Right. And if you have those three things, I think it's a great conversation starter, and then a great follow up to kind of finish your due diligence on that. But most often times the thing that is overlooked, I have a bias because I'm from r&d. But But I will say that because the time is so short, most often the due diligence is more focused around the financial aspect of it, and then you're going to realize a little bit later, that maybe the product is not where it should be, or is not what it was claimed to be or needs more work on it. 

Robert Kieval  6:30  

Okay, thank you. So Ye, I was going to ask you the same question. Are there? Are there items that are that are more typically overlooked that shouldn't be overlooked? And how does that inform how you compose your your due diligence team and what skill sets or functional groups you involve in the diligence process?

Ye Bu  6:52  

So, you know, when I was on banking side, we helped, you know, coach, I would say startups try to position for the buyers, you're on that side, you are more thinking about, okay, what is the strategic rationale for them to buy me, now I'm on the buyer side, we'll talk about risk mitigation all the time, right? It sounds different, but the end of the day is really to identify the value drivers for that asset. So if you think about it, there are probably three, normal five things that are critical to deliver probably 85% of the value of the asset. And then the rest, probably, you know, is good, if you can do everything perfectly, then you're going to achieve the rest. But so there are a few got to haves said that the key is different for each business, some of the asset, you buy it for the assets you have for the technology, some of the companies, you buy it for the channel, some of the companies you buy already for whatever different things. So for once you identify the value drivers, the key focus of the diligence will really try to turn every stills on the key drivers, there's always going to be something you know, check the boxes. But once you check the key things, it might it'll be a much easier conversation. I agree with Tesh here, there's always going to be something that you missed, you just hope that the thing you missed are not the key value drivers, so you can kind of mitigate it along the way. But it's also as from the you know, from the startup side, it'd be good for you guys to start thinking about what are the key things to help the strategics really to mitigate the risk, if you kind of know, cut them the day is but you see a lot of deals that are structured. So you're going to hopefully will can hire you as motivated as to stay in the game to really help us deliver the value to on that line. So the earlier that you kind of help us think through all those things, the better.

Robert Kieval  8:57  

Fantastic, thank you. We'll come back and talk about structure deals in a second. Tal I have a question for you. And then Anna, question for you. So from on the on the on the startup side, you know, do you how do you prepare for diligence and position the company as an attractive acquisition target? Do you tailor your preparation and how you organize it based on who their prospective acquirer is deciding kind of what to show when and you know, whether that depends on how well you're able to build trust with a prospective acquirer to become more and more transparent during the diligence process.

Tal Wenderow  9:40  

And I think the short answer is yes. The long answer transaction like that it's the process right. And you mentioned trust. The previous panel also discussed that just a sense of Siemens score in this relation. I think I met them first time in Germany in 2008. So 11 years before the transaction, and you know, in Luckily, most time people stay a long time in company. So you develop those relation, and you understand what they need. But I think, you know, two things. One is you go back to the previous question, you always miss something, because by definition, the startup don't know if everything, right, they don't even know if they knew everything, they don't need us to acquire them, they'll just go all the way and go public and build a full scale organization. And whether it's a product, the adoption, the technology, the market, how do you position that? How do you sell that. So there's a lot of things they don't know. So the strategic cannot even understand that you just need to put a leap of faith that you're going in the right direction, I do believe that you have to position per company, right? Especially medical devices, so many players. And sometimes the buyer is not the usual buyer. It can be the imaging company, it can be the device company, it can be the Google of the Amazon that are moving or Salesforce that is looking into digital surgery, and all of that. So you never know who is the buyers, and you have to speak with everyone. And you have to tailor your pitch in a way to that specific buyer. But it's a long process meaning 

Robert Kieval  11:12  

Yeah, sounds like a lot of preparation and a lot of education along the way, 

Tal Wenderow  11:16  

Not say a lot of preparation, long process. Don't have time to prepare.

Robert Kieval  11:22  

Okay, thank you. So Anna, you know, in terms of expectation in terms of like how long the diligence process is going to take, you know, whether it's going to be weeks or months, I imagined somewhat depends on the scope of the deal, the stage of the deal. Some things may be predictable, some maybe not. What kind of expectations do you set with your potential acquirer ease? And what are some of the things that can derail a due diligence? And, you know, stretch it out longer than anticipated? 

