SIA Story: the Good, the Bad, and the Ugly of M&A | LSI Europe '24

Alexei Mlodinow 00:06
Henry, thank you for that introduction. So yeah, as Henry mentioned, we were all involved in very different ways in a company called SIA, which developed a bioabsorbable mesh for plastic and reconstructive surgery. Todd and I, as well as a very well-known clinician at Northwestern, John Kim, co-founded the company in 2016. I was an MD/MBA at the time, and this was sort of an experiential learning project at Northwestern that turned into a thriving business under our and our predecessors' leadership. So I'll just let everybody do a quick personal introduction before we get started.

Lauren Lacagnino 00:52
So I'm Lauren Lacagnino. You know I work at Integra. As Alexei mentioned, I was involved in the deal, leading the negotiations and the execution of the deal for Integra. And now I am working in the tissue technologies division, doing strategy and business development, but also have operational responsibility for the dermal program and making sure that the PMA gets over the finish line.

Todd Cruikshank 01:19
Todd Cruikshank, co-founder of SIA. While in business school at Northwestern, which was followed by seven years—actually eight years now—of my journey from idea and patent to this very stage. Before that, I was with Baxter Healthcare for six and a half years, working in the biotechnology business where we spun out bioscience into Baxalta, which was ultimately acquired by Shire. So the two entities with which I spent the most time ended in exits, which is apropos to this discussion.

Alexei Mlodinow 01:56
All right, so just for a little bit of background, we're just going to start with a couple of highlights to level set and talk about, let's say, the industry, from our perspective as a startup company at the time. So put yourself in our shoes: in 2016, we licensed some IP from Northwestern University, saw an unmet need in post-mastectomy breast reconstruction, but also a couple of adjacent soft tissue support opportunities. We developed this bioabsorbable mesh product, spun it out of the university, and sort of had a tandem approach to the U.S. market, whereby we had a 510(k) for general soft tissue support, and we were able to start to commercialize off of that and get our first clinical experience. At the same time, we initiated a first-in-class PMA pathway to get a breast reconstruction indication from the FDA, which no one had ever done. We won't get into too many nitty-gritty details, but it's just important to understand that that dual pathway of commercializing—having a commercial product in the market as of, call it, 2019—and simultaneously having a very important regulatory milestone in the PMA that was still being pursued at the time of our acquisition in 2022 and is still being pursued now by our esteemed acquirer in 2024. So that's just kind of framing. All right, the industry itself we can get into as needed, but we don't need to belabor the product benefits or the exact nature of the market. I wanted to just start by asking Lauren to put her corporate development hat on. She wears a lot of hats. We love the hat that she's mostly wearing these days, which is the SIA business unit, but she has a big corporate development role at Integra. I want you to just talk about when you first kind of heard about this small company out of Northwestern, what channel that came through to you and your team, and how you guys thought about it initially.

Lauren Lacagnino 04:10
So I would say, I think it's helpful to frame up how we're structured, right? So we have at Integra a corporate development group that is a corporate function responsible for deal execution, and then that group partners with the division and their strategy and business development within the business unit itself. I would say the business unit had been, in this case, talking to you, but in general, talks to all these startups, kind of combs different areas of interest that are either completely overlapping with ours or complementary to ours. Through that process, the division became aware of this technology and had it on their radar, right? Usually at that stage, it stays within the division. So I would say the first couple of years, it's the division courting the startup, maintaining the relationship, cultivating that relationship, with the goal in mind that at some point, if there's an exit, we're going to get the call, right? Corporate development is aware that those conversations are happening but not super involved. I would say SIA first really became on the corporate development radar probably around 2021, and then we have what we call the M&A game board. So as a corporate development team, in partnership with the division, we put together kind of the game pieces. If, in an ideal world, if everything were actionable, here are the companies we would acquire or the types of technologies we would acquire, and SIA was on our game board at least since the end of 2021, early 2022, I would say.

