Pharma Market Infected with M&A Fever

Chemistry World recently reported that M&A activity in the pharmaceutical sector has reached fever pitch, with the announcement of a $1 billion deal in which Valeant Pharmaceuticals acquired Sprout.

M&A activity remains a key part of the growth strategies of many businesses in the pharmaceuticals industry, and as a result, we can expect many more such deals throughout the remainder of 2015 and into 2016.  As Laurie Little, Valeant Pharmaceuticals’ Senior Vice President of Investor Relations, told Chemistry World: “Acquisitions will continue to be an important part of Valeant’s growth strategy, and we still see many attractive market opportunities.”

The activity in this sector recorded in Q1 of 2015 has been truly record-breaking, with greater investment seen within the first three months of 2015 than in the 12 months of 2014 combined (Fig. 1).

FIG1 Pharma Market

Such activity may well prompt business owners to examine their own options, in the hope that they may take advantage of these positive conditions. Indeed, a partial sale or a full exit may well be part of your own short or long-term plans.

Rather than simply relying on a busy market to deliver on your objectives, the right planning on your part is key to exploiting the success of an exit strategy or partial sale.

This may prompt several questions; whether to exit and, if so, when? What stage of the business’ growth is the best for exit? What kind of an exit (full or partial) would be the most lucrative?

Answering the Exit Questions

Although many questions are raised when considering an exit, M&A is not something that should be feared. It should, of course, be considered carefully but also welcomed as a catalyst for progress.

In the case of the pharmaceutical industry, as each product can take more than 10 years to develop with significantly high development costs, M&A can become a business enabler, allowing products and businesses to realise their full potential.

Armed with this understanding, business owners can begin to make sense of which exit strategy might best suit their needs.

A Complex Catalyst: M&A Advice

However, the pharma industry faces unique challenges and each business and business owner within the market has their own unique fingerprint, dictating when the best time for M&A activity to take place. This highlights the importance of strategic planning in order to ensure that any eventual sale is the right deal for stakeholders involved.

Without doubt, the two most important undertakings when considering a business exit are the development of trust and an element of competition:

Trust:

Revealing every intricate element of your business to your adviser or potential buyer requires a certain level of trust between all parties involved. This trust will ultimately secure the best multiple when the discussion of valuation occurs.

Competition:

Valuation can be subjective because ultimately, businesses are only worth what someone is willing to pay.

Transparency helps ensure the right buyer is identified, the right multiple is achieved for the seller as well as the buyer, and the deal structure offers the seller options that meet his or her objectives.

These vital elements can only be achieved by working with a partner that understands the industry and, more importantly, your business. Benchmark International has a team of expert advisers operating within the pharma industry, including a professional research team that monitors activity of key industry participants and trends in the sector.

To find out more about exit and growth strategies, visit www.benchmarkcorporate.com.

An in-depth feature into exit strategy for pharmaceutical businesses by Benchmark International was featured in the September edition of European Pharmaceutical Contractor and can be read here: http://www.samedanltd.com/magazine/11/issue/240/article/4184

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