Value Impact Modeling (Sell Side)
CASE STUDY: CathCo
A growing company receives an unexpected offer to sell.
CathCo is a manufacturer of innovative microcatheter-based products for the treatment of neurological and vascular diseases.
CathCo had been approached by a large medical conglomerate that was interested in purchasing the company.
Although CathCo's management team had not solicited any offers, they understood the potential strategic merits of the merger; however, the company needed to receive a particularly attractive price to move forward.
On the sell-side, how to command a sufficiently high price?
The management team believed the price premium the company would receive should reflect not only the value of current and projected sales, but also the value of the upside potential and synergies from CathCo's newly introduced technologies.
The CEO recognized that being on the sell-side, CathCo would need to be able to show from where its large projected growth would come.
The CEO hired Quattro to help in his efforts to effectively make the case for receiving the high price premium he and the Board believed the company deserved.
Value Impact Model - fact-based, supported by customer-interviews.
Created a rigorous quantitative method, a Value Impact Model (VIM), for mapping out and demonstrating CathCo's real sources of growth and profit, both standalone as well as from synergies.
Conducted extensive customer interviews as well as market and disease state analyses to develop the VIM.
A detailed bottom-up financial map, the Value Impact Model, incorporated market size, share, unit and revenue growth, and price changes for each disease segment the company addressed. It demonstrated precise growth, margin and profit impact (as well as sensitivities) of alternative market and management actions (e.g., new product introductions, pricing declines or increases, changing product mix, increased penetration of patients and potential cost reductions in manufacturing and operations).
Successful sale. Exceptional premium.
The CEO used the Value Impact Model as the pivotal quantitative tool to explain in detail to the suitor CathCo's attractive growth potential.
CathCo was successfully sold to the medical conglomerate - it received one of the highest price premiums among all medical device transactions during that year.