Todd Cruikshank 05:57
Which is super interesting, because Todd and I were at ASPS, which is the big plastic surgery conference every year. We were there every year from 2016 through today, 2024, and I think from our shoes, right, we were doing the dance with strategics, right? It's a marathon, and it's a process that unfolds over years, at least in our case, not just when you initiate a process, so to speak. So it's, I guess, simultaneously surprising that corporate development became sort of aware of it and focused on it in 2021 when, from our perspective, we were having conversations as probably as early as 2018 with some of the divisional R&D staff and stuff. But on the other hand, it's also surprising to hear, you know, they hold their cards close to their chest. So it's also surprising to hear that we were on some kind of M&A game board at the top in 2021 when, if you had asked us in 2021 how interested Integra was in your company, we would have said, clearly disinterested, right? Like we had talked to the division. We had talked to some R&D people a couple of years back; nothing ever came of it. So it's interesting to see how you guys track things and have that separation so that there's not too much palpable excitement when we're talking to the divisional people, but you guys are still tracking things.

Lauren Lacagnino 07:32
And I would say we're careful sometimes to bring corporate development in too early because we don't want to set false expectations that we're immediately going to be putting in a bid or doing something that is super actionable when it might still be we need to see some sort of proof of concept or a clinical milestone, a regulatory milestone, before we'd really be willing to pull the trigger, right? So I think it's sometimes intentional to keep that separation between the division and corporate development.

Todd Cruikshank 08:02
Yeah, no, it really is interesting interactions from our perspective of just the timeline because we did end up in a formal process, as you can imagine, in 2022 with the banker, which we'll talk a little bit more about, the nuts and bolts of that. But at that time, we had written off Integra and were negotiating with a couple of other parties simultaneously. So it was like some activity in 2018-2019 from our perspective, nothing really, and then again, from our perspective, out of nowhere, in 2022 there was interest when it was time to shit or get off the pot, as they say.

Alexei Mlodinow 08:41
Which is, you know, helpful in retrospect. At the time, it's particularly frustrating to be in multiple ongoing discussions—not diligence, but talking with the strategics—and becoming, I don't want to say crestfallen, because, you know, most deals don't happen. But going through the process again and again allowed us to harden and ensure that we focused— we as a management team focused on just doing what was within our control, which is execution. Because, as I heard on a panel earlier today, could have been you, I don't know, do the thing you said you were going to do two years ago, one year ago, and last week, and continue to do that to the end and even after. If you're, you know, with the strategic, and I stayed on for a year to run the business and lead the integration from the CEO side. But again, we think hard and ourselves by going through the process with those strategics, so we were ready when the time was right.

Lauren Lacagnino 09:46
Yeah. I mean, I think that's a really good insightful point, right? This comes up over and over again, right? But with fundraising, with M&A, with even customer development, it's sort of a game of building trust, and it's a long process. You need to show face, and then your face needs to say what you're going to do, and then you need to show face again a year later. And then if they were listening, which usually they were, and taking notes, your face needs to say we did what we said we were going to do. And with fundraising, it's true that came up a couple of times on panels today, and with the M&A process, eventual M&A process or partnership. It's true, and you will definitely get into exciting, heated conversations about different potential partnerships along the way, and many of those will fail. I mean, one of our board members said this sounds a little bit dismal. I don't know if it's true, though I'm not a venture capitalist, but one of our partners who used to do corporate development said that in his corporate development role, some enormous percentage, like 90% of signed term sheets did not culminate in a closed transaction, which seems crazy, but I think having gone through the diligence and the merger and negotiation and everything, we could see how that is true. I don't know if it's true; I haven't vetted those numbers, but he was credible, and, you know, he said it when we were having these conversations three years ago. So, yeah, yeah.

Todd Cruikshank 11:21
Again, testament to the importance of organizational focus. So as soon as those diligence calls are over, as soon as the pitches to the head of R&D are over, back to work, getting done what you said you were going to do, versus high-fiving because you might be on your way to an exit, yeah.

