Business Articles

What business valuation would you place on a distribution management software company with $1.5 million in annual revenues and $500,000 in losses? How about a healthcare software ASP with $3

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

00 K in revenues that is breaking even? These companies don’t exactly fit the 5 times EBITDA or the discounted cash flow valuation models.

That is what makes software or technology based com

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

panies so much fun to sell. Arriving at a business value is done the old fashion way. You identify the universe of likely buyers, prepare your blind profile and NDA, and contact the presiden

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

t or person in charge of mergers and acquisitions. What you are trying to accomplish is to identify and articulate the strategic rationale for considering this acquisition.

In the example ab

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ove, our distribution management software company had adapted their software to a new vertical market while also introducing it on Microsoft’s .NET platform and upgrading from green screen to

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

GUI interfaces. They were not getting any traction in the new vertical competing against the two dominant players in that space. They had, however, created a lot of value in their technology

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

. They were a very good acquisition candidate for one of the dominant competitors. They had “leap-frogged” this competitor with a more modern platform. The competitor, through a series of pri

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

r acquisitions, was actually supporting six different software platforms for essentially the same capability. They were contemplating a long and expensive system rewrite. They needed to conso

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

lidate platforms, but did not have an upgrade path for their installed clients. Their clients were vulnerable to defections.

We approached the president and positioned our client as follows:

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

1. Purchase our client for a favorable buy versus build outcome.

2. Time to market – We could provide an immediate upgrade path versus eighteen months of development

3. Substantial cost s

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

avings – By rationalizing their software platform and reducing the number of supported systems

4. Immediately end customer defections by announcing an actual upgrade path versus years of pro

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

mises

5. Prevent a more formidable competitor from getting his hands on this technology and causing them some real damage

The good news is it worked and we were able to get our sellers nort

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

h of $2.5 million. Over a year later it has proven to be a good deal for both buyer and seller.

The healthcare ASP also turned out to be a strategic fit for a much larger healthcare IT firm.

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

This established company had previously delivered their software through a traditional licensing approach where their clients managed their own internal systems. The buyers needed our clie

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

t’s cutting edge module that completed their suite of products. They intend to use the ASP model as the springboard to launch their entire product suite on the ASP model to complement their l

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

icensing approach.

Much of this transaction value was in the form of a well structured earn out. Both buyer and seller feel comfortable that the sales targets will be met and will provide t

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

he maximum contractual payment. This will result in a value for the seller of about $2.5 million. The buyer’s customer base of 1400 hospitals are prime candidates to upgrade their current so

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

ftware system (the buyer’s product of course) with this new capability. The seller achieves a 20 times improvement in the sale of their product as part of the large company. The large compan

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

y increases revenues and uses a portion of that revenue to complete the purchase price obligation. It was accretive from day one.

When it comes to software or technology companies and busine

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ss valuation, beauty is in the eye of the beholder. If the company can identify the right buyers and if they can be positioned as a strategic fit, traditional valuation metrics may not apply

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.businessarticles.org.ua/article/3805/businessarticles-Software-Company-Business-Valuation.html">Software Company Business Valuation</a>

BB link (for phorums):
[url=http://www.businessarticles.org.ua/article/3805/businessarticles-Software-Company-Business-Valuation.html]Software Company Business Valuation[/url]

Looking to buy cheap office equipment? Use the Internet, which is now the best source for finding bargain office equipment deals, as more and more manufacturers, retailers and resellers use the Internet to sell products faster and securely. Whether you are looking to buy small items like staplers and paper punches or more expensive items like printers & copiers, the best office equipment offers are invariably found online. Don't miss out.

Although the NFL season doesn't run the full 12 months, the money making potential certainly does! People taker advantage of this the whole year round - read on to discover 3 ways you can too.

For many of you who are businessman and businesswomen, traveling becomes second nature. As you jump from city to city, it gets to the point where people ask you what you do for a living and you have to refrain from saying, “I’m a Nomad, what about you?” Traveling for business can certainly be a pain in the bags, but with a few simple changes, you may find the transition from home to away to be easier than assumed.

Tags

Links

Business Articles - Software Company Business Valuation

Related Articles: