Realising value from M&A, alliances and collaborations

In today's economic climate, it is more challenging than ever for pharmaceutical and biotech companies to deliver on shareholder value. The loss of patent protections and shortfall in pipeline to replace the lost sales, combined with the general decline in return on research & development and sales and marketing, has left companies searching for alternative methods of delivering maximum returns to shareholders.

Many are looking to transactions such as mergers & acquisitions, divestitures, and licensing/collaborations to enhance value during these challenging times.

Recent transaction activity in the industry includes:

  • Acquisition of biotech companies to help fill pipeline needs.
  • Acquisitions in emerging markets to diversify away from the US markets and into growth countries.
  • Acquisition of specialty pharmaceutical companies to move away from the blockbuster drug model.
  • Acquisition of generic companies to diversify away from the branded/ethical market and generally align better with the changing political climate in the US.
  • Divestiture of non-core businesses/products. Now more than ever, companies are re-shuffling their portfolios to raise cash and better align their strategic direction. Given that the cash generated from these divestitures is often ploughed back into acquisitions or to fund additional research projects, it is increasingly critical to maximise the value of the proceeds.
  • Maximising intellectual property companies are now licensing out non-core or secondary technology or intellectual property in an effort to fund priority programmes.
  • In-licensing/collaborations in an effort to find their next product success, many companies are seeking the right partner to collaborate with.
With more companies focused on transactions, however, the deal environment has become more complicated. Companies are often competing for assets, and must find ways to win by extracting the maximum value from the transaction. They must therefore address several critical success factors, including:
  • Understanding the target’s strategy, commercial focus and competitive position
  • Choosing the appropriate deal structure
  • Understanding the underlying sales and earnings quality
  • Ensuring cultural compatibility
  • Understanding potential exposure from the target’s commitments and contingencies — up front, prior to doing the deal
  • Understanding the comparability of the acquirer’s financial statements (e.g. US GAAP vs. IFRS vs. local books)
  • Evaluating the risk of aggressive practices and/or compliance failures
  • Properly assessing and valuing potential synergies
  • Ensuring a robust post-deal implementation plan is in place
  • Efficiently managing tax risks and optimising net cash flows (e.g., minimising the adverse impact on the effective tax rate)
How PwC's consultants can help you

PwC is well positioned to assist you with all of your transaction needs. We have a strong track record of working with clients across all segments of the pharmaceutical and life sciences industry. Our specialists offer a full range of services, from inception to post-deal integration. And our global network, in combination with our deep industry knowledge, enables us to be constantly in touch with the markets and to spot opportunities and assemble teams to execute a deal as the need arises.

Our capabilities are built around cross-functional teams with deep industry experience organised to deliver the full spectrum of integrated deal services. We can offer you experienced deal structuring and financing advice at all points throughout the deal cycle and, in addition to our transaction specialists, our tax, corporate finance and legal professionals can support you in all aspects of your transaction, working as a deals team. Our deep experience, strong international network and commercial focus allow us to add real financial value to transactions.

Our professionals are able to help with not only the accounting and tax considerations that deals create, but with a wide range of planning and integration concerns related to operational, systems and regulatory issues.

PwC offers a wide array of industry-focused services that address the challenges facing pharmaceutical and healthcare products companies, including:
  • Finding the best targets, and analysing their strengths and weaknesses.
  • Developing the best deal structures.
  • Identifying synergies and potential opportunities for improvement.
  • Negotiating the best terms.
  • Accessing the capital markets and other sources of finance.
  • Managing the post-deal integration process – particularly the first 100 days, when it is essential to stabilise the new acquisition and stop any “value leakages”.
  • Carving out non-core assets and selling them for as much as possible.
  • Minimising tax costs and ensuring tax-efficient deal structuring (both during and post-deal).
  • Implementing processes to realise improvements in long-term performance.