Shenkan Advisors

M&A Screening

Management of a medical technology company asked us to identify attractive companies to acquire. Although the company had acquisition experience, management wanted an outside perspective to add more rigor to the analysis. First we developed a criteria for acquisitions based on valuation metrics, growth expectations, market size, and market leadership expectations. We profiled and ranked over 100 public and private companies against this criteria as part of a proactive screen for acquisition candidates. Next we performed a deeper dive into select companies we concluded to be most attractive. Our deep dives included financial analysis, financial synergy identification and quantification, and strategic fit analysis.

 

This project enabled our client to focus its resources and to select a few high potential target companies. Our client was proactive in approaching potential target companies and avoided a highly competitive auction process and closed the acquisition with a fair valuation.

 

Due Diligence on Acquisitions or Investments

Our client was a top 5 medical device company considering a multibillion dollar acquisition. We conducted due diligence on the target company and conducted a comprehensive survey which included over 45% of the physicians in the market. We also performed phone calls with a subset of ~100 of these physicians, medical facility administrators, and payors. Our financial model was based on the data we collected which was more comprehensive than any currently available data.

 

Our disciplined valuation of the target company for our client was below the selling price of the target company and we encouraged our client not to pay in excess of our valuation of the company. The target was never sold due to the target company’s unrealistic valuation expectation. Two years later, our client acquired a public company in the same space at a more realistic multiple of revenues. Our data and analysis enabled our client to be patient and disciplined in its acquisition strategy and to eventually acquire a fairly priced company and maintain a high return on assets.

 

Strategic Assessment and Capital Allocation Analysis

The Board of a publicly traded healthcare company asked us to conduct a strategic marketing assessment of a high profile business unit that had missed its revenue goals for 2 consecutive quarters. The leader of the business unit had recently departed and the Board was struggling to understand the issues with the business and was evaluating whether to keep the business or divest it.

 

We performed an analysis of the market size, market growth rate, competition, and a review of the current portfolio and pipeline of products. We interviewed senior management and also sales and marketing people down to the sales representative level. We watched cases in the operating room to rule out product issues. We surveyed over 1,000 physicians and conducted interviews with ~100 physicians, facility administrators, and payors. We identified issues with reimbursement, product design, and the marketing message which had caused the slow down in growth. As a result of our analysis the company allocated capital for a post market study which would support a stronger sales and marketing message. The company also allocated capital to change product design and make the product more user friendly and increase the physician adoption rate. With management, we developed a new strategic plan and gave the board confidence to continue to invest in the business.

 

Strategic Marketing and Pricing Analysis

Management of a medical equipment company asked us to evaluate the market position and pricing for a new product platform that would disrupt the market. We surveyed over 1,000 of the physicians in the market, interviewed ~100 physicians and medical facility administrators and built a financial model. Our analysis helped to establish the sales and marketing message, develop the product roadmap, and determine what market segments the company would target.

 

We also helped the company build a pricing strategy for different segments of the market. Our pricing analysis enabled the company to understand the physician and facility profit requirements in order to adopt this new procedure. With customer information, we were able to recommend how high to price the product in order to maintain the maximum profit for the company while also sharing enough profit to make the procedure financially rewarding for the facility and the physician. Management was included in our analysis and adopted our recommendations.

 

White Space Evaluation

Our client was a top 5 medical technology company. We were asked to evaluate a white space for a potential new product platform and to help the company determine if it would invest to develop this new platform of products. This white space would satisfy an unmet market need and disrupt the market. We were challenged with describing a futuristic product to the physicians, other medical providers, facility administrators, and payors. After ~50 interviews we understood the need for the product, the competitive landscape, and identified potential business models. We then performed a quantitative study with over 1,000 physicians, medical providers, facility administrators, and payors to quantify the need for the product, the market size, the growth rate, the value of different product features, and to develop a pricing strategy. We developed a financial model and analyzed the new market. Lastly, we pressure tested our analysis with ~50 additional interviews.

 

Our surveys and user interviews identified the physician and medical providers’ needs for the platform of products and helped the company to shorten the product development timeline by determining which design components were essential. Our research enabled the company to determine what clinical data would be needed for adoption and to prioritize which clinical trials to finance. Through financial analysis we helped to validate a sales and marketing business model and pricing for the novel platform of products. Our analysis helped the company to commit to developing this platform of products and establish a new business unit. 

 

Exit Planning

Our client was a group of private equity investors who were considering the future of a portfolio company. The healthcare company was in a large market with a differentiated product. After surveying physicians and other medical providers, medical facility administrators, and payors, we concluded the company’s growth opportunity would be significantly enhanced if the company was combined with another leader with a complimentary platform of products in the market. Our primary research and financial analysis enabled us to convince the private equity investors there would be a higher return on equity by merging with another company rather than growing the company organically. The company then pursued an M&A strategy and has become the market leader, increased operating margins, and established pricing power due to its large portfolio of products.