Anna Szafranski  11:58  

Yeah, absolutely. Good question. So typically, with the due diligence process, we want it to be a mutual opportunity for us to both sides to really learn valuable information that will really help us to understand how to truly value in acquisition, and also can we really be successful in ultimately integrating that technology into our portfolio. So that certainly in a few cases, can be relatively short, maybe six weeks or two months, but they often go quite a bit longer. And as we heard in the last panel, sometimes there's other phases, we may do our due diligence, decide it's not the right time, but then later come back and want to relook at it. But But typically, in a diligence process, what I'm really looking for, is one on the product side, what is the value driver of the product? What stage is it at? Right? Is it very early stage, or their company already have products that may be commercial on the market? So let's say in Europe, or in the US, the stage of the product is absolutely going to determine how deep we have to go in the rigor of our technology we're looking at, can this product be manufactured easily? Right? If it's on the market? What are the complaint rates, it's really important that we truly understand the product, the current state, it's in? How much it does cost to manufacture? And do we believe we could easily bring it into our systems to then we're also checking out right, what's the IP situation too, we're looking at, of course, the financials and documentation, and you just really want to make sure that you do a thorough job, so that you can have just predictability, you know, what you're gonna get, you know, that you can be successful, and then move forward in that transaction. 

Robert Kieval  13:37  

Fantastic. I guess one thing, another consideration would be if you're in a competitive process, and you don't necessarily have the luxury of all the time that you would that you would like to take, Tesh, what kind of stresses does that add to the, to the process in your experience? 

Teshtar Elavia  13:53  

Well, I mean, I think from a technical perspective, it adds a lot of stress in terms of, because technical assessment is most likely the long pole in the tent, right, as Anna mentioned, you know, especially if you're an early stage startup, to validate the promise of what the startup is selling from a product perspective, from a value driver perspective, is harder than if something is already on the market. So, you know, you can't figure out whether the product is performing or not without testing it, for example, right? And you may not be in a position to do that. So then you start looking at what's the science, what's the engineering first principles behind it? Do you believe it? And then I think the other promises of how most startups come up with their valuation or their projections of the market opportunity, you know, the the times or I mean, even even at LSI, when we heard about all the TAM, right? You hardly hear anybody say it's a 500 million TAM, it's always starts with like 40 billion 10 billion, and by the time you actually dissect that, and you analyze it, and you say, what's the true market that you know, this product will serve? It's often maybe a billion or you know, half a billion, something like that. And now, you're talking about your penetrate churn rates through that, and nobody signs up for a 50% penetration rate, right? Most often the curves that you see are all like, hey, five years down the line, I'll take 10%. Right. So it quickly narrows it down from a technical perspective, it's hard to go in and justify that valuation that early on. But then you have to like tell, say, take that leap of faith is the technology differentiated. And if commercialized, or if developed correctly, maybe it takes a year or two more than what the startup is saying. But if it's developed correctly, does it have the promise to, you know, change and disrupt the disruptive market? 

Ye Bu  15:32  

One thing I want to add on that, you know, for the process, because I used to run set aside the process all the time, right, and we have a timeline, say, hey, six to eight weeks first run and, you know, two months second, you in order for you to for that process to be successful, I would suggest that, you know, you get to the socialization process done before, you know, people come to the party, because it's very hard for a lot of organizations, including probably most of us on the stage, for them to actually get to understand the technology understand the company and all the things to chapter and within a few months, it's very difficult. So what I have seen worked out better is that we used to call it socialization, but it's really you start the conversation with the potential buyers, even like, sometimes half a year before you start thinking about a process, where do you get the teams to, you know, try out the technology, understand the market, your value proposition, all that kind of good stuff out of the way. So when you start the process, really people focus on, you know, okay, like driving to the value to see, okay, everything else checked, we're really talking about how much we're gonna value this asset, that will be a much better outcome, because otherwise, you will put some potential buyers who are not that, you know, who don't who don't move that fast in this advantage when it comes to bid.

Robert Kieval  16:58  

Yeah, excellent point. Okay, last question about diligence. Do you do you see a lot of variation in the quality of the preparation of the potential target companies that you that you look at? Should you should that be a surprise? And is there any predictive value in that in that I mean, can it can accompany essentially, just knock itself out of consideration by being so poorly prepared that you just, you know, you get a bad omen from that?

