Regulatory due diligence is nowadays crucial for mergers and acquisitions in MedTech. The acquiring company must have a clear understanding of the regulatory risk profile of the target company and place the existing risks in the context of the potential acquisition. The outcome of the regulatory due diligence could affect the valuation of the deal, particularly if high costs are involved to address identified compliance gaps i.e. for conducting clinical investigations, changes in production processes. The increased regulatory scrutiny may have an impact on deal timelines but can reduce the risk for unexpected post-close regulatory delays.
Regulatory professionals are typically regulatory affairs or quality assurance staff employed by the acquiring company or external consultants hired specifically for due diligence review. Most private equity firms don't have the medical device regulatory experts in the company to support the due diligence review process and rely on external resources to perform the due diligence review. Reasons as to why you would need regulatory due diligence experts differ:
- Lack of in-house regulatory expertise
Most private equity firms don't have the medical device regulatory experts in the company to support the due diligence review during the merger and acquisition process and rely on external resources to perform the due diligence review.
- Goal of Regulatory Due Diligence review
The regulatory experts involved shall conduct a review of all market approvals or pending registrations and listings, the technical documentation of the products involved, the quality management system, manufacturing plants, if applicable to assess regulatory and clinical strategies of product designs in pre-market state.
An important goal of regulatory due diligence is to identify possible risk mitigations and addressing costs involved, instead of becoming costly surprises post-acquisition.
- Expansion into new markets
If your acquisition strategy includes expanding the target company into new geographical markets, regulatory due diligence also becomes essential. External experts can assess whether market expansion plans and costs are realistic, if regulatory processes are robust and what steps would be necessary to gain market access,
What does regulatory due diligence look like?
Expert regulatory consultants can evaluate the target company's current compliance level against applicable standards and regulations in existing and potential markets.
Technical file documentation and QMS systems will be assessed or audited as well as product filings and listings in different territories. This assessment will help to reveal how robust the company processes are from a regulatory perspective.
Regulatory experts can provide realistic estimates for timeframes for new market approvals, costs associated with achieving regulatory compliance, and resources needed to maintain compliance.
- Strategic value assessment
Understanding how regulatory factors impact the target company's strategic value allows for more accurate valuation and better-informed healthcare mergers & acquisitions decisions. This includes evaluating whether stated growth strategies align with regulatory realities.
When to engage regulatory experts
Regulatory due diligence isn't just about identifying problems. It's about understanding how regulatory factors shape your target acquisition's opportunity landscape and future growth potential.
By partnering with regulatory experts during your M&A healthcare process, you gain critical insights that can protect your investment and enhance your ability to realize the full value potential of the MedTech company you're acquiring.
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