Reinventing Value Creation in Medtech CDMO: A Smarter Playbook for PE Exits

As the medtech contract development and manufacturing organization (CDMO) market matures, private equity (PE) investors are finding that scale alone no longer guarantees optimal valuation. Increased competition, integration risk and diminishing arbitrage have shifted the value creation imperative from aggregation to optimization. At L.E.K. Consulting, we see forward-looking sponsors asking a sharper question: How do we build an asset that is designed for a better exit from day one?

Our answer: a deliberate, multidimensional value creation strategy supported by operational discipline, commercial excellence and a robust, proactive “exit checklist” that transforms portfolio companies from good businesses into exit-ready platforms.

CDMO exit checklist: What maximizes valuation?

While not comprehensive, the following components are often key pillars of a value creation plan and can vary widely for specific medtech CDMOs depending on the historical context, management vision and roadmap.

• Commercial optimization
  • End market mix: Portfolio exposure to higher-growth markets and resulting weighted average market growth rate (WAMGR)
  • Customer mix and distribution: Diversified, strategic relationships
  • Commercial sophistication: Proven ability to acquire and grow strategic accounts (e.g., clear roles, aligned incentives, rigorous sales tools/processes, diversified pipeline)
  • Geographic footprint: Aligned geographically with original equipment manufacturer (OEM) supply chains, providing resiliency and cost effectiveness
• Operational optimization
  • EBITDA margins and trajectory: Clear and credible margin story at or above peer average
  • Product and service offerings: Full-service capabilities across preproduction, production and postproduction; internally integrated for effective handoffs and cross-selling
  • Technical capabilities: Demonstrated depth of technical expertise
  • Compliance and scalability: Quality systems and infrastructure designed to scale

The waning effectiveness of the traditional rollup model

While there is still plenty of room for consolidation, the market is increasingly crowded and multiple expansions and arbitrage can no longer be relied upon as a primary source of value creation. All this results in the increased importance of a proactive exit checklist to create incremental value. Value creation plans are not a new concept, but the confluence of macroeconomic trends (e.g., supply chain disruption, inflation, tariffs), CDMO consolidation and added complexity, and evolving medtech OEM priorities (e.g., return to margin, segment focus, destocking, new launches) have added complication to historical value creation playbooks.

A smarter value creation approach: Beyond the basics

To deliver outsized returns, PE sponsors must encourage management teams to mature from episodic initiatives to a multidimensional, ongoing value creation model. A clear strategic value creation vision should be ready early in the investment hold period (optimally from day one) and should be designed with the exit in mind. Below is a selection of value creation pillars L.E.K. regularly leverages to support medtech CDMO value creation.

Exit checklist: Example commercial optimization pillars

Growth strategy in the core markets and customers we know well versus the adjacent markets and customers we should expand into:

• WAMGR-driven prioritization: Are we in the right end markets?
• Customer segmentation and white space mapping: Are we active with the right customers? Are we reaching their correct divisions? Said differently, is our CDMO “winning with the winners”?
• Geographic expansion strategy aligned with regulatory capabilities: Where can we go next?
• Technical adjacency strategy: What technical capabilities should we add next? What new programs, new parts of current programs, new customers or new markets might that position us for? Do we have differentiated technical capabilities for mission-critical parts or key bottlenecks in the supply chain?

Commercial excellence in an increasingly sophisticated medtech CDMO market:

• Go-to-market (GTM) model design for new services or geographies: Is our GTM model (channels, coverage, partnerships, pricing and support model) fit for purpose for the priority target customer segments?
• Sales force effectiveness and account targeting: Are our reps targeting the right platforms at the right OEMs at the right time?
• Business development: How concentrated or diversified is our pipeline by product/platform, by OEM customer and by market? Are we landing and expanding across decentralized OEMs effectively?
• Key account management and pricing discipline: Are we treating all customers equally? Do we have a structured tiering to balance resource utilization and return with our key customers? Are we giving white-glove service to those customers that deserve it?
• Talent: Do we have the right mix of sales talent to balance “hunting” and “farming” expectations?
• Commercial enablers: Does the organization have the right tools, processes and enabling functions in place to effectively and efficiently target and convert priority customers?

Pricing strategy in what has historically been a “cost plus” environment that leaves value on the table:

• Margin value capture: Are we capturing the value we are creating (especially in mission-critical applications or complex device programs)?
• Contract architecture (volume tiers, inflation pass-throughs): How do we protect ourselves against cost, inflation and tariff uncertainty?
• Pricing processes: Are we limiting our financial returns due to process, people and tool limitations when quoting business?

Exit checklist: Example operational optimization pillars

Margin levers and scalability

• Cost structure: What are the largest cost drivers that could be optimized through various mechanisms (e.g., automation, computer vision quality inspections, procurement, use of artificial intelligence in back-office functions)?
• Facility readiness (i.e., capacity, throughput, downtime): Are we buying an asset that can keep up with demand in priority markets, especially high-growth markets (e.g., the pulse field ablation revolution in electrophysiology)?
• Quality systems’ robustness and regulatory risk: How sophisticated is the asset in managing quality and regulatory risks?
• Scalability of standard operating procedures, enterprise resource planning (ERP) and workforce capabilities: How hard will it be to find, train and retain requisite skilled labor to scale the business?
• Operational competitiveness: How do our roles, resourcing, key performance indicators and ways of working stack up to the competition’s?

Capability/asset integration

• Functional integration (e.g., finance, quality assurance, supply chain roadmaps): What is essential for day one? How do we ensure no deterioration of out-of-tolerance or failure rates? How do we capitalize on improved buying leverage with key vendors?
• System and process harmonization (e.g., ERP, manufacturing execution system, quality management system): Where, if at all, do we harmonize with other existing businesses?
• Cultural alignment and leadership continuity: How can we proactively address cultural friction that could lead to loss of key engineering or sales talent, and do we have the right leadership for the long term?
• Synergy-capture tracking and governance: How do we deliver and diligently track the synergies identified (e.g., general and administrative, work transfers that enable right-sizing capacity or labor efficiencies, capabilities cross-sell)?

Conclusion: Designing for exit from day one

The playbook is changing. Scale alone no longer commands premium valuation. Today’s buyers want operational maturity, growth potential and defensible commercial strength. By embedding structured diligence, a strong integration capability and targeted value creation levers early in the hold period, PE sponsors can create assets that are not only scalable but also prepared for a more optimal exit from the beginning of the holding period.

L.E.K. brings the sector insight, toolkits and rigor to help medtech investors transform good assets into great exits.

For more information, please contact us.

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