Anna Szafranski  17:31  

Let's say, yes, sometimes we go into the data room, it is very thin on information. And typically, we will be we have a checklist, right that we're clearly looking for is what's the type of information there if the data are a little too thin, we'll have to pause and say, Listen, these are the documents that we really need in there. So we can really do a thorough analysis. Other times when you go in, everything's there. And you know, they've probably been through this before, right? And are very ready to for our review. And that just makes it a lot a lot smoother. So you're looking for is the information we need readily available? And then when we have the conversations with the target company, how open are they with information, right, you want to really understand too, is what they're telling you matching? What's in that documentation? Right? Do you believe it? Is it robust? Are you building that trust that's going to help lead you to the next stage? 

Teshtar Elavia  18:26  

Yeah, I mean, I think the to Atlantis point, the information that in the data room should also be believable. Right? Oftentimes, I think remain mentioned it in the previous panel, it's really important to be honest and vulnerable about where you're, you know, technology or your product. And most oftentimes, when companies actually come in and pitch the, hey, everything is perfect, it actually raises more alarms and beam will actually then do more due diligence, like, Why is there nothing wrong here? Like, I can't believe it, right? It's too good to be true. But if you can take your, you know, potential partner on that journey with you to say, look, this is where we are today. But these are the steps we see in the interim to in order to fulfill the promise that we're pitching you, I think it opens up for a more transparent Win Win dialogue. And you may even get help, like, I've been a part of, you know, deals where the partner has come in and said, like, hey, I really need r&d help to kind of vet this through, can you or I need clinical assessment, but can you do it, you know, and then then if it pans out, you will see it. And we've actually done that, right. We've invested our resources to kind of say, hey, the technology looks promising. The partner may not have the funds, or we may not have the funds to invest today. But what we can do is validate the technology through our infrastructure. And oftentimes, we ended up doing that. And then to Dan's point, you know, the relationship is over a period of time you start believing it, and then the trust factor builds. Great. And one more point about that, and I think I relate to the data room, you asked about readiness and preparation from the startup experiences. You want to make sure we have the data when ready at all times. And that's really the strong CFO and CFO is not the financing guy. See In I had a CFO that did not know a lot about financing, but he knew how to organize the company to be ready all the time, whether it's investors, whether it's strategic, because I switched sides, I was in startup now in a strategic one thing I underappreciated is the momentum of the deal. And, you know, we see so many deals right now, you probably see much more than me, and the team move on if the company is not ready. And you have to be ready in a very reliable, transparent way. And also, you know, from a startup guide, the thought is a your one stop shop, meaning I'm selling one company, I'm done, and I'm retiring. Or if you want to do more and more, no one will come back to if you're lying, or you're not telling the truth. So you want to be honest, transparent, because hopefully, you will work with these guys for a long time and keep meeting them at LSI and all these others social events and become friends.

Ye Bu  20:53  

I totally go that since momentum point, you will have used to say time kill all deals. If you drag along, you never know what happens. That's one thing. Another thing is that, you know, as we probably all feel like that, right? The longer you're in this medtech industry, the smaller you feel like this social circle is you bumped into people. So reputation is very important. And also another thing is that people are by nature, there's sometimes emotional, right? If you're not prepared, and then there are started your question marks start to build in people's mind that all four will be factored into other days, their consideration to whether putting the bed or how much they voted that company. 

Anna Szafranski  21:36  

And just two things add to one to reiterate, we're not looking for perfection. To write, we realize that Medtronic we have a lot of resources and the smaller companies, you're really doing your best, but we totally understand if it's you're letting us know, hey, we have a supplier of this key part that may be not ideal, that's fine, right? Those are the type of things we can plan for and we can build in it's more the surprises that are the problem to it is not just recognizing that there is some opportunity for improvement. And I'd say also in parallel, as we're in the data room, we're doing this due diligence, we're also out talking to physicians, we're trying to see cases, if we can, we're really learning from them trying to understand what the physician perspective is. And then is it then at a site of service or a channel where we can also be successful at so I think that part is just equally important to us to determine how successful we'll be

Robert Kieval  22:30  

perfect. So moving on to like getting the deal closed, Anna I'm going to continue with you. Obviously getting to a deal involves agreeing on valuation. And from an entrepreneur or startup perspective, valuation expectations, to your point are typically pretty high. Whereas an acquirer, you may take a more conservative view of things. So without revealing your secret sauce, can you, you know, talk about how you approach establishing valuation? And how you, you know, what are some of the issues you face and trying to bridge that gap with a potential target? 

