As we’ve learned in recent months, word of M&A’s demise in the medtech space was greatly exaggerated. 
 
In Q4 2023, North American M&A activity fell by a whopping 87% compared to Q4 2022, prompting what many have deemed a medtech merger slump. However, overshadowed by the YOY stat is Q4 2023’s 160% uptick from the preceding quarter. And the most recent figures suggest that this positive momentum is continuing.
 
So while medtech M&As might be down, they’re certainly not out. Here, the main reason has nothing to do with numbers, and everything to do with recognizing emerging market needs and having a strategy to address them. Increasingly, medtech companies are seeking contract manufacturing partners that can participate with them on comprehensive product journeys – from initial concept to validation to large-scale manufacturing and everything in between. To meet these needs, contract companies must level up their capabilities, and certainly strategic mergers are a compelling means of accomplishing this. Transforming a business to meet these new needs is now a driving force in medtech deals. 
 
Of course, transformative deals can be fraught with challenges. Joining two robust companies to fully leverage their collective strength is a painstaking, high-leverage process. My goal here is to share some best practices toward navigating the types of truly transformative mergers that could steer organizations to unprecedented waters. But before we can showcase how a level-up can unfold, some context is required. 
 
Leading up to late 2023, my business—TekniPlex Healthcare—had made a name for itself as a prominent contract manufacturer in the medical device and pharmaceutical sectors. Our core expertise lies in applying advanced materials science to deliver critical solutions for medical and diagnostic devices, drug delivery systems and healthcare sterile packaging applications. For years, we’ve been a market leader in several of our niches – and while I’m obviously a less-than-objective source, I’d like to think we meet these challenges exceptionally well.
 
But any business has capabilities gaps, ours included. Our success is firmly rooted in the ability to combine materials science and process technologies to solve customer needs. Understanding that our customers increasingly wanted input right from the start of product ideation – from materials selection and design straight through to manufacturing, with ample participation in critical steps like co-design, detailed component engineering and validation testing – we were actively seeking design and engineering muscle to complement our materials science and manufacturing prowess. Our M&A targeting prioritized these capabilities toward our strategic objective of becoming a fully capable CDMO partner in the medtech space. 
 
Last year, our targeting focus paid off. In December 2023, we merged with Seisa Medical, a contract design and manufacturer of Class II and Class III medical devices and specialty components. With a wide range of products including catheter-based devices, stents, stent delivery systems, metals fabrication such as wire forming and laser welding of specialty metals, and complex assemblies, Seisa’s capabilities span every stage of the product life cycle, including initial phases like design and development, simulation, prototyping, validation and component manufacturing – all adding to our already comprehensive materials science and process technologies portfolio. 
 
It was the transformative step we set out to take. Through manufacturing locations in North America and Europe, Seisa is a global provider spanning several key categories. With Seisa in the fold, TekniPlex Healthcare can now engage with medtech organizations from early-stage R&D, design and development. From there, our legacy materials science background allows us to continue that relationship into the manufacturing sphere. Customers now have a true end-to-end partner vested with them in delivering better patient outcomes through new medical technologies. 

 
At first glance, all this seems… well, sort of obvious. As the healthcare solutions landscape becomes more intricate (the surge in multi-material, multi-component devices and therapies is an apt example), more medtech companies are seeking out partners that can see a process through from design and validation to manufacture and assembly. Considering this, adding front-end capabilities like product design and prototyping to our longstanding manufacturing skillsets – putting the “D” in CDMO, so to speak – can be perceived as a no-brainer. 
 
Quite the contrary. The fact is that several years’ worth of meticulous planning and proposals must precede marrying two already-robust companies into one mega-robust organization. 
 
The best M&As are the culmination of countless Q&As. Here are just a few issues to consider for medical device organizations seeking growth via merger and acquisition.  

Strategy Development 

First and foremost, a company looking to expand via M&A needs the right strategy – or, more specifically, a properly developed one. Doing so takes a cleareyed assessment of what your organization is, what it isn’t, and what market trends are emerging. These exercises are crucial to determining which capabilities gaps absolutely must be bridged for a merger to be worth the incredible resources, time and effort required.
 
Among other goals, this process – which includes intense, granular internal assessments, market analyses, and potential partner profiling – allows an organization to realize what an ideal merger partner looks like. Only by prioritizing those skillsets that must be added (and, by contrast, which are “nice to have” but not absolute musts) in the context of the ever-evolving medtech landscape will a company know what qualities an ideal counterpart should embody.
 
Much like any partnership, it’s highly unlikely that any potential match will meet 100% of a company’s desired capabilities add-ons or weakness points. However, a well-executed strategy process can help find one that meets all the must-haves and, likely, many of the “want to haves.” 

Culture Is Key

Ideally, the aforementioned development process is reflective as well as reactive; in other words, it reveals insight not only about your company’s ideal M&A partner, but also your company’s culture. 
 
