What Works (and Doesn’t) in Build‑to‑Buy Deals in Medtech

The build-to-buy model is becoming a recurring theme in medtech boardrooms, strategic planning sessions, and early-stage funding conversations. But for all the talk of structured deals designed to streamline acquisitions and accelerate innovation, questions remain about whether this model actually delivers on its promise. At LSI USA ’25, a panel of industry leaders gathered to unpack the build-to-buy approach, exploring its potential benefits and its all-too-frequent pitfalls.

Definitions and Divergence

Moderator Joe Mullings kicked off the conversation with a foundational question: What exactly qualifies as a build-to-buy?

According to Addie Harris, there are two main flavors. “You have your pure innovation build-to-buy, and then you have fill-a-gap-in-our-portfolio build-to-buy,” she said. In the first model, strategics provide funding to incubate innovation in a specific area, often with early academic or startup collaborators. In the second, companies know exactly what they want built and contract a partner to deliver it.

Josh Makower noted that the first scenario is almost more of a “build-to-invest” structure. “There are partnerships, but those don’t necessarily lead to a buy at the end,” he said. Harris emphasized that what unites both models is clarity of ownership. “The entity putting the money in is the one who gets the toys at the end.”

The Economics and Risks of Structured Deals

Theoretically, build-to-buy structures help align incentives and distribute risk. Strategics get access to off-balance-sheet R&D. Startups receive funding and validation. But when the buy doesn’t happen, things get complicated.

From an investor’s perspective, said Andrew ElBardissi of Deerfield Management, these deals can be hard to justify. “You’re capping your upside while still carrying 100% of the downside,” he said. “You have no control over the changes that happen inside the strategic, and that’s a lot of risk to assume without certainty.”

Makower agreed, pointing to real-world examples where companies banked on a buyout that never materialized. “People change, strategies change. Sometimes you end up with a champion at a strategic who didn’t even choose the deal, and they might not even like it,” he said. “You have to structure it so that there’s an easy out, and that out is very friendly.”

Why the Clock Kills More Deals Than the Competition

Timing emerged as one of the biggest threats to the success of build-to-buy models.

Ramin Mousavi likened the model to a long engagement. “You enter into an agreement where the wedding is down the road. But the more you get to know each other, the more you find things you don’t like,” he said. “And the more successful you are, the worse it feels, because in an open market, you’d likely get a better deal.”

Makower was candid: “I don’t know many build-to-buys that have actually consummated in the end.”

When the Deal Becomes the Risk

There’s also the question of integration. For startups, success doesn’t end with the acquisition; it’s just the beginning of another challenge. “You have to think through the org charts, who’s on the team, what motivates them,” said Harris. “Culture is everything. If you don’t protect the team and retain what made the startup work, the value evaporates.”

Makower noted that R&D costs for digital platforms continue long after launch. “If you’re not retaining the people who got their payout in the build-to-buy, you lose critical capability,” he said. “It’s never just the technology.”

Mousavi added that speed is often undervalued. “Highly coveted talent won’t stick around if they’re bored. You can’t just throw money at it and expect that to be enough.”

This blog is originally published here: https://www.lsiusasummit.com/news/what-works-and-doesnt-in-buildtobuy-deals-in-medtech