Anna Szafranski  23:06  

Exactly. There's always a gap, right? And we do anticipate that. And so the first thing we're looking at is, what is the market opportunity, we typically, if we're getting further along with a company have already done a model. So we typically know what's the size of the market? How fast do we think it's growing? Is it a market we're already in? Or is it a new market we want to be in? So we're really looking at that piece first, then we're looking at can we execute? Do we have the sales channel, the sales team that might be calling on the right physicians or the right sites of service? Or do we believe we could add that piece of it? So we're taking this top down and bottoms up model to come to what's the opportunity? And how can we execute against that, then it is really helpful to see the model from the target company to because what I'm looking for is what are their assumptions? What are they assuming about reimbursement? What are they assuming about FDA approval or enrollment in their study? And I'm trying to document those and saying, Where do we match? And where are we off. And when we're off, sometimes that means a milestone payment that we'll have to build into the structure will say, you may think reimbursements gonna come early, we may think it's going to come a little later. So let's put a payment on that, too. It's one way is where you help to bridge those types of gaps

Robert Kieval  24:25  

Tal help from from your perspective, on the other side of the table, what are your thoughts?

Tal Wenderow  24:30  

There's always gap and in everything in life, but the other thing is, is a good deal. Everyone needs to leave something on the table. And otherwise, it's not a good deal. Right? So I think, you know, from the startup side, you have to realize, what's your objective? Are you trying to grow the company all the way you want to sell? Do you want to flip the company? Is it a tuck in acquisition? Is it the full scale business unit for that franchise? And that's how devolution comes into play. Again, startups do not think like that, right? You always think my product is the best product ever. Medtronic or BD has to have it and if not, GE will steal it because they want to go into the device. And I know better than them. And that's usually the startup mentality. And it's part of this ego mindset that you are the best, otherwise it cannot survive. Meaning it's, you know, we also those five years forecast $100 million revenue. And my question is all the time you show me five companies that reach that, and let's keep talking afterwards. No one which that. So you just need to be realistic. And also, the previous panelists spoke a lot about that is who are your shoulders for you investors of the family office is their strategic involves of the VC, what's their valuation expectation? What's the multiply, because in the of the day, the CEO job is to serve the shareholders, right? And not himself, not his ego, also is employee. So we have to make sure it's all match. And sometimes a good deal is to an FX on the table right now, and not 5x In a year, because you need to create more value, but you need to bring another $40 million in so you need to do those bounces, and it's always a middle ground.

Robert Kieval  26:07  

That's excellent perspective. Ye, I've heard you say that, you know, some deals, work, some deals don't work, some deals work better than better than others. Can you just elaborate on that?

Ye Bu  26:21  

Yeah. So I would say when I said that is more from economic standpoint, you know, they're their deals that work out better than the others. If you think about look backwards, I think it goes back to my point earlier, it's very, like the key value drivers. You know, once we sign a deal, or during the negotiation part stage of a deal, some people start to forget about where you're really buying, right, and then things start to feel like, okay, we're talking about numbers. Now, all the others don't really matter. At that point, then, and then also, once you sign the deal, get into integration, you don't necessarily sometimes people don't do a good job to really preserve that key value driver, for example, their deals, especially like bigger deals, you know, if the sales rep is important, you got to figure out a way to be able to keep them to grow the revenue, right? If you, if you kind of fill on that front and lose the sales rep near 30% of the sales rep the first month, and then your value is not, you know, you're not going to achieve the projections you actually think you're getting. And then sometimes is, for example, as I think about now, say, hey, device company wants to buy or sell for a company, for example, or digital IT company, and then we're going to sell the product, the way that we sell devices, that probably not going to work out very well. Sorry. So it really comes down to how, you know how we're how well we're able to preserve that hub rally driver during the whole process, you know, for us, you know, we learned during our parse recent deals is that it's important to have an integration leader to be involved in the second stage of the diligence, not necessarily say, hey, you know, we think about integration is really during this whole process, you can kind of figure out, okay, what are the key things that I have to gather right from day one, to make sure we don't screw up. So those tend to be you know, better deals. Another thing is also from the startup side, that is very, we talked about, you were mentioned that they trust or risk a prize is really for us. The risks that can be mitigated, is is okay. It's really the risk that we cannot mitigate, or we didn't fit had have a plan to mitigate on on the time in a manner that gets us into trouble.

Anna Szafranski  28:52  

Just to reiterate how important retention of key talent are. That is absolutely something we're looking at during the diligent process, we're asking a lot of questions because there will be key technical talent, sometimes its manufacturing and technical talent. And then there could be key individuals with very strong physician relationships, or the ability to sell the value proposition of that product. And being able to keep those individuals through at least some portion of that integration phase is really, really critical to success. 

