cashing out successfully: exit strategies to capture value presented by james e. nicholson chairman...

Cashing Out Successfully: Exit

Strategies to Capture Value

Presented by

James E. Nicholson

Chairman & CEO

Cortek, Inc.

April 16 , 2001

MIT Enterprise Forum

Outline

• Getting Ready

• Exit Strategies

• Evaluating a Company

Setting the Stage for the “Exit” Starts Early

An Enabling Technology

Management & Leadership

Good counsel

Financial Strength

Technically Proven Product

Having an Exit Strategy

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.

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)

Examples of Enabling Technologies

• Non-invasive technology for DVT.

• In use for 30+ years now.

Putting the squeeze on clots: The Venodyne Boot

• 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

Factors that Influence Success

Technically Proven Product

Murphy’s Law # 247

For every vision, there is always an equal and opposite revision.

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!”

Then prove it . . .

• Statistical analysis with sound data

• Sales

• Professional papers

• Doctors acceptance

• FDA approval

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

Want to be acquired?

• Sales

• Profitability

• Product with an enabling technology

• Strong fundamentals

• Strong management team

Want to go public?

• Sales• Profitability• Product with an enabling technology• Strong fundamentals• Seasoned management team

• Timing is critical . . .

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)

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.

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

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