AI Meets SI: Where the Data Ends and Judgment Begins in Medtech M&A—A Medtech Makers Q&A

By Sean Fenske, Editor-in-Chief

Artificial intelligence (AI) is permeating every industry across the world. While the use case varies for each situation, it’s undoubtedly becoming a powerful tool for users, offering benefits that exceed expectations. As the comfort level with AI increases, it will be incorporated into more circumstances and new tasks.

Within the medtech space, it’s being leveraged in a variety of areas, from device manufacturing through to the point of care. It’s also being used for aspects not often discussed, such as part of M&A activity. However, for that situation, it must be coupled with a uniquely human counterpart—situational intelligence (SI). The two must be complementary for a successful deal.

To help explain how AI and SI can co-exist in medtech M&A to achieve the greatest outcome, Dave Sheppard, Co-Founder and Managing Director of MedWorld Advisors, answered a variety of questions on the topic. In the following Q&A, he explains the significance of each in a negotiation and highlights what each offers.

Sean Fenske: First, can you please explain how AI is being leveraged in the medtech industry?

Dave Sheppard: We’ve seen it firsthand—2026 has become the year AI moved from pilot projects to actual implementation across medtech. It’s showing up in commercial intelligence, supply chain operations, and automation on the factory floor, and that’s before you get to the products themselves. Everyone from the largest strategics down to the newest startups is finding productive uses for it. On the product side, it’s enhancing system precision, supporting clinician performance, and ultimately improving patient outcomes.

M&A is no exception. In a market this competitive, everyone involved is using it. Buyers lean on AI to assess their own portfolios, identify where the gaps and opportunities sit, and pinpoint companies that fit their criteria. Information that took weeks to assemble—patents, financials, FDA filings—now surfaces almost instantly, which has compressed the early stages of any process considerably.

What’s changed more fundamentally is that AI adoption now shows up in a company’s operating numbers. It’s no longer a story a management team simply tells; it’s visible in margins, headcount, and throughput. That makes it one of the first factors an acquirer looks at, and for our middle-market clients at MedWorld Advisors, that’s exactly where AI starts to matter in a transaction. So, to answer the question directly: AI in medtech isn’t one thing being leveraged in one place. It’s being applied simultaneously inside products, inside operations, and increasingly inside the deals that move those businesses from one owner to the next at the best stakeholder values. With that stated, situational intelligence [SI] still overrides AI when determining the best transactions. AI may get us there faster, but SI will make or break the deal.

Fenske: What is situational intelligence (SI)?

Sheppard: We talk so much about AI that it’s easy to start relying on it and forget that we, as people, bring knowledge that matters too. In business, situational intelligence has long been how good decisions actually get made.

Situational intelligence is the intangible layer. It sits closer to instinct than analysis, and it comes from experience rather than information. AI works with facts and data, and it works with them exceptionally well. But it can’t tell you what the pause before an answer meant, or what matters most to the person on the other side of the table.

In M&A, SI is about human interaction and about processing information in real time as it arrives. Our favorite example of it we simply call “reading the room.”

Consider a management meeting—the first face-to-face session between a prospective buyer and the seller’s leadership team—where the buyer hears the business explained by the people who run it, and both sides begin assessing whether there’s a genuine fit. Understanding who is around the table, what their titles are, and what they each need and want will shape how the discussion goes. Whether you’re the buyer or the seller, knowing why you’re there and with whom you’re meeting is essential. These meetings can turn from an opportunity into a disaster, or the reverse, very quickly.

One instance stays with us. We had a client with a specific request: they did not want their company absorbed within an existing platform. They wanted to be a strategic fit for a strategic acquirer, or the foundation of a new platform if a private equity firm were the buyer. That was communicated clearly to the buyer pool.

In one management meeting, the seller asked directly: “What will you do with my company?” The prospective buyer answered that it would become integrated with their business. Honest, but not a good answer given what the seller had made clear they wanted—and still recoverable at that point—if the buyer was flexible and listening. Instead, the buyer dug in, explaining at length why being integrated into their business was the better outcome. The more they talked, the more the seller disengaged. They never adjusted to the energy coming from the seller.

Situational intelligence would have told them to stop and change course. They didn’t, and they lost the deal. AI can prepare you for a meeting; it can’t read the room once you’re in it—and in M&A, the room is usually where the outcome is decided.

Fenske: How does AI relate specifically to medtech M&A?

Sheppard: That’s an interesting question since AI is now a part of our daily business lives in this industry. Let me share a few examples of how AI is utilized as it relates to medtech M&A.

Relative to many MPO readers, OEM suppliers that are adopting AI to improve their operational excellence (from supply chain to customer service to the factory floor) are perceived to have more value than those that have not yet begun that journey. The caveat (of course) is that one has to utilize SI in adopting that AI to ensure the AI is actually driving improved KPIs within that medtech business.