Alexei Mlodinow 11:37
I mean, I think to that point we'll get, I guess, into the nuts and bolts of the process in a second. But I think managing that distraction—I mean, I think Todd and I were an excellent team along the way because I think intermittently, we would bear the brunt of the distraction at different points in the business with different acquirers. John Slump, who's here raising money for there, he is, right there, best finance guy in the game, said after his, you know, four or five exits, and I don't know, 10 companies he's been involved in, that Todd is the best ops guy in med tech. I want to hear, you know, your summary of, let's say, 2018 to 2022, strategic interest. But I think maintaining a steady day-to-day face to the organization and making sure that we are hitting our milestones on time, while internally, emotionally and at the board level, there's these ebbs and flows of crazy conversations, that's like super critical.

Todd Cruikshank 12:42
Yeah, yeah, there's your multi-layered question. One of the areas where we excelled early and prior to incorporation, this was a clinical research project that Alexei was working on. But when I joined that summer in a class focused on early-stage medical device commercialization, which is super on the nose, there was already a cache of primary market research from surgeons. There were just like interviews, and in those discussions in 2016—and I know you said to bracket this at 2018—but in those discussions, we had surgeons who were interested in investing, and that was sufficient for me to kind of really get enthusiastic and excited because a customer who's willing to invest is, you know, essentially buying the product many years before they can actually use it. But in addition, what those surgeons said early and continued to say is, whatever it is you introduce to us, if you can indeed make the thing you say you're going to make, make it well and deliver it consistently, do those two things, and you should be okay. My focus during the time, even with the distractions associated with strategic conversations, was picking the right suppliers and ensuring continuity of supply and a high-quality product. That was where my heart and mind were, and I guess will always be as an operator in med tech. So picking the right suppliers was essential, selecting those who are not so big that they won't answer your phone, but not so small that you are all of their business, thinking about dual sourcing and second sourcing, such that your board is confident that should a thing go wrong, you can continue to meet that demand for the surgeons, so on and so forth across every functional area. Kind of business continuity had to be the most important activity in my mind, and I think it was until the end, and those reins were handed off to Lauren and those responsible for SIA and that product and those SKUs to ensure that the milestones associated with our regulatory aims are met. So I think I checked each of those boxes, but if I missed one, let me know.

Lauren Lacagnino 15:00
No, thank you. That was great. Let's turn more to the nuts and bolts of the process. I think there's some good insight for people who are here talking to strategics, getting excited like we got excited three or four times over six years before anything actually meaningful happened. But just for a little bit of background or a little bit of perspective, just thinking about timeline, we got a—I’d say if you think about meaningful written term sheets from public companies for acquisition of SIA—we got three over the course of four years before this all culminated in the acquisition by Integra in 2022. That kind of relates to what we were talking about earlier, about the dance and the distraction and stuff. I mean, that's all part of it, right? You're meeting people, you're building relationships, you're building trust, you're showing that you're doing what you say you're going to do. People will intermittently, at different stages of the company's life cycle, want to pull the trigger on something, right? Because they see that there's value building. They want to get in before they can't afford it anymore, honestly, or before the value inflection point occurs. That was always outside the context of anything that we would consider a formal process, right? That was always just in conferences like this or ASPS, in, you know, specific industry conferences, HRS—not for us, but for that guy over there. You're going, you're talking to these people. They're not stupid. They know that you have investors. They know that those investors like money, right? They are following you. But they're not always waiting for you to invite some kind of offer before they provide one, right? If the risk profile is right for them. This is before the formal process. I think that we learned a lot about the pros and cons of our business using the stalking horse of a distribution deal for European sales, actually. So there was no—we were not trying to sell the company. We were not trying to message to people that we were trying to sell the company. But we had some strategic relationships. We had a CE mark. We had a desire for revenue. We had no ability to execute in Europe because of our small team. We used that stalking horse to really get a bunch of our partners up to speed on the product, on the clinical data, on the technical characteristics, on the financials, outside the context of an M&A transaction process, right? It's just like, hey, we have a cool product. You guys have a sales force in Europe, so we should partner. We got a lot of information, and that was years before the process itself, right? We took that information and carried it forward, and those parties who participated and engaged with us early on took that knowledge forward, and anything you can do to build other people's excitement about your business early is going to be critical later.