Teshtar Elavia  29:29  

One one additional perspective that folks here may find helpful is a few years ago, a consulting company came up with a report around pre revenue startups that had been acquired and kind of analyzed where they were seven years down the road from a projection when they were acquired to where they were 73% of the acquired startups were 80% less than projection 1% were 50% above projection, and the rest were within plus or minus 10 of projection. So as larger companies, when they're looking at those deals, they have that information they're going in with that mindset. So to your point about the valuation or Ye's point about the economics, I think there's some, there's some data behind it, right. So people are looking at that making their decisions also based on some of that historical information as well. 

Robert Kieval  30:20  

So, it brings up the question in my mind about whether emotion, how or how emotion factors into a prospective deal and when an acquire, particularly a champion of of a deal, you know, is is involved, whether that, you know, can interfere with having a dispassionate and disinterested diligence process and set up the potential for problems in the future. 

Teshtar Elavia  30:49  

I mean, I think it happens all the time, right. Like Tal said, you know, you everybody has an ego, right, and including ourselves, but my father always said, like, Never let your ego be bigger than the ego of what you're serving. And I think that's important to remember is, ultimately you can be the most passionate, you know, advocate of your technology, but don't let it blind you, right? If you use it positively, and channel that information, like the previous panelists, were saying, it can actually be constructive and guide you towards some of the changes you need to make. But if it like, if you let it blind, you and you ignore the facts, I don't think you'll be very successful indeed. 

Robert Kieval  31:25  

Okay. We have just under 10 minutes left, let's move into the third or final phase of post deal, integration and success. And Tesh, I'll continue with you. One of the things we didn't really touch on, are whether there are important differences between asset purchases and full full scale acquisitions. And how that influences the the diligence process, the closing process and the integration process. On its face, it would seem that asset purchases should be more straightforward, but maybe not. 

Teshtar Elavia  31:57  

Yeah, I mean, I think it's a case by case example, right? asset purchases are very specific efforts to complement a portfolio to compete well against your competitors. And as such, the scope is narrower, right, but the same principles of acquisitions still apply, right? Are you purchasing something that you believe can you can grow in the market with? Are you purchasing the right talented team that can help enable you know that outcome? Are you going to be able to use that asset? You know, across your business, even if you have different businesses, like BD does, sometimes you just gonna say, hey, this technology not only could help peripheral intervention, but if you channel that technology and put it in surgery, it could add to it could fuel additional growth. So a lot of that depends on what the scope of the asset acquisition is. But I think the same basic principles still acquire whether you are acquiring an asset or you're divesting an asset. Right. 

Robert Kieval  32:52  

Got it. Okay. Maybe one or two more questions, Anna, in terms of the integration process, when we've been doing some work supporting post deal integrations, and it's been a learning experience, looking at the timeline required for really completing the the integration or when you would consider an integration complete? So in your experience, is this a six month process a one year process? You no longer than that? Or, you know, these things need to be resourced, whether internally or externally? Can you just talk about what that what that process looks like? In your experience? 

Anna Szafranski  33:31  

Yeah, the length of time for integration clearly depends on how big it is, as part of the Covidien Medtronic integration, I'd say that that lasted a number of years, maybe still going in some in some places. But typically, we put about a two year time horizon on it. And typically, there's some financial reasons that we do that, too. And you want to get the bulk of the company and the technology integrated within that two year time period. And what you're also then looking at is how to resource that, right? Because, you know, we joke at Medtronic, we'd bring an army in for due diligence. And then we bring a little even larger army in to do the integration to it involves a lot of people, we're going through every supplier that has a part in that product, right, for example, that requires a lot of resources and people, right, we're going through all the regulatory. And so we look at what are the jobs or roles we're going to need through the two years and longer those we may hire, right? But there's going to be many roles you need for six months, nine months, 12 months, that's where we'll look at using consultants or contractors or different organizations. I know we work with you on a number of acquisitions too, because you really want to find people who can come right in and hit the ground running, that they have an expertise in that area. They can come they can do the supplier quality, for example, and then, you know, move on to another project. 

