What Investors Look for in Regulatory Due Diligence, and How a Bit of Regulatory Prevention Can Save Time and Money
When you buy a used car, it’s a good idea to get a seasoned mechanic to take a look under the hood to check for any signs of wear and tear that might lead to trouble down the road. The same principle applies to buying or investing in a natural health product business where the stakes are even higher.
That’s where dicentra comes in. The 30-person consulting firm has worked with over 1,200 companies since it started in 2002, gaining a global reputation for thorough and strategic insights.
They offer regulatory due diligence to help buyers and investors identify anything in the business that may cause a regulatory infraction down the road. In some cases, dicentra is asked to do a high-level look at a company, which involves reviewing documentation or conducting a quick site visit. But in other cases, it can be much more in-depth, depending on the needs of the client.
“When CCMP was acquiring Jamieson, they wanted to know everything about the company,” says Peter Wojewnik, Vice President of Growth, Marketing & Sales, referencing the $300M acquisition in 2014.
In that case, dicentra was tasked to do a complete regulatory due diligence. They left no stone unturned, reviewing everything from the GMP to the facilities and suppliers–every step of the life cycle of the product was personally inspected for potential compliance issues.
“Companies making an acquisition know how expensive a recall can be,” says Wojewnik. “The recall process itself plus the incremental damage to the brand and consumer trust can be devastating.”
Wojewnik says natural health products are a highly regulated industry with a lot of obligations, which can be somewhat confusing to investors eager to get into these growing opportunities.
“You may see a young company that’s doing well and growing, and they may not even be aware of a possible non-compliance issue with a supplier of one of their ingredients,” says Wojewnik. “That’s when a 3rd party can do a deep dive and proactively get ahead and uncover those issues.”
But that doesn’t always mean the deal gets stopped. Sometimes finding those issues is a smart first step to resolving them so the business can carry on and the transaction can proceed.
It’s this kind of thinking that makes dicentra a valuable asset to earlier stage companies as well, even before they’re looking for investors or acquirers.
“Regulatory compliance is not just something you have to get out of the way,” says Wojewnik. “It can actually build confidence in your brand, prevent unnecessary expenses, and help your bottom line.”
He cites an example of a company that was starting their business and came to dicentra wondering about a clinical trial. The team at dicentra was able to determine that there was enough existing evidence to make the product claim they were seeking without the need for a $300,000-clinical trial.
Finally, Wojewnik says that many entrepreneurs in the natural health product business are not driven solely by money but rather a genuine desire to help people live healthier, happier lives.
“We can’t help people if their company goes out of business,” says Wojewnik. “That’s why we like getting in to help them early so we can ensure their company has a solid regulatory foundation to set them up for success.”
This interview was originally published on the Natural Products Canada website.