Lauren Lacagnino 18:34
Particularly based on real value, right? We invested the time and effort, blood, sweat, and tears on the value creation associated with a CE mark and with ISO 13485, so it wasn't purely for that end. It was this is what's most important for our business. If you continue to create value, good things will happen, and you'll have something to say when the strategic is on the other end of the phone, or the Zoom, or the what have you, whatever was the technology back in 2017, I don't know.

Todd Cruikshank 19:05
Yeah, no, I think that's a great point. It doesn't have to be a CE mark you use. It could be a legitimate need for an expensive U.S. sales force and the lack of desire or ability to raise money to build one, right? Then you can have these partnership conversations and see for yourself. Do we want to raise this money and do it ourselves, or is there someone who will market the product for us for a strategic? Or will we have that conversation and they'll get excited, and then inevitably, they will just offer a term sheet that is more of an acquisition offer than a commercial partnership offer? So these are all—it's all like part of a spectrum of deal-making that these companies are doing, and you have the opportunity to do a market test whenever you want, based on whatever partnership structure is useful to your company. Yeah. Let's talk about the quote-unquote process, right, which is, again, like four years later, when we actually hire a bank and we decide, hey, one of these term sheets is worth taking a serious look at with an exclusive financial advisor and maybe moving forward to an acquisition. Our CE mark was in 20—what? 18 or 19? Some of those conversations occurred in the year subsequent to that, including through, like, the early COVID era. Then, you know, fast forward two years, and we had been commercializing ourselves based on our own fundraising, and we got an offer that led us to engage an investment bank, and ultimately led to where we are today. So Lauren, please, I guess talk obviously you see SIA as a specific example of useful, but just talk about like within the corporate development process, like when it's game time. What are you guys doing internally? How are you evaluating things? What are you looking at?

Lauren Lacagnino 21:07
So I guess it depends, right? As you said, there's a spectrum of approaches that we get, right? Sometimes it's more of a market test, sometimes it's a formal process. Sometimes it's the founders reaching out, right? But if it's true game time and there's a process, right? We're assembling a cross-functional diligence team where I have 50 people that I'm trying to wrangle, none of whom report to me, which is interesting, and all who have a day job. So it was trying to get that engagement internally and explain the strategic fit of why it's worth their time, right? I think in the SIA case, it was very crisp for us because we have a really good story of the complement of the PMA that we're pursuing with Surgemend, and the value that that brings to have an animal-derived ADM in the marketplace, with there still being a spot and a place for the dual brand, right? Having a natural material, having a bioresorbable synthetic material in our bag, and being the only company pursuing two PMAs in the space, it was a really easy story to tell to get that internal engagement. Then we have a finance partner who builds our models for us, right? So corporate development's not building our model. You have our finance partner who's going out to all the teams, getting the inputs, understanding what additional resources we might need to bring on to fully burden the model, where we might have synergies. In the case of a startup, there's less of that, right? That's more applicable in a carve-out situation. But knowing, you know, we study the cap table a lot, knowing kind of who the investors are, how many investors you need to get to the 51% or whatever your governing documents say you need to get to a majority to approve a deal is really important because that sets the stage so much for the deal dynamics and the negotiation dynamics and understanding kind of who the decision-makers are, knowing how much cash is left in the business and how soon they'll need to have another fundraising round tells you a lot about the situation and how motivated the sellers are to actually get a deal done. But at the end of the day, it has to be a fair deal for everybody for it to really work, right? Like we're not—we can't take advantage of a cash-poor situation. If there are employees who are shareholders who are coming over, right? We don't want to leave a poor taste in their mouth. So it's like balancing all of these things. But ultimately, it comes down to our DCF and not paying for value that we're creating.

Todd Cruikshank 24:01
Makes sense. And then if you take a step back, right? Like, you have an M&A board, which we learned today, like, literally, this is like nuts and bolts of the process that's different at every company that we learned today for Integra somehow. But you have an M&A board; we were at the top, in the top tier? Yeah. Okay, so you have that, you look at it, you review it quarterly as a team. But before the gargantuan diligence legion descends upon the unsuspecting entrepreneurs, which we'll definitely get into, what comes like between we're on the board and then you said you get a call from a banker or the founder or whatever, and what, how do you go from knowing you kind of want the asset, probably, to the green lighting that comes before the full diligence, because we obviously term sheet and all that stuff, right?

