“It’s not infrequent that someone with an idea perceives it should make sense to J&J, but they don’t understand where our business is in that space,” Stebbins said. (See Stebbins discuss M&A deals at DeviceTalks Boston on Oct. 2.)
“The target companies don’t realize why the buyer might be interested in them.”
When seeking licensing or an acquisition from a major medical device company, getting the pitch right is more important than ever because the number of medtech OEMs out there is shrinking amid a flurry of mergers in the industry.
At any given time, an OEM could be looking from one of three different angles (or perhaps some kind of combo involving the three) in possible acquisition targets, according to Stebbins. What a company is looking for changes over time, too, so don’t be surprised if you come back in a few years and there is interest when there wasn’t any before.
Ask yourself how your medtech startup fits into these three buckets – and which buckets an OEM is after – and you’ll be more likely seal the deal:
1. Technology company
Sometimes a large medical device company could be looking to enter or for a reset in a particular space, so they’re hungry for startups with cutting edge core capabilities, innovative materials, etc. This is the optimal time for the classic medical device startup pitching a potentially groundbreaking innovation.
Simply being a great technology company, though, doesn’t always work for an OEM, according to Stebbins.
“The thing that strikes me about the startups we see now, there are some good solutions for some patient-based care, diagnostics, different things, but they’re still pretty far from how companies want to shift into that business model,” Stebbins said. “Just because you have some health technology doesn’t mean that acquirer is interested in that yet. It can take a while.”