M&A Compliance & Due Diligence
M&A Due Diligence
In the private equity and trade buying space, regulatory change is the primary driver of market volatility. However, traditionally in M&A transactions, financial, legal and commercial considerations have taken precedence over regulatory considerations. Failure to perform robust regulatory / FDA Compliance due diligence is not an option in today’s regulatory environment and can lead to unknown liabilities materializing after the deal. The benefit MEDVACON provides is very unique and the service we offer is critical during the due diligence phase. During this time, we conduct inspections and audits of the company’s FDA regulated systems that encompass warehousing, manufacturing, packaging, distribution, supply chain, all supporting computer systems, Quality Management Systems, etc. This work is crucial in assisting organizations focus on due diligence phase and in avoiding costly system flaws. This becomes especially critical (and more expensive) if these gaps are found during an FDA audit. By proactively identifying these issues, acquiring company solidifies a strong financial position through risk management. This approach and work also provide the company with a detailed report outlining the critical issues requiring attention. In addition to conducting the assessment, MEDVACON provides the expertise to help the organization remediate any gaps and achieve compliance.
By ensuring a robust approach to regulatory due diligence, firms can gain a host of benefits. Throughout the process of an acquisition and while taking into consideration the factors mentioned above, firms should constantly reflect on whether their due diligence process (and the deal itself) facilitates:
- Regulatory approval – approval of the transaction is of course the end goal, and robust due diligence can help achieve this
- Effective risk analysis – ensuring your process leaves no stone unturned will result in the highest level of assurance against future regulatory-related costs
- The avoidance of fines – through gaining a full understanding of what issue may exist and putting a plan in place to mitigate those issues places, the company in a much more defensible position for regulator inspection. Furthermore, after a transaction has taken place, acquiring firms may struggle to obtain restitution for any historic issues. Robust regulatory due diligence can help mitigate this
- The preservation of reputation – whether issues are uncovered that make a deal untenable, or a solvable issue presents itself, the acquiring firm can protect its reputation by either walking away or implementing a plan to solve regulatory issues immediately. The acquiring firm can also stipulate that issues are solved within the acquisition prior to deal finalization.
- Pricing assurance – issues identified by regulatory due diligence needn’t always result in a transaction being blocked. Robust due diligence can provide the information a firm needs to negotiate a realistic price – one that reflects the cost of correcting any issues.
- The understanding of best practice – aligning the firm with regulatory expectations will help ensure compliance and help to drive best practice prior to completion of the deal
Example Projects:
Venture Capital – Acquisition of Medical Device Product Line
MEDVACON worked with a venture capital firm to conduct deal due diligence around compliance, quality and regulatory. The venture capital group entered into a bilateral negotiation with the parent of the acquisition target. MEDVACON worked with the VC leadership to review quality agreements as well as to evaluate the Compliance and Regulatory costs associated with two options to house the acquisition target. The fist analysis was to identify all of the costs for compliance and regulatory involved in standing up a new Medical Device facility assuming acquiring reasonably cGMP adequate space to start with; the second option involved analyzing the same but utilizing a CDMO rather than building. This provide the VC with information to assist in negotiations.
Manufacturing and Compliance Due Diligence – Gene Therapy CDMO
MEDVACON was engaged by a gene therapy contract development and manufacturing organization (CDMO) to conduct due diligence on a partner/acquisition target that would support development and production of Phase 2/ Phase 3 clinical trial material for an investigational gene therapy. MEDVACON previously provided review and input on the planned personnel and material flow concepts for the facility, as well as input on the proposed area environmental classifications, with possible future expansion or addition of Fill/Finish manufacturing in mind. Additionally, MEDVACON reviewed the site QMS (Quality Management System) policies and procedures and provided the client with a comprehensive Gap Analysis. MEDVACON was engaged to further assist with drafting the Quality Agreement for product for Phase 2 and Phase 3 clinical trial batches and to support the client with an in-depth Quality Assessment for manufacturing of Phase II/III drug substance batches.
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