Lauren Lacagnino 24:57
There's kind of a mini diligence team, I would say, right? So mostly VP level, right? We're not pulling in the people who are down in the weeds just yet, right? We might have within our marketing leads, obviously like commercial—they need to make the commercial case for it—but we'll at least take a high-level look at the financials and put together a presentation for our executive team, inclusive, right? I report to the division president now, but in the corporate function, I was reporting to the corporate vice president for M&A in that corporate function, right? She has these regular meetings with our CEO, our CFO, the chairman of our board, the division president. That's a forum usually where, if there's a process that is forming that we want to take part in, that's usually the forum where we'll raise these kinds of things with some high-level financial analysis. It is not a full model by any means, but that's usually kind of how we can start to get to an initial bid, early IOI, kind of situation.

Todd Cruikshank 26:07
May I ask, the information, the inputs to that forum come from the organizational history that you've accumulated from a specific information request? What were the source of the inputs for that discussion?

Lauren Lacagnino 26:22
Usually we'll have at least a teaser, right? So there's some information, updated information the targets provided, right? So we'll use that. We may ask a couple of follow-up questions, like, hey, we need this additional light diligence, right? Sure, which I know like you laugh, but some basic information that we can at least high-level do some analysis on, right? That combined with our own market intelligence, right? These are spaces that we're watching, right? So we usually have some sort of opinion on, can they do the traditional hockey stick? Right? Like, every target, it's almost like you open up the teaser and you laugh because it is like, don't worry. The fact that we've only grown 5% the last four years, we're going to grow 50% the next four years, 100% year over year for two years leading up.

Todd Cruikshank 27:19
You are the exception to the rule, right? So, like, you know, pressure testing some of that with the market intelligence we have, and it's not always disingenuous on the target side, right? Like they may have some assumptions or information that they're going off of that is different from ours because we're actually in the space talking to the surgeons every day, right?

Lauren Lacagnino 27:41
Yeah, yeah. I mean, it is in the PowerPoint template at business school. You just copy over the hockey stick into your kids. That's why they all look alike.

Todd Cruikshank 27:54
Amazing cap table. Sorry, this just, this is a departure, but we got a few accolades from the Integra diligence team during the M&A process. None of them were accolades you want. I would say very, very few. One of them was, this is the most interesting, expansive cap table we've ever seen. We had a 270-plus names on our cap table at the time that we exited and would have had to register as a public company had we raised one more round in the manner that we were raising it just based on the number of shareholders, which would have been super painful. You find things like that maybe gives you some pause, but I guess just more generally, once you're at the term sheet stage and you say, okay, there are some weird things, but we think that they're surmountable, which we'll find out over the process if they are, right? Let's talk a little bit about organizational distraction, and forget the 270 people you have to call about this deal. That work is a lot of work, but it can be split up between various people in the company. But what about the 25 people in the company who don't know that there's even an active deal when you have 40 people on the acquirer's side who are asking questions from a diligence standpoint?

Lauren Lacagnino 29:31
Oh my goodness. I mean, this panel is called the good, bad, and the ugly. This isn't the good. I don't know which of the latter two it falls into, but yeah, you're exactly right. By design, and I'm sure I sound like a broken record at this point, but I assure you it was much worse for our colleagues. Organizational focus and a lack of distraction was just essential for us fulfilling our clinical and commercial promise. We made it clear, I think, early on in the process that we thought about it, thought hard, and would not be disclosing to our colleagues that the process was active for two reasons that have already been discussed. A, most don't end in a deal. And B, let's focus on getting the job done, the task at hand across all of our functional areas. So we aspired to wait until at least a week or two before closing to disclose it. I think we got relatively close to that. But that was essential. What that means for the founder or those in the know is the onslaught—those you say 40, it felt like 80 people sending diligence questions on an hourly basis. The burden of that falls on just a couple of people, and those people have to answer as if the future of the company depends on it, which it does. Do work as if the future of the company depends on it, which it does, and then, you know, try and salvage some sort of personal life if possible. That does fall into the third position. So it was quite difficult, but it's worth it, I think, because to introduce the idea of a strategic acquirer to an organization of 40 or even 10 introduces existential questions and existential risks amongst the employees where this is out of their control. There are trade-offs here again that I acknowledge, but we really made a point to protect and execute as far as long as we could until the end.