Robert Kieval  34:52  

Yeah, and it's really it's not just about integration. There's a lot of remediation, I guess that that goes along with it. You have you know small companies that use low volume suppliers, they may not be able to keep up with capacity, they may not be on your approved vendor list and blue approved supplier list are not qualified. That could be a pretty involved. Tesh, your experience or talent, I'm sorry, 

Tal Wenderow  35:18  

I don't have as many experiences these guys. But you know, I think the biggest thing that you're trying to solve and usually unsuccessful is the cultural difference between it's tied to retention, it tied to shortcuts on the quality system that the startup can do, because they don't have a legal team that checking their, you know, checks and balances all the time. And staff can cut corners on the quality on other things on supplier lists, we're fine, we only need to get 2000 units. So the culture to me is the biggest gap, pre and post but mainly post. And going back to what you mentioned about the growth drivers it style. Because if you're hiring a team, right, and if you look at Ohio technology innovation, you want to keep them isolated from the big giant quality system, and even two or three years with the data line reporting. And there's no one good equation and most company in my opinion failed. And we all saw the j&j layoff last week, after a $3 billion acquisition. And to me the culture difference in how to pretend the team is the most difficult to post integration. And it's tied to resource meaning I know several companies that going back to volition projection, the projection was higher on the sales. So the choir thought we're going to have net revenue that I can position back to r&d innovation, but the net revenue did not arrive. And now the company seems Oh, I'm sure $10 million. Where do I get that resource from? So it's always that ties together to meet the biggest one posts.

Robert Kieval  36:45  

So when in a in a cat in a cash transaction, obviously, just getting to the close defines success, but in a structured deal, where there's earnouts, you have to continue to be able to perform successfully within the new parent organization. Is there a way that you can assess the post close risk? In what what might be anticipated to be a structured deal? And can that be can that be mitigated during the negotiation and closing process?

Tal Wenderow  37:11  

I think it depends on what the reason we were by the company that technology or market market, it's in a way easier to assess, because the tie that to revenue on the technologies, how do you tie the technology milestone, you know better than I about that? I don't think there's a one solution for all of that it's really a case by case and understanding also, what's important to the other side and the structural deal. And how do you assess that risk? And how do we turn those people? Great.

Robert Kieval  37:36  

Okay, well, we have one minute left. Just want to open it up for anything we should have talked about that we didn't talk about or any last thoughts? Yeah.

Ye Bu  37:45  

No, I think we've covered all the ground. One thing that I want to add is that, you know, especially when a company starts up on a valuation gap front, there's it's always gonna is a structure deal is there because of this valuation gap. And I think one thing that I want to say is that during the whole process, there's always going to go be a push, you know, taking gave some people, some, most of the time that deals die, before it happens. It comes down to some like, you know, human nature, people don't really feel they have pushed in enough and to say, hey, one, one, you know, one of the parties say, Hey, I'm not. And then people might come back to the table. So this, this whole process back to your comments. There's emotion in there, there's, you know, all the legal and everything in there, I'd say just hanging there. If you do think this, there's a value for a deal to be made, it might not happen immediately. You know, sometimes it takes quite a few years to get a deal done. But if you believe in, they're just hanging there, and hopefully something will happen at the right time.

Robert Kieval  38:56  

Right, thank you Tal any quick?

Tal Wenderow  38:58  

I'll do it quick. I think it ties to what you mentioned about emotion, people buy technologies and asset not companies, right? It's obviously served for the company. It's all about people. So you know, nurture that relation and understand that it's all about the risk of making mistakes, or on the other end risk to be successful. So just manage that.

Robert Kieval  39:16  

Fantastic. Thank you, Tesh.

Teshtar Elavia  39:18  

I mean, I think the the one piece of advice I would give is you have a limited time in order to get your narrative straight. Make sure it's authentic, make sure it's transparent. And that goes a long way. In having a conversation starter and peeking somebody's interest. Most people make their decision in the first hour of hearing the pitch deck or maybe even less. But if that if that narrative is transparent, authentic, vulnerable, I think you will have a higher shot at engaging the audience.

Robert Kieval  39:45  

Thank you. Anna I'll give you the last word I was just going to

Anna Szafranski  39:47  

agree with be open, honest and transparent as you're working with us one of the strategics and find that shared vision at the end of the day. We're here because we want to improve the lives of patients. We're looking for those technologies that it fill an unmet need and can fit successfully in our portfolio so we can execute against that and enable more patients worldwide to benefit from the the great innovation that's going on here.

Robert Kieval  40:11  

Fantastic. Well, please join me in thanking the panel for sharing their wisdom and for an engaging conversation.