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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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