Todd Cruikshank 31:48
I would say from the other side, we were kind of laughing about this earlier, right? The onslaught of questions is actually something that's tempered by me on my side, right? So there's this constant reminder to my team that, hey, this is a small company. There are like three people answering questions. We cannot and should not ask every question that just pops into your mind, right? Like, is this something that you need to know to make a decision and to measure risk versus an integration question or something that is something that we can learn post-close, right? As a corporate development person, part of your job is to try to manage that list. Having run divestitures for Integra, I can kind of feel your pain, right? Like at a different scale, right? Obviously, like, I still had a team behind me, but running a process that has multiple active bidders, a bank, trying to help you sort through that, but not quite understanding the nuance of every question, right? I think I brought that experience with me to try to, you know, as I do lead a deal to try to empathize a little bit, but it just at some point gets overwhelming.

Alexei Mlodinow 33:07
I think hearing some of that, I don't know what you shared, but the origins of our kind of friendship happened in the trenches of the deal because you're both kind of bleary, red-eyed, and extremely tired and have to say, you know, is this actually that important? You can say, No, it's not actually that important right now. Taking a step back from the entrenched roles that you have in the negotiation process, I think is very helpful to see that, hey, we are working towards the same goal here in many respects. So let's do this process right? I think we were able to do that.

Lauren Lacagnino 33:45
I think we were, and I think that a lot of times, like for me at least, I try not to just send questions over with no context, right? If something feels like a bizarre question, I think I told you to raise that, right, and then to explain why we need it, right? Here's the history, here's the reason why, and whatever deal, right? Some deals have rep and warranty insurance, and we just know the underwriters are going to expect us to have looked at something or to add this product to our products liability. We're going to need this piece of information, or whatever it might be, but to give the seller that context so that, you know, we're not just asking questions to see how high we can get you to jump, right? There's an actual reason behind why we're asking what we're asking.

Todd Cruikshank 34:31
Yeah, and our skepticism is very much informed by the processes and the head of beauty, you know, that came before you. Right? It's healthy skepticism, and it's healthy protectionism of your people and what it is they're paying attention to each day.

Lauren Lacagnino 34:46
Yeah, for sure. How many questions were in the diligence tracker by the end of the deal? Oh, how many line items do you know?

Todd Cruikshank 34:55
It's in the weeds. It was between five and six hundred.

Lauren Lacagnino 35:00
I want to say that was a number I was going to throw out.

Todd Cruikshank 35:03
So and these are not yes, no's.

Lauren Lacagnino 35:06
Some are. Some are yes, no. Some are go convince 136 out of the 270 shareholders that they need to waive this right or that right to get the deal done. So, yeah, some take longer. Some take less time.

Alexei Mlodinow 35:23
Yeah. Well, you'd like to say all's well that ends well, but even post-close, the work doesn't start—should you have a favorable outcome? Diligence happens, and then you breathe, hopefully. And then integration begins, which is a whole other beast, and it can take probably infinitely many forms, but probably should be the subject of a different, although very helpful panel at another day. But it continues, and it remains a sprint. The entrepreneur's journey remains a sprint.

Lauren Lacagnino 35:58
On the integration piece, I don't—I am of two minds about getting into it because I think it is full of rich, interesting stories and takeaways, but maybe just for a minute. I think we have, what, 10 minutes left or something, but maybe just for a minute each because I really was not involved in the integration process other than at a very high-level, clinically heavy standpoint. So talk a little bit about integration, how you think about it, how you think about cultural preservation and headcount, preservation of key people, and then as being one of those key people, talk about what that experience was like for you and for the people reporting to you at the time.