There’s an important (and potentially deal-breaking) difference between “What does your company do?” and “How does your company work?” What is your organization’s overarching goal, and how does that goal play out in the day-to-day? What is your approach to customer service, new business development, marketing, each other? 
 
Checking a bunch of capabilities boxes simply isn’t enough in something as too-huge-to-fail as a high-leverage merger. Divorce is an incredibly messy (and expensive) fallback, meaning two companies better be certain about the marriage. 
 
Granted, compatibility can take many forms. In a paradise scenario, the two organizations’ corporate cultures are quite similar where it counts the most – areas like customer service, problem-solving/innovation, and internal team cohesion. However, if certain core cultural aspects don’t quite align, there may be instances where one company’s cultural strengths inform another’s weaknesses, and vice versa. If their market capabilities sets are a strong fit, some cultural misalignments can be bridged with two things often overlooked in business: honesty and humility. 
 
Cultural alignment is so critical that if there are significant indications of misalignment without any insights on how to merge paths, the best decision might just be to find another target.  

Business Process: Aptitude and Adaptability

Once capabilities and culture are aligned, the last potentially deal-breaking question becomes this: Can your potential partner actually pull this off? All pleasantries aside, it’s time for cold, calculating assessment. For two organizations to come together, both need the business acumen to conjoin as seamlessly as possible – extreme emphasis on “as possible.”
 
Even under idyllic conditions, mergers are steep hills to climb. The confidence that a potential partner has the process muscle to walk the path with you makes the ascent far less daunting, and could even be the difference between reaching the desired destination at all.
 
Helpfully, one way to help determine this all-encompassing issue is to break it down into levels and disciplines. As much as possible before the dotted line is signed, compare various functions – C-Suite, human resources, accounting, sales, and marketing. Would combining your teams be truly complementary… or truly a disaster? When doing so, be mindful not to set unrealistic expectations or, conversely, catastrophize worst-case scenarios. More than anything, we’re assessing logistical feasibility here. The test doesn’t necessarily need to be aced, but it must be passed, and preferably comfortably. 

Early Integration

The contracts are signed. So now what? While there’s no cure-all for growing pains, a good rule of thumb would be: “You’re merged – now merge.”
 
In doing so, don’t hesitate to seek help. Showcasing how challenging mergers can truly be, there’s an entire cottage industry dedicated to helping recently merged companies integrate. 
 
At TekniPlex, we’re finding that successful integration relies upon intra-category cooperation. Even before the ink was dry, we began pairing up executives with their counterparts at Seisa – an organization-wide intradisciplinary meeting of the minds. Here, it’s important to note what these “twinnings” are not: they are not the acquiring party bossing around the acquired one. That’s not how best practices are shared, progress is made and organizations are enriched. 
 
To best ensure a mutually beneficial process, regular integration check-ins are a must. For starters, this is “Resentment Prevention 101,” a forum for airing issues that may be emerging with nascent relationships and team dynamics. When conducted consistently, such tools build trust and keep everyone swimming upstream together. 
 
Finally, two rules of M&A integration so vital I consider them commandments. Consider it leaving the best of the best practices for last. These are, in order, “Protect our patients at all costs,” and “Don’t disrupt the business.” 
 
Atop any medtech company’s priority pyramid should be one message etched ALL CAPS in stone: “WE ARE IN HEALTHCARE.” Absolutely nothing – a merger or anything else – should detract from our responsibility to bring to market materials and devices that help improve patient outcomes and help save lives. Companies in other sectors have missions; we have a duty. 
 
And really, “Don’t disrupt the business” is part and parcel to this duty. A medtech company’s economic wellbeing directly affects its ability to best ensure, through its products, the wellbeing of patients. While it’s a good idea to address any dustups or disconnects that can occur during early integration, don’t hesitate to backburner them when the business demands it.  

Conclusion

Like any process in the exacting, expertise-dependent field of medical device development and commercialization, a merger between two complementary businesses should be forged in a set of best practices. When orchestrated with directness and diligence, mergers become more than expedient paths to obtaining desired capabilities and disciplines; they become a gateway to a revitalized business whose whole is truly greater than the sum of its parts. 
 
After all, the most successful mergers come to fruition the same way that lifesaving med devices do: gradually, and with rigorous, incremental planning to ensure viability, compatibility and, most importantly, exceptional quality. By accruing and adhering to patient, strategic approaches toward targeting, orientating and integrating, an organization can make mergers even more attractive in a segment that increasingly favors turnkey partners with comprehensive capabilities.
 

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Chris Qualters is CEO of TekniPlex Healthcare, a CDMO partner servicing every stage of the product life cycle, from design and development through component manufacturing and final assembly. The company utilizes advanced materials science expertise and technologies to deliver critical solutions for medical and diagnostic devices, drug delivery systems, and healthcare packaging applications, among other solutions. www.tekni-plex.com/healthcare.