cashing out successfully: exit strategies to capture value presented by james e. nicholson chairman...
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Cashing Out Successfully: Exit
Strategies to Capture Value
Presented by
James E. Nicholson
Chairman & CEO
Cortek, Inc.
April 16 , 2001
MIT Enterprise Forum
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Outline
• Getting Ready
• Exit Strategies
• Evaluating a Company
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Setting the Stage for the “Exit” Starts Early
An Enabling Technology
Management & Leadership
Good counsel
Financial Strength
Technically Proven Product
Having an Exit Strategy
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What is an “enabling” technology?
• Something that didn’t exist before that allows you to do something you couldn’t do.
• It solves a difficult problem quickly and elegantly.
• Unique product or service with a viable market.
• Provides an opportunity for substantial growth.
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Examples of Enabling Technologies
Building the Colosseum
Built from 70 - 80 ADStructure needed greater supportRomans developed the formula for cementEnabled construction of superior structures(Formula was lost in 450 AD until the Renaissance)
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Examples of Enabling Technologies
• Non-invasive technology for DVT.
• In use for 30+ years now.
Putting the squeeze on clots: The Venodyne Boot
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• Management & Leadership– Experienced CEO– Seasoned Finance Person– Marketing Expertise in Business Sector– Innovative R&D, Product Focus– Regulatory & Clinical Professional
• Good counsel– Patent– Corporate– Regulatory
• Financial Strength– Venture Capital - Staying Power
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Factors that Influence Success
Technically Proven Product
Murphy’s Law # 247
For every vision, there is always an equal and opposite revision.
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First: Have a technically proven product that solves a real problem
“Computer number 9 has just discovered a cure for which there is no known disease!”
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Then prove it . . .
• Statistical analysis with sound data
• Sales
• Professional papers
• Doctors acceptance
• FDA approval
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Factors that Influence Success
An Exit Strategy
Murphy’s Law # 325
Almost everything in life is easier to get into than out of.
Corrollary: A marriage license costs $2.00
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Want to be acquired?
• Sales
• Profitability
• Product with an enabling technology
• Strong fundamentals
• Strong management team
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Want to go public?
• Sales• Profitability• Product with an enabling technology• Strong fundamentals• Seasoned management team
• Timing is critical . . .
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PUBLIC EQUITY ISSUANCE FOR MEDICAL TECHNOLOGY COMPANIES (as of April 5, 2002)
Source: Securities Data Corp.
Notes: Values for disclosed transactions only. Labels represent number of completed transactions.
MEDICAL TECHNOLOGY EQUITY MARKET UPDATE
312
26 32 25 9 14
7 21
6
11
27
61
20
31
10
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1994 1995 1996 1997 1998 1999 2000 2001 2002
Tra
nsa
ctio
n V
alue
Follow-ons IPO
(Dollars in Millions)
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Evaluating a Company
Whether you are a start up company, a potential investor, interested in M&A, or an IPO . . .
you should consider the following checklist.
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Checklist Yes No FixableIdea Enabling Technology
High Margin ProductTechnically Proven
Capitalization Realistic Financial PlanConservative ForecastSeasoned Venture Capital
Management Seasoned CEOExperienced Financial personExperienced Marketing & Sales peopleInnovative R&DStrong Regulatory person
Market Growth Market SegmentProprietary Product
Legal Position Patent CounselCorporate AttorneyRegulatory Attorney
Performance Meet or Exceed PlanApproaching ProfitabilityCapital Availability
Exit Clear Exit Strategy
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Footnotes:(1) Index Includes: ABT, AKSY, AMMD, ANSI, ARRO, ARTC, ASPM, BABY, BAX, BCR, BDX, BMET, BOL, BSTE, BSX, CNMD, COO, CRY, CYBX, CYTC, DJO, EW, GB, GDT, IMDC, IART, ISRG, MDT, MTIX, NOVT, OCLR, OFIX, OTEC, POSS, RITA, RTIX, SNCI, STJ, SYK, VASC, VMSI, WMGI. (2) Index includes: ABT, BAX, BCR, BDX, BMET, BSX, GDT, MDT, STJ, SYK.(3) Index includes: AKSY, AMMD, ANSI, ARRO, ARTC, ASPM, BABY, BOL, BSTE, CNMD, COO, CRY, CYBX, CYTC, DJO, EW, GB, IMDC, IART, ISRG, MTIX, NOVT, OCLR, OFIX, OTEC, POSS, RITA, RTIX, SNCI, VASC, VMSI, WMGI.
Source: FactSet.
STOCK PRICE PERFORMANCE 4/05/01 - 4/05/02 Market Cap Weighted; 4/05/01 = 100
S&P 500
MEDICAL TECHNOLOGY EQUITY MARKET UPDATE
All Med. Tech. Companies Index (1)
Large Cap Med. Tech. Index (2)
Mid/Small Cap Med. Tech. Index (3)
60
70
80
90
100
110
120
130
140
4/5/2001 6/5/2001 8/2/2001 10/5/2001 12/4/2001 2/4/2002 4/4/2002
Indexed Prices