Todd Cruikshank 36:45
Okay. So, yeah. I would say cultural integration starts in diligence, I would say, right? Part of my interactions with you, right? It's feeling out people and saying, like, are we going to mesh post-close, right? Because that's a huge piece of is this going to be a successful deal in our hands, right? If the cultural fit isn't there at all, likely the founder is going to peace out right after a month, and then people are going to follow, and then what are you left with, especially in a program like ours, where it's the long haul, right? We're going for the marathon with the PMA, and so the people are so key. Even today, the team reports to me, it's like retaining the people is like my number one goal all the time, and just making sure that they feel okay and supported, and that we're bringing in the right resources from within Integra to support them. So I would say there's the acute integration of making sure people get paid on day one, right? And like know how to log into their email. But then there's this longer haul integration of just making sure that people feel like this is a place that they can be. I totally understand, like some people only ever want to work at a startup. They only want that entrepreneurial spirit, but to the extent that they want a home with us, I want them to understand there is career progression here, there is a place for them, and that what they're doing matters and that they're supported.

Lauren Lacagnino 38:15
Yeah, yeah. I think that that happened, yeah. Integration is particularly difficult if you don't give your colleagues a lot of heads up prior to the deal because the deal happens, they ask questions about, you know, is my job safe? So you have to then establish even greater trust and rely on the credibility that you establish as a leader for the years since the beginning of the company. Integration in our situation, in our case, wasn't as much of a fight because I was able to articulate the areas of our business that were creating, continuing to create value that should be deprioritized, right? If it touches the customer, if it has to do with quality of the device, if it has to do with supply, right? And that's not the entire company; there are other functional areas that can be integrated. So can we come up with an integration plan that prioritizes that which is easy to fold into the company? Again, you need a partner who's willing to accept this. Can we save some things for later? By articulating that or fighting that fight, your colleagues will see that you're thinking about it the right way. We were able to do that, I think.

Lauren Lacagnino 39:43
Yeah, and it was a unique approach for us, I would say, a little bit of an experiment for our company to do this lighter touch integration that we hadn't done for other deals. There's probably a lot of lessons learned there, too, right? Things we would do absolutely the same, other things that we might change, but overall, I think it's been really good for the team, for the program, for the company overall. If anything, I think we would have—not that we would integrate, but I think we would just help people to understand more the areas we did not integrate. Like, it didn't mean that, right? I think there's some people who struggled a little bit with, like, I'm not allowed to talk to that Integra colleague, right? Because I'm not integrated, right? I think we've made strides there, right? We're much more connected, even if the reporting structure is not there.

Todd Cruikshank 40:38
It doesn't have to happen that way, right? It's no longer our company, but I think in any area of the business, building a good argument and then being eloquent in your articulation of that argument and building a compelling mountain of evidence and why you should do it a certain way, you know, I think proves successful and can prove successful when you're thinking about integration, but they are hard.

Lauren Lacagnino 41:02
And while it did—while it was not prescriptive how the integration happened or who was retained for how long, there were some guardrails around the idea of having a semi-autonomous business unit, at least at the beginning, which we didn't really touch on yet, the deal structure, but very extra important to us, him, and all of our shareholders. This hasn't come up, but right? It's an earn-out based deal where the total deal value, headline and all of the fancy publications was $140 million, which is a big number, and the upfront was $50 million, which is also a big number. But if you're good at arithmetic, you can do the math and figure out that there's a pretty big gap there that we're all interested in filling, right? So far, so good that we've outperformed the deal model, actually, despite many people's reticence to do an earn-out structure. That made integration all the more important, cultural preservation all the more important, retaining key people to hit those earn-outs to achieve objectives that are important for Integra and also important for our shareholders. I think I mean even the deal structure. I don't know if you want to talk a little bit about whether it's from looking at our business perspective or Integra just generally, but earn-outs, I think in some investment circles, it's kind of a dirty word, right? Often ends in litigation. Or these are the arguments that we heard going in, right? Often ends in litigation. Never pays out fully. You know what? It creates headaches for the former shareholders of the business and to some extent, like sure, if you have the option to take 100% upfront or 30% upfront, any idiot can tell you that you should take 100% upfront, but you have to put everything in context in a fair way. What is the risk that has yet to be retired, and what is the value of that? What is the risk that has already been retired, and what is the value of that? Value of that? And that's how you come to a deal structure. I mean, if you just hold off for all upfront payment, your profile looks a little more like a pharma company. And, I mean, sorry to use like an American analogy in this European conference, but here, if you go too hard for Gulf Stream, you can end up in an Airstream. So that's like, that was a little bit of our decision-making, and I'm sure yours on how to structure the deal in a way that everybody agreed with.