In general, software companies (specifically digital health organizations) have been highly sought M&A opportunities. They were driving valuations with huge multiples of recurring revenue versus most companies being valued as a multiple of EBITDA. In 2026, due to what has been dubbed on Wall Street as the “SaaSpocalypse” (where software companies valuations were driven downward due to the concern of their future being in jeopardy because of competitive AI adoption), digital health companies effectively must either have AI as part of their solution today or firmly embedded in their pipeline in order to have the opportunity to have a fair market value in an M&A process.

On the buyer side of the equation, many strategic corporate development M&A professionals and private equity (financial) players are utilizing AI data to identify potentially good acquisition candidates and inform their decision-making regarding likely valuations.

Fenske: What is the impact of having situational intelligence in an M&A process?

Sheppard: It’s hard to overstate the impact of situational intelligence. Let me offer three cases from our own experience that illustrate the point.

First, I’ll mention a deal that shouldn’t have happened on paper. We were working with a seller who had attracted interest from both a private equity firm and a strategic acquirer. After a competitive process, we’d concluded that either could be a genuinely good fit, and part of SI is understanding that Value = Strategic Fit + Timing®.

When it came time to choose an acquirer, both the PE firm and the strategic had the potential to meet the seller’s valuation. While that number was higher than any AI model or market comparable would have predicted, our client had kept impressing through the diligence period with their profitable growth performance. It was reasonable for either buyer to conclude this would be a very good company to own for years to come. Based on their performance during the M&A process, the seller gave the PE firm the first choice to complete the transaction at their desired valuation.

When I gave the PE firm’s leader the seller’s number, he wasn’t sure his firm could get there. So, I said, “Twelve months from now, we’ll be sitting next to each other at an industry event, and we’ll either be celebrating that we did this deal together, or we’ll both be crying into our soup because we didn’t.” He thought about it, decided I was right, and went back to his investment committee to get it done.

Time has proved him correct. The company became a platform they’ve continued to acquire and build around, and the firm now acknowledges it was a very good deal. The seller, meanwhile, exceeded the stakeholder expectations they’d held before the process even started. Buyer-side SI closed that deal, and both parties won.

Another example involves a deal that required us to read the world, not just the room. Several years ago, a German company asked whether we could help sell their business alongside their joint-venture “daughter” company in Israel. Both used similar technology, applied to different markets.

Knowing how global PE firms think, we said yes, and structured it as a roll-up. A PE firm would acquire the German parent, and the Israeli business would be their first add-on—executed simultaneously. Anyone in this industry knows PE groups love a roll-up.

Then the October 7th attacks happened, just as we began marketing both companies.

Finances matter, but people come first—in this business and in life. A sound SI principle is simply to treat people as you’d want to be treated, and trust that good things follow. Therefore, we took a breath, paused, and asked our Israeli seller whether he wanted to continue. He did. Moving forward, he told us it helped distract from constantly thinking about the atrocities and their effect on friends and family.

With that settled, SI told us something else: not everyone in the financial world would have the risk appetite to invest in Israel at that moment. We needed acquirers who did. That led us to a PE group already operating around the world and on the ground in Tel Aviv. Both companies were acquired by that firm, which had the situational intelligence of its own to see the roll-up opportunity for what it was.

On the other side, the absence of SI can cost you dearly.

Pre-COVID, we were working with a respiratory company that had developed an innovative proof of concept. They wanted a strategic acquirer to buy the business, finish the product, and take it to market. After a long search and many conversations through 2019, we found the strategic fit and the timing—at a valuation exceeding their stakeholders’ expectations when they engaged us.

Then came early 2020, and suddenly the world needed more respiratory products.

Our client’s respiratory solutions were still two to three years from market. At that moment, we were concerned the acquirer would walk away, given they already had more demand than they could meet for their existing products. We called to check their current thinking on the deal. Good news: they saw it as a long-term development program and remained committed.

Then our seller, without telling us but thinking they had leverage because they had a respiratory product, called the acquirer directly and demanded significantly more money for their company. The acquirer politely declined and called us to say the deal was off.

Several years on, to the best of our knowledge, that company’s products never reached the market. The company ran out of funds. A little situational intelligence would have gone a long way.

Fenske: Where do you see situational intelligence when it comes to the due diligence [DD] phase of a process?

Sheppard: It’s critical for both sides. For sellers, be transparent with your advisor. Tell your M&A advisor everything—what’s happening in your business today, the history behind it, and where you intend to take it. Staying aligned allows the two of you to work out the best way to tell your company’s story. You never want to misrepresent anything. But how the story is told matters enormously to stakeholder value, and there’s situational intelligence in how you tell it at each stage of the process.

Also, treat your advisors as one team. Your legal, accounting, and M&A advisors are your team. SI is making sure they know each other and work together on your behalf. You’d be surprised how many sellers assume each advisor performs their function in a silo while the seller coordinates everything themselves. That may or may not be how you run your cross-functional teams’ day-to-day. In M&A, it doesn’t work. To get the best value for your company, you need your advisors aligned around your exit objectives.

Further, if you don’t trust one of them to do that, replace them. You’re sharing confidential information, personal goals, and financial objectives; you need people you trust to handle all of it. Trusting your gut with your M&A team’s advice is SI working in your favor.

