M&A - Merger and Acquisition Case Study

Dual Objectives: Launch Medical Device Product and Position Company for Acquisition

Background:

A medical device company approached SalesForce4Hire®, LLC seeking a strategic sales partner with experience and success in launching products into the medical device marketplace. The company, like many in recent years, had been highly focused on staying as non-dilutive and capital efficient as possible. They were also evaluating innovative sales models to launch their new product successfully, accelerate revenue and increase market traction to attract potential acquirers, with the lowest amount of risk.

The objective of the medical device company was to leverage the expertise of a sales partner by employing a “shared risk - shared reward” Sales Prototyping® model. Important benefits of this flexible model include:

Ability to capture and utilize real-world customer feedback early and to validate and optimize the sales cycle
Quick acceleration of revenue stream
Mitigation of financial and HR risk
Sales team can easily be disbanded in the case of a liquidity event, with no HR risk to client. Or: sales team can be transferred back to client with the blueprint for full scale deployment
Mutually aligned interest, based on pay-for-performance, “Shared-Risk, Shared-Reward” business model
Significant increase in company’s valuation at exit

Challenge:

As discussions progressed with the client, it became apparent that there were actually two strategic goals to consider. The first option under consideration was to attract venture capital funding for further product development. The second route was to attract potential acquirers that could provide a liquidity event. After SalesForce4Hire, LLC consulted with the client on these options, it was decided that we would utilize our proprietary Sales Prototyping® process, which guides us as we create a scalable sales force and is designed to optimize market launch speed while minimizing business and financial risk. This sales prototype would be designed with the agreed-upon goal of an acquisition by a targeted acquiring company.

By doing this, SalesForce4Hire, LLC partnered with our client to implement a Sales Prototyping® model that mirrored the sales strategies of targeted acquiring companies within our client’s specific marketplace. Acquiring companies will pay a higher value when the products they are purchasing have proven market traction and can plug in easily to their existing core sales channel. The main challenge was to justify the client’s accurate pre-money valuation and evaluate potential best suitors for their products. This Sales Prototyping® model would also be used to validate the sales revenue the acquiring company could expect through acquisition of the medical device company and deployment of the new product line to its own existing sales channel.

Solution:

SalesForce4Hire, LLC was brought in with the goal to accelerate revenue and successfully sell our client’s product into the medical device marketplace. Once our custom sales prototype was developed, we employed our Sales Accelerator System®, which was complete in less than 30 days, to develop and build a revenue-generating sales team, which was hired and ready for training in less than 60 days. SalesForce4Hire, LLC built a sales prototype on a small scale to analyze and optimize the following:

Customer acquisition process
Acceleration of market traction
Length of the sales cycle
Messaging focused on economic and clinical value
Market risks vs. rewards; Reimbursement issues
Call points, including: value-analysis committees, key opinion leaders, physicians, group purchasing organizations, integrated delivery networks, distributors, etc.
Expected ROI per territory
Increased valuation at exit

The custom-designed Sales Prototyping® model, created exclusively for our client, increased the valuation of the medical device company at the time of its acquisition. This situation placed the medical device company’s management team in an advantageous bargaining position, since the sales team could be easily disbanded by SalesForce4Hire, LLC and was non-disruptive to the sale. Redundancy of personnel and resources is a significant deciding factor when performing due diligence prior to acquisition and the cost to eliminate redundant functions must be considered.

Our client realized a higher value at exit, because:

The acquiring company realized a cost/HR benefit in not having to acquire additional sales representatives.
The acquiring company utilized the market tested and proven Sales Prototyping® model as its blueprint for scalability.
The client’s sales team, managed by SalesForce4Hire, LLC, was able to be disbanded quickly. This flexible option was built into the original contract in case a liquidity event presented itself prior to the contract’s end date. Since SalesForce4Hire, LLC assumes all HR risk while managing the sales team, our client and the potential acquiring company were free to move forward without disruption.

This approach minimized the risk for the acquiring company, because it received a proven product. The acquirers knew all the key touch points, successful messaging, and issues when deploying the product into the field, which put them in a better position to successfully integrate the product into their core sales channel.

Result:

The SalesForce4Hire, LLC “shared risk - shared reward” Sales Prototyping® model benefited all parties involved in the acquisition of the medical device company. It allowed the medical device company to have a sales model in place that was carefully designed and targeted to help determine its product’s ultimate viability in the marketplace. In addition, the custom-designed sales prototype placed the medical device company in the best possible position to be acquired, with fewer burdens on its acquirer to integrate its product line into their business.

This acquisition expanded market presence beyond the United States and into the global market, and placed our client’s technology in the hands of surgeons worldwide. Sales Prototyping® allowed the acquiring company to leverage a proven model, validating the due diligence process prior to acquisition.

SalesForce4Hire, LLC aligned its interests in the medical device company’s success by operating a “shared risk – shared reward” business model. If our clients don’t win, we don’t win. Flexibility is a key component of our unique business model; therefore, companies may choose a fee-for-service, fee-for-equity, fee-for-royalty or a combination arrangement.