The last few years have been quiet in medtech M&A. Founders, developers, and manufacturers have felt the chill. Yet, analysts and industry insiders are now signaling a strong shift: M&A activity is expected to pick up significantly and accelerate into 2026.

This resurgence is not random. Acquirers are focusing on strategic, smaller targets in high-growth areas: next-gen robotics, innovative heart treatments, and specialized diabetes technologies. These fast-growing companies are hot assets, but their rapid expansion often masks foundational risks.

A great product is just the ticket to the dance. To secure a premium valuation and a smooth exit, you must prove you run a clean, de-risked company. An exit is, first and foremost, a massive due diligence event. Working with thousands of high-growth life science companies, we can attest that the biggest mistake is waiting until the Letter of Intent (LOI) arrives to address risk.

Following is a three-part blueprint to prepare medtech companies, ensuring they manage the regulatory, financial, and operational exposures that can derail a deal.

1. Taming Regulatory Risk: The Dealbreaker in Medtech M&A

In medtech, compliance is non-negotiable. If you sell enterprise software, a hiccup in a service contract is fixable. If you manufacture a heart ablation device, a compliance failure can result in class-action lawsuits or a full product recall. Regulatory risk is the fastest way to kill a deal.

Design Controls & The DHF/TF Audit

The mistake we see most often is the “build first, document later” mentality. When you get acquired, the buyer is not interested in your prototype; they are interested in your process. They will bring in regulatory experts to scrutinize your design history file (DHF) and technical file (TF).

Any gap in the traceability—from user needs and design requirements through to verification and validation testing—is considered a significant vulnerability. If your documentation is sloppy, the acquirer must factor in the expensive, time-consuming remediation work, which directly reduces your final valuation. Make your documentation auditable and airtight well before you start talking to bankers.

Product Liability and Post-Market Surveillance

An acquirer is purchasing your history of risk. They need confidence they are not inheriting a stream of unresolved quality issues. They will review all customer complaints, adverse event reports, and field corrections.

Ensure your product liability insurance program is not just adequate for today, but for tomorrow’s scale. Inadequate limits or poorly managed claims history signal a major financial headache for the buyer. Robust post-market surveillance (PMS) systems are your first line of defense; they demonstrate you are proactively managing the device’s performance in the real world.

2. Mitigating Financial Risk: Securing Your Premium Valuation

A successful exit depends on trust. The financial due diligence process is designed to find reasons not to trust your numbers or your ownership.

Quality of Earnings (QoE) and Financial Hygiene

Your internal accounting is a starting point, but an acquirer will rely on a quality of earnings (QoE) report. This process ensures the reported revenue and EBITDA are sustainable and accurate.

If you have used aggressive accounting methods—perhaps recognizing revenue too early or relying heavily on non-recurring expenses to boost EBITDA—these adjustments will become apparent and painful. The actionable strategy here is to engage a firm to conduct a “mock” QoE review early on. This allows you to clean up your financial records and present a transparent, defensible financial story that justifies your premium valuation.

IP Protection and FTO

For technology companies, intellectual property (IP) is the crown jewel. However, its value is only as good as its protection. Acquirers’ legal teams will look for two primary issues:

1. Ownership Gaps: Are all employee IP assignments fully executed? If a former R&D leader claims ownership over a key algorithm, the deal stops immediately.
2. Freedom-to-Operate (FTO) Risk: Can you operate without infringing on a competitor’s patents? Conduct a thorough FTO analysis to avoid inheriting massive litigation risk.

Transactional Risk and R&W Insurance

Once the price is set, the seller needs certainty. The standard mechanism for protection is the seller’s indemnity, which means the seller’s money is held in escrow for years in case of a future claim.

This is why Representations & Warranties (R&W) insurance has become standard practice. R&W insurance covers breaches of the seller’s representations (e.g., that their financials are accurate). This tool allows founders and investors to cap their post-closing financial liability to a minimum, providing a cleaner, faster exit and a happier buyer.

3. Ensuring Operational Resilience: The Key to Integration and Retention

Acquirers don’t just buy a product; they buy an operating machine. If that machine crumbles upon integration, the deal’s value is destroyed. Proving operational maturity is essential for a smooth handover.

Supply Chain and Manufacturing Scalability

In the current global climate, reliance on single-source suppliers is a major operational risk. Acquirers are looking to scale your product rapidly. If they fear a disruption in the supply of a core component, they will be wary.

You must document contingency plans and, ideally, demonstrate redundancy across critical components. Show that your manufacturing processes can handle a five-fold increase in volume without sacrificing quality control.

IT, Data Integrity, and Cybersecurity

For fast-growing sectors like robotics and diabetes tech, connectivity is everything. This introduces significant cybersecurity risk.

Acquirers will conduct thorough diligence to ensure your IT environment is not only functional but also compliant with strict data regulations such as HIPAA/HITECH. A system with known vulnerabilities—or one that isn’t clearly documented—is a massive liability, exposing the buyer to regulatory fines and public scrutiny immediately after closing.

The Smooth Exit Blueprint

The medtech M&A market is moving from hibernation into a strategic hunt. Your innovative technology is what got you noticed. Your proactive management of regulatory, financial, and operational risk is what will secure the premium valuation and the certainty of a smooth closing.

Don’t wait for the LOI to start this work. Implement these three layers of diligence now. For the founder, risk management isn’t a cost center—it’s the profit center that validates your worth and delivers your ultimate exit.

Justin Kozak has been a part of the risk management space for over a decade with Hub International, PBC, and Founder Shield. As EVP, he leads the Life Sciences team, supporting all new clients and partners joining the Founder Shield Network. Kozak thrives in building bespoke insurance programs for emerging industries, especially in the mobility, delivery, and PE/VC spaces. His motto is to “let challenges be your driving force.”