A good recipe for equity raise and acquisitions

I am very familiar with MedAssurant as I had an opportunity to talk with their CEO a few years ago about the company’s strategy. MedAssurant is a small, biotech company with a simple application to their product line. They were very strategic when raising initial equity for operations spending and future acquisitions, in that they approached equity firms and current/potential clients. After signing the agreement with two current customers (who are exceptional candidates to one day acquire the company), they approached the VC industry to complete the equity raise. They have a professional BOD who are attuned to the industry and can provide expert guidance to product development and financial strategy. Now that they are expanding their product line through M&A, MedAssurant is engaging advisors to explore the market for candidates and advise on valuations and structures. Instead of expanding their investor base, they have gone back to the well for additional funding.

 

MedAssurant has provided us with an ideal road-map to raising capital- 1. have a solid strategy and client testimonies, 2. know how much equity you will need for operations and how the funds will be used, 3. be open to who the potential investors are and have a good understanding of their profile, 4. include the savvy investors on the BOD, and 5. execute on your plan. When and if the time comes to acquire, be patient and hire the right advisors.

 

Some may private companies attempt the scattergun approach when it comes time to execute the equity raise, and ,if successful, are stuck with shareholders who either don’t fit well with the company’s strategy or have disconnected goals. In strategic acquisitions, many times the acquirer will target a single company and will hire advisors whose objectives are not inline with the company’s. All of which can reduce the ultimate valuation and return to investors.