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© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 23, 2023 1
M&AAcquisition Target Identification
M&A Due Diligence
© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 23, 2023 2
Acquisition Target Identification in the medical supplies industry in Canada
• The client was one of the leading distributors of packaging and facility supplies, with operations primarily in the United States and Canada
Client
• The client wanted SGS to assist them in performing an attractiveness-assessment of three different segments, viz. safety supplies, medical supplies and wide format printing supplies and also help identify acquisition targets (distributors)
Client Ask
• SGS undertook desk research to gain an in-depth understanding of each sub-segment and future potential in Canada• SGS also conducted desk research to identify leading distributors in the industry and their financial and other related information• SGS also conducted primary research with industry participants to validate the information gathered from desk research and to
understand the trends prevailing in the market, and also undertook an extensive telephonic primary research with manufacturers, distributors, retailers and other industry experts
• SGS also interviewed the top management in the target companies to study the company in detail and identify their willingness for the venture
Sutherland’s Solution
• Through SGS Research’s analysis covering the overview of the industry, market size, growth drivers, supply chain dynamics, major players and future outlook, the client was able to gauge the opportunity in the industry
• The research also helped the client understand the practices followed in the distribution space in the industry in the country and understand prospects in the sector based on parameters such as distributor intensity, competition, margins and regulations
• The client also benefitted from the comparison of short-listed target distributors on pre-defined parameters such as revenues, geographical operations, operational excellence and possible synergies, to explore target businesses
•Benefits to the Client
© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 23, 2023 3
Value Chain of Medical Supplies in Canada consists of 3-4 intermediaries
Canadian Manufacturer
National Wholesaler/ Distributor
Group Purchasing Organization
Regional/Tier II
Distributor
END
CUSTOMERS
Company Specific Distributor
Manufacturer’s Sales Office
~60-65%
~25-30%
~30-35%
~10-15%
~5-10%
~5%
XX% - % of medical supplies volume going through each channel , indicative from primary research, hence there could be a deviation of 5-10%
Hospitals
Long-Term Care
At Home (Retail) Customers
Pharmacists
Laboratories
Medical Practitioners/
Physicians
Foreign Manufacturer
(Imports)
~95%
Source: SGS Analysis, primary research
© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 23, 2023 4
Operations of medical supplies distribution market
South Asian Manufacturer
Opens up a sales Office in Canada
Distributor
Imports products from
Manufacturers’ Country
Distributor Pays the Import duties if
orders are in bulk
• All distributors must have a valid license to distribute the medical supplies products.
• Though the license is easy to obtain but it is mandatory for all distributors in the medical supplies industry
• Each product that the distributor supplies has to meet through Health Canada regulation and has to comply to ISO 13485
• Distributors also have to abide by the regional rules and regulations. • Different provinces have varied regulations for the medical supplies. For
e.g. Quebec, a French province has to have everything written in French on the medical supplies packages
Prerequisite for a Medical Supplies Distributor to Operate in Canada
Distributes to Health Institutions/
GPOs
Distributor prefers manuf.
sales office
New Manufacturer Medical Supply Distribution Process
• Usually the end-customers order medical supplies on “On-Demand” basis with very short lead times.
• Distribution depends on the order size and the distance of customer from the warehouse.
• If customer is in regional periphery, then they get into an agreement wherein institution’s trucks/ vans carry distributor’s supplies and their logo and in return distributor gives them rebates/discounts
• In farther regions, they use logistics companies such as FedEx, etc. based on their distribution contracts with them
Method of Distribution
Source: SGS Analysis, primary research
U.S. Manufacturer
Local Manufacturer
Distributors markets itself usually to U.S.
Manuf.
Local Manuf. markets
its products to distri.
© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 23, 2023 5
Target Companies
Acquisition Criteria
Source: SGS Analysis
Operational Excellence
Comparatively higher revenues along with geographical reach makes XX and XXX most attractive acquisition targets
Synergies with Client
Geographic PresenceSize of the Company
ON QC BC AB MN RatingNL NS
Low HighMediumLow- Medium Medium-High
Final Rating
1 2 3 4 5
3.75
3.25
2.75
3.00
2.25
2.00
Ratings
XX
XXX
XXXXX
XXXX
XXXXXX
XXXXXXX
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