Due Diligence Audits

Why Due Diligence audits?

Medical Device companies operate in a very heavily regulated global environment. The ability of a company to meet those requirements is often what determines a company’s potential and profitability. Due diligence audits helps a manufacturer in evaluating the potential of a target company.

When considering the acquisition of a medical device manufacturer there are a lot of things to consider, not only financial, business and legal issues. Amongst other things the following areas are in need of evaluation:

  • What regulations and standards the device must live up to.
  • Regulatory Due Diligence
  • Quality Due Diligence
  • Facility / Equipment Assessment
  • Personnel Assessment
  • Post-Merger Integration
  • Open FDA inspection observations or warning letters
  • Pending submissions
  • Major design changes – are the changes controlled adequately? Have they been submitted?
  • Incomplete or limited product approvals
  • Uncontrolled or mismanaged production activities
  • Adverse events or field corrections

A thorough review of all of these points are essential for reducing the risk for a potential buyer of medical device companies.


Confidentiality

Due to the highly confidential nature of M&A financial advisers are normally used to limit the knowledge internally in the acquiring company. These companies are specialised in the financial, business, and legal issues involved in the merger and acquisition of companies of all sorts. However, not all of these companies consider the need for a certified, competent Lead Auditor specialised in medical devices who is used to working in settings where confidentiality is essential. Too often the compliance evaluation of the potential target is left to the acquiring company or even overlooked. As a potential buyer you have the right to request and choose the right competence for this part of the due diligence audit, to provide you with the most relevant evaluation of these critical points. Without this how do you really know the real state of compliance for your target company?  


Why use an external auditor for due diligence audits?

Consider if your M&A partner is able to help you determine the following from a Regulatory point of view:

  • Is the system compliant to MDSAP, Medical Device Regulation 2017/745 (MDR)?
  • What is the status of Device approvals, Licenses and Certifications?
  • Does the target company have an appropriate QMS in place?
  • What are the results of regulatory and QMS audits by outside authorities?
  • What are the results of Internal audits? Is the internal audit program adequate?
  • Are all products and processes properly validated?
  • Is all relevant software validated?  
  • Subcontractors and suppliers. Are they adequately selected, controlled, and re-evaluated?
  • Are the quality agreements in line with regulatory requirements?
  • What is the status of complaints and non-conformities?
  • Are there any recalls, adverse events, advisory notices, etc.?
  • What is the status of CAPA’s? Is the CAPA process effective?
  • Are distribution activities adequately controlled?

If the answer to the above questions is NO, then you should consider choosing an external auditor for your due diligence audit. This will provide you with an unbiased evaluation, as the objective for the consultant is to provide you with the evaluation that you need to determine the feasibility of the acquisition target in terms of regulatory and QMS compliance.

If you as a buyer will need to correct any of these regulatory problems, this evaluation will help to adjust the purchase price down. It will also allow you to plan the merger in a more efficient way. Therefore, fast identification of these problems will help save you money and time.


For further information about how Quality-Audit can help you with your current medical device compliance challenges:

Please use the contact form, or call for an informal discussion on +45 31 44 40 24.