By Emily Vernon, Innovation Analyst, RTI International
Because of the imperative to innovate following the COVID-19 public health emergency (PHE), medical technology (medtech) mergers and acquisitions (M&A) are on the rise. Today, medtech players must collaborate to respond rapidly, develop and manufacture diagnostics and therapeutics globally, and create solutions that respond to new patient and clinician behaviors and preferences.
However, choosing a partner is challenging. There’s pressure to move quickly and achieve development goals and milestones, but if you choose the wrong partner, your business and reputation may suffer.
How do you know you’re choosing the right partner or acquisition target? From our experience helping clients navigate the dynamic and complex partner landscape, RTI Innovation Advisors have collected the following recommendations to help you find the right partner(s) to proactively innovate and adapt to the changing times.
- Don’t choose a partner based on one referral.
A referral—whether from an internal champion, customer, or a trusted collaborator—is a great catalyst for sourcing a partner. However, this quick win could distract you from a better suited partner you may not have yet discovered. When identifying potential partners, don’t stop at one referral and one interested partner. Perform your due diligence and explore whether other, similar partners could be interested. The result could be a more compatible partner and increased bargaining power in negotiations.
Ask yourself: What similar companies or organizations may be interested in partnering? How do we measure compatibility? Which company or organization rises to the top? Am I biased in my preference?
- Avoid partnering tunnel vision and shortsightedness.
When you start your search for a partner who fulfills your strategic needs, you may have a preconceived idea of who that ideal partner is and where they sit along the value chain. Although the partner you’ve envisioned may be the kind of partner you eventually pursue, don’t limit yourself to one type of partner early in the identification process. Rather, consider what synergies exist with other stakeholders along the value chain. Especially in the wake of a global PHE, it’s crucial to take the long view when seeking and choosing partners—who is good for your business today and years from now.
Recently, our team supported a medical device manufacturer who needed support developing their partnering strategy. This manufacturer had an idea of which types of partners they could pursue but wanted a fuller view of their partnership ecosystem to ensure they didn’t miss an important potential collaborator. Through a structured approach, we explored their value chain stakeholders and helped expand their view and definition of a suitable partner, providing them with a larger view of potential collaborators to help them with their new product vision.
Ask yourself: Who in my value chain might I be overlooking and why? What needs might this stakeholder type respond to? Can this partner grow with me? Does this decision fit in with our 5-year strategic goals? our 10-year strategic goals? beyond?
- Don’t rely on one form of due diligence
Selecting the right partner involves assessing compatibility in technical, strategic, and value fit. When management asks why this partner is the right one, you must answer with clarity and fact. In addition to vetting during meetings with the potential partner, perform your research. Review the company history, customer satisfaction, news, intellectual property, employee reviews, and other resources to discover why you should or should not move forward with this partner. Vetting takes time, but it’s better to take a longer time in the vetting process than to face large delays in reaching key milestones because the wrong partner was chosen.
Ask yourself: What, if any, red flags do I see with this partner? What questions do I need answered before I feel comfortable moving forward? Why is this the right partner?
- Avoid treating partner searching as a one-time activity.
Partner searching should never be a one-and-done type of activity. Sometimes the timing isn’t right for the business to pursue a new partnership, or a potential partner’s interesting technology or capability may be too early-stage for your business’s needs. Monitoring the status of known potential partners and identifying emerging partners is crucial for an intentional and comprehensive M&A strategy and partner identification.
We previously helped a large medtech manufacturer identify technologies and partners in a new clinical space. At that time, that manufacturer decided not to pursue that clinical space because the timing wasn’t right. Three years later, they came back to us to refresh their target search, and what did we find? The market signals and customer discovery research exhibited that the market was much more ready for the product solution they had envisioned years ago.
Ask yourself: Does this partnership make sense with our current business and other activities in our business? Is the market ready for what we have envisioned? Is this partner at the right stage of development for our needs?
Companies no longer innovate in secret—open innovation models and strategic M&As have replaced closed-door developments. This transition, combined with other key trends in the medtech industry (e.g., in silico drug design and development, adaptive clinical trial designs, digital technologies that complement and enhance your existing product line), is compressing innovation cycles and the time to market. To ensure you are not left behind in the wake of the innovation boom, it’s critical now more than ever to choose the right partner through an intentional, structured, and unbiased evaluation process.