For buyers, watch what your diligence advisors are doing. By the time you enter diligence, you’ve already invested significant resources to be in the game. Letting your advisors do their job matters, and for most strategics and PE firms, a deal simply can’t close without independent financial and legal review.

With financial diligence specifically, it’s often the case that the big-name auditor has zero real operational experience. That leads to irritating questions put to a seller who is already feeling overwhelmed by the process. Use your SI to keep your diligence team focused on what actually matters—not tripping over dollar bills to pick up pennies.

Also remember, relationships matter. With rare exceptions (mostly hostile public-company takeovers), deals get done between two parties who like each other and need to work together afterwards to protect the company’s future. That matters to everyone involved. Reach out from time to time and simply ask the seller how they’re doing. Not about line 24.1 of the purchase agreement or the current AR on the balance sheet; there’s plenty of time for that elsewhere. Ask about them, their team, their customers, their markets. Keep it casual. You’ll strengthen the relationship, and you may well learn something useful.

Some advisors in our industry want to control everything, conversations included. Our SI tells us the opposite. Underneath all the AI, the financials, and the purchase agreement, it’s relationships that drive the best outcomes. Thus, we encourage buyers and sellers to talk throughout diligence, with our SI guidance (of course), so neither party feels overwhelmed by the other, and the important trust relationship is allowed to build.

When diligence is finished and the agreement is signed, those same two parties must work together to take the company to its next level for every stakeholder involved. How a buyer uses SI to manage that relationship is critical at every step—before, during, and after the deal.

Fenske: Please explain the importance of having AI and situational intelligence be complementary. As a company that helps to facilitate an M&A transaction, how do you leverage both and have them contribute to a positive outcome?

Sheppard: This is a great question as the ability to combine SI with AI is becoming critical to being a successful dealmaker. AI tells you what’s possible. SI tells you what’s real. Neither one closes a deal by itself. In our process, the combination is impressively powerful.

For the buyer universe, this is where AI earns its keep, because it’s a direct counterweight to a real human bias. We use it to force the list wider than instinct would go—the PE platform with a stated thesis in the space, the strategic two adjacencies over, and the international acquirer. Then situational intelligence prunes it—who actually closes, who retreats at the eleventh hour, who’s credible on a carve-out, and who’s in a quiet period. Wide AI net, disciplined SI keep.

In terms of positioning, AI assembles the market data, comps, and regulatory backdrop, and gets a draft on the page fast. But the equity story—why this company is worth a premium to that specific buyer—is a human judgment about someone else’s strategy. That doesn’t come out of a model.

When it comes to process management, AI is huge—diligence trackers, Q&A logs, document summarization, and first-pass financial modeling. Every hour AI takes off that pile is an hour back for the phone call that actually matters—often the one with a nervous seller who’s realizing this is the biggest financial event of their life or the buyer who needs to find that critical platform to fit their investment thesis.

Negotiation and close are almost entirely situational. AI can sensitize an earnout or model what an escrow does across outcomes, but it can’t read whether a buyer’s silence means they’re walking or waiting on investment committee. Or if an RWI [representations and warranties insurance] policy might just solve that escrow issue for both parties. That SI read is worth more than the model.

The marriage of these two intelligences is what produces a better outcome for our sellers. It leads to more qualified buyers at the table, which creates competition and moves price. It breeds a faster, tighter process, because time kills deals and administrative drag is where time goes. It also produces fewer surprises in diligence, because the issues are surfaced early rather than discovered by the buyer’s lawyer in week ten. AI identifies many of the opportunities and challenges; SI manages the next steps to make the deal happen in both parties’ interests.

Fenske: What challenges are encountered with the use of AI without situational intelligence? What are the common mistakes or assumptions that could result in incorrect conclusions?

Sheppard: AI valuation outputs that are built on public comps and “average market data”—when applied to a privately held $3 million to $10 million EBITDA medtech business—miss the strategic-fit and timing premium entirely.

Buyer universes generated by AI that look comprehensive are not—firms outside the mandate, firms that just did a competing platform deal, and firms with no previous appetite for the geography. AI does not know the PE group’s current investment committee mood.

Another example is stale or scraped financials on private companies. Many times, AI is confident but wrong on private revenue and ownership, and buyers who screen for that information miss out on good targets.

We also see AI-assisted seller DD materials that overstate the situation. It’s important that DD becomes the “it is what it is” documentation. If overstated, it can create credibility issues with the buyer. Even worse, it can create “rep and warranty” exposure for the seller.

Fenske: Do you have any additional comments you’d like to share based on any of the topics we discussed or something you’d like to tell medical device manufacturers?

Sheppard: To any medtech business owner reading this, you’re building something remarkable, day by day. Selling it will likely be the single largest financial event of your life, and you’ll only do it once. So, trust your own situational intelligence when you choose your advisors—legal, accounting, and M&A. Ensure they have the AI tools to work at their best on your behalf. Then, let their judgment sharpen yours.

No model will truly value what you’ve built. That’s the part only people can do. That’s where the data ends, and the judgment begins in medtech M&A.

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