How to Maximize Value in M&A Transactions and Avoid Pitfalls
By Dylan Kissane
In the context of a biopharma market where valuations and deal values are plunging, it was little surprise that a panel session focused on maximizing the value of an M&A deal attracted a full house. Chad Davis, a Partner at international law firm Dechert, moderated a discussion between Holger Reithinger, Partner at Forbion, and John Easton, formerly of AstraZeneca and now Advisory Board Member of Sterling, that offered advice under three broad themes.
First and most important in maximizing the value of any M&A target is developing and communicating a clear value proposition. Easton called the value proposition the โred threadโ that would run through the entire deal process, impacting everything from the first preliminary discussions to the data room and the post-M&A press release. He reminded company leaders that dealmakers do not have the same insights into the asset or company that someone on the inside has. He urged them to look at assets and business from the buyerโs perspective, explain where the value lies, and clearly express the targets.
Reithinger agreed but explained that a value proposition is not something that should be built for buyers but is developed right from the start of the company. The value proposition should be prepared well before any asset is put on the market or the company prepares for a sale. Itโs the product of a continuous process and never a one-off production for a specific deal.
The second of the strategies for maximizing M&A deal value relates to communicating value detractors. Davis quizzed the two panelists on the best way to raise and explain value detractors to potential buyers. Easton argued that itโs critical to anticipate any objections the buyer might raise. Consider how a buyer will look at an issue in advance, he warned, and avoid surprising a buyer with information or hiding something from them. He said anything that is not made obvious and later discovered during due diligence would negatively impact confidence in the company and its leadership.
The third strategy to maximize deal value is to focus on the due diligence process. Easton argued that the โred threadโ of the value proposition needs to be made clear to everyone involved in the diligence process. While executives and leadership might be aware of the overall messaging, it is equally important that leaders in other departments, including manufacturing, know the corporate value proposition.
The importance of the due diligence data room was highlighted by Reithinger, who urged a staggered approach to share information. He argued that the data room should only be opened when needed and that the buyer, usually a larger pharma firm, should never be given free rein to all the information in the data room at once. Easton added that the best data rooms are well structured and make it easy for buyers to find the information they seek. Returning to the value proposition, Easton suggested that the logic underlying the value proposition should be used to structure the data room. Consistency, completeness, and ease of navigation are keys to successful due diligence for the buyer and accelerating any deal.
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