How does collaboration with a consultancy partner in regulatory consultancy work?

Conducting thorough yet efficient due diligence presents unique challenges in medical technology investments that demand specialized approaches. Collaborating between regulatory consultants and private equity firms is a critical relationship that can provide crucial insights that drive successful investment decisions. We examine how private equity and medical consultancy companies come together to assess risk, identify opportunities, and determine value in the complex MedTech landscape.

A time-constrained reality

Perhaps the most significant challenge in MedTech's regulatory due diligence is operating within extremely compressed timeframes. Private equity firms typically expect comprehensive regulatory assessments to be completed in as little as a month and sometimes require early insights even earlier so they can assess whether the acquisition is worth their time, creating substantial pressure across all parties involved.

Regulatory consultant teams must mobilize quickly, sometimes pulling specialized experts from other ongoing projects to meet these urgent demands. The consultants need immediate access to technical files, quality management system documentation, regulatory clearances, data rooms, and compliance records to meet deadlines.

This time pressure necessitates a highly structured approach where initial impressions and red flags are communicated early and regularly, even before comprehensive analysis is complete. Private equity firms prioritize understanding major compliance issues, potential remediation costs, and material business impacts over exhaustive documentation reviews.

Different professional languages

The communication gap between regulatory experts and investment professionals represents a fundamental challenge in the due diligence process. These professionals operate with different vocabularies, priorities, and frameworks:

Successful collaboration requires experts to convert complex regulatory findings into clear business implications. They must quantify compliance gaps regarding remediation costs and timeline implications, identify organizational strengths and weaknesses in quality and regulatory functions, articulate how regulatory standing may impact market access and revenue potential, and prioritize material issues over minor compliance observations

The structured collaborative process in detail

Adequate MedTech due diligence typically follows a well-defined framework that balances thoroughness with efficiency, beginning with rapid project initiation. This involves quick proposal development focused on specific regulatory areas requiring assessment, immediate contract execution to minimize delays, establishing secure data room access and information-sharing protocols, and definition of reporting cadence and communication channels.

The comprehensive information-gathering phase involves a systematic review of technical documentation. This includes technical and design history files, risk management documentation, clinical evaluation reports, quality management system procedures, regulatory submissions and correspondence, complaint handling and vigilance records, and previous audit findings and corrective actions.

This review is supplemented by information collection through structured interviews with quality and regulatory personnel, on-site audits of manufacturing facilities when critical, sampling of product documentation across different risk classes, and review of supplier and subcontractor management systems.

Ongoing communication and updates are essential throughout the process. This includes regular progress meetings to share preliminary findings, early identification of potential red flags that could impact valuation, interim reports focusing on material issues rather than comprehensive documentation, and continuous dialogue allowing investors to ask follow-up questions.

The business impact translation phase involves converting technical findings into business implications, estimating remediation costs and timelines, assessing organizational capabilities in quality and regulatory functions, identifying potential post-acquisition integration challenges, and evaluating regulatory strategy alignment with business objectives.

The process concludes with final reporting and clear role delineation. This includes comprehensive documentation of findings with prioritized recommendations, clear articulation of regulatory risks and their business consequences, maintenance of consultant independence from investment decisions, and availability for clarification questions during deal negotiations.

Potential Challenges and How to Address Them

For regulatory consultants:

• Resource allocation. Freeing up specialized experts on short notice for intensive projects.
• Incomplete information. Making assessments with potentially incomplete documentation.
• Business language. Converting complex regulatory findings into business terms.

For private equity firms:

• Regulatory complexity. Understanding the implications of technical findings.
• Moving regulatory targets. Assessing compliance against evolving regulatory requirements (like EU MDR/IVDR transitions).
• Balancing speed and thoroughness. Getting sufficient regulatory due diligence insight without delaying healthcare mergers & acquisitions timelines.

Best practices

Private equity firms should engage regulatory experts early by bringing them in at the earliest stages of target identification. They should ensure consultants get comprehensive documentation access quickly, prioritizing access to key information. Setting clear expectations about what level of detail and focus is needed helps streamline the process. Firms should select consultants who can effectively communicate in business terms. Maintaining independence by allowing consultants to present objective findings without pressure ensures the integrity of the assessment.

Regulatory consultants should focus communications on business implications, speaking the language of investors. They should distinguish between critical issues and minor observations, prioritizing effectively what matters to the transaction. Providing estimated remediation costs and timelines helps investors assess the financial impact of the regulatory problems. If the consultants understand the difference between theoretical compliance and material business risk, their assessments will be more pragmatic. Developing systems for rapidly deploying expert teams helps manage resources efficiently in time-constrained situations.

Target companies can organize regulatory documentation in anticipation of due diligence, preparing proactively for the process. Acknowledging known issues upfront rather than hiding problems demonstrates transparency and builds trust. Helping consultants understand business priorities and regulatory strategy by providing context improves the quality of the assessment. Ensuring regulatory and quality personnel are available for interviews facilitates access to critical information and insights.

The collaboration between regulatory consultants and private equity firms in MedTech due diligence represents a critical intersection of technical expertise and investment strategy.

The success of this collaboration depends on mutual understanding and clear communication. Regulatory consultants must develop the ability to translate technical findings into business implications and focus on material issues that impact valuation and strategy. It's two different worlds... but it's exciting to bring in these aspects and ensure that consultants can tell the impact on the business.

Contact us for more information about this subject; we’re happy to share our expertise.