Mergers & Acquisitions

Executing an acquisition - as buyer or seller - is quite straightforward, and yet rarely done well. The key is to have a good plan with clear priorities and then execute the plan efficiently while harvesting the synergies. Where it often starts to go wrong is on D-day - when there is no return. The entire external PR is in place, but the practical issues (company signs, emails, Intraweb, who is in charge and who is not) is where it goes wrong. When day 1 is not perfect, the following integration period tends to be long and inefficient. A fixed 100 days plan is the key to success combined with an HR group referring to the CEO that secures key competences that are otherwise often lost.

XOventure has refined its M&A process tools to make the sell and buy process fairly generic and give attention to the main differences between buyer and seller attitude: The buyer wants to harvest the synergies and expected improved performance, while the seller wants to optimize the business prior to the transaction and even push the price beyond synergies to the point where only long-term corporate strategies and wishful thinking can convince the buyer.

The buyer on the other hand likes to find weak spots and to imposes conservative NPV models and other scenario modeling and would often consider a favorable earn out model whenever the price gets too high – to share the risk and some of the upside. The buyer might often prefer an asset deal to limit his risk further. However no deal is similar and deal terms vary greatly depending on the minds involved. For a successful acquisition good advisors acting as middlemen have proven useful.

M&A - a risky business

The above risk can be handled in the planning process, but is a real challenge for most companies, particularly since several other parameters enter the scene.

• GroPep, Australia
• Delta Biotech, UK
• Qingdao Huayuan Fine Products, China
• Pharmacia & Upjohn Portugal
• Novozymes BioPharma, Lund

Jørgen Thorball, XOventure: " I particularly remember the Pharmacia & Upjohn merger, the so-called "merger among equals". A lot of effort went into realizing this proclamation - even the head office was placed in London, half-way between the headquarters in Sweden and US. After a year it was apparent that there is no such thing as an equal merger. While the fight over control went on, the company was run inefficiently, and the once glorious Swedish company was swallowed by Pharma giant Pfizer."