Lauren Lacagnino 43:56
I mean, we're in a unique position, but coming at it from the position of a publicly traded company, right? Like we can't just always say here, here's all the money upfront, right? Because we have to answer to our investor community and to the public. We've had very specific guidelines on ROIC and accretion dilution on our deals, right? Those metrics would look quite different if we paid everything upfront, right? In order to hit our metrics, but still understanding kind of what your expectations were, knowing that there's a clinical trial and process and a PMA process, right? That also warrants some value on the back end and also motivating, quite honestly, motivating you as founders to stay with us, right? Not just take your money and run, right? We need your support to get over that PMA finish line. All those things are considerations in this type of situation, right? Every deal is different, right? So what we did here does not mean, right? That's the other thing as a publicly traded company, right? Sometimes you announce a deal, and then the next time you're talking to somebody, they want the exact same deal, and it's like, well, it doesn't fit this situation, right? Just taking a look at all of those things, what our public KPIs are, and making sure that we're satisfying our investors and also satisfying the company that we're trying to do a deal with, right?

Alexei Mlodinow 45:36
Questions? Can I ask a clarifying question about timing? Because we don't have our aid, our little timer. Aid, that was right here. Four minutes, okay, so maybe if there's like four minutes, whatever, two questions. Thank you. Anyone have any questions, any fun bloopers to share? You want to go on that one? Yeah? No.

Todd Cruikshank 46:07
No, yes, a lot, many, but I don't know, scars take a while to heal.

Lauren Lacagnino 46:13
You need to ask Todd, oh no, about the iPhone story at the bar later when we're off camera.

Todd Cruikshank 46:26
Yeah, I don't know. You put at least that one. You put a lot of— not here in a high-pressure environment where they all really care. Funny things are going to happen, sad things are going to happen.

Lauren Lacagnino 46:36
And things will leak out of the high pressure.

Todd Cruikshank 46:39
And, yeah, things leak out. But no, no.

Alexei Mlodinow 46:45
Very diplomatic answer. Okay, any others? Oh, okay, here you go. How did you manage title deflation?

Todd Cruikshank 46:58
Title deflation? Oh, okay, yeah.

Lauren Lacagnino 46:59
Yeah, that's a good one. Title deflation, like, so you weren't the CEO anymore. There were—I wasn't on the board because the board didn't exist. It's title deflation. I would say, I want to hear your answer, but my answer is we had a few million band-aids to put on our wounds.

Todd Cruikshank 47:28
It's a very serious answer. I didn't care and never did, but my colleagues really did care, and the negotiation process and getting towards the end, one of the first questions people ask is, do I still have my job? The second question people ask is, will I get more money? The third is, what will my title be? That's a process you really do have to take seriously because that wasn't my last company, and it wouldn't be our colleagues either. They want ever rising and more ever ever rising, and I guess, more impressive title on their CV. We actually took pains to really be intentional about the titles that our colleagues got.

Lauren Lacagnino 48:19
And it's hard, right? Like, if you think about it, for a startup, if you don't have funds to give, you can give a title, right? So it doesn't always translate in leveling them when you come into a one-and-a-half billion dollar publicly traded company, and it's this really hard dance that we have to do, from a retention of the new colleagues' perspective, but also a retention of our existing colleagues, right? Like now this person is coming in, doing a very similar job to me, with a different title. You can't trigger like 200 people now asking for a promotion, right, within the buyer organization. So it is really complicated.

Todd Cruikshank 49:06
Yeah, our supreme executive of regulatory affairs didn't fit right into your stacking.

Alexei Mlodinow 49:15
You were no longer King Todd.

Todd Cruikshank 49:17
That's true. That's true, but the crown is still there? Good. Good question, though.

Alexei Mlodinow 49:23
Good question. Thank you. Well, thank you all.

All Speakers 49:27
Thank you very much.