June 19-20, 2014
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Mergers & Acquisitions from A-Z: We’ve been bought – what next? (July 11, 2013)
Recap by Simina Popa, University of Washington
This panel was moderated by Thong Le (WRF Capital). To view a slide deck on the current M&A Market Update and Outlook, click here. Thank you to Henry Gosebruch, JP Morgan Chase.
The panel discussed the current merger and acquisition (M&A) climate in Biotechnology. Although income from mergers and acquisitions has increased by 23% from the last year, this is attributable to only a few $10 billion deals. The number of deals has actually decreased by 10% since last year. Considering that financing rates are still low, there should be more M&As taking place in the industry, but the criteria for deals to move forward has become more stringent. Nevertheless, companies in biotech have more incentive for M&A than those in medical technology industry because they have a robust initial public offering (IPO) market.
The panelists then offered ways for interested parties to negotiate and transition into a successful M&A scenario. Highlights of the discussion included:
- Parties should be prepared for unanticipated delays and costs; often companies have unrealistic expectations of how mergers and acquisitions will proceed.
- David Giuliani, who arranged the sale of Sonicare to Philips, gave advice to companies who are looking for buyers. Some of his tips included:
- The best deal is one where the acquisition makes your product more valuable under the next owner (e.g. Philips elevated the Sonicare market to an international market).
- Don’t be in a position where you have to sell. Seek more than one interested buyer by hiring an investment-banking firm. Be able to walk away from deals that don’t make you happy.
- Start with a strong plan, establish ground rules and ask the acquirer how you can help them and how you can get out of their way as you both head towards a successful conclusion to your business transaction.
- Be transparent with employees during negotiations so that they can focus on their work and not worry about the future.
- Work hard during the first year of the acquisition to drive your assets to success and make the new owner feel good about the acquisition.
- Robert Pelzer, who was on the deal review committee at Novartis, gave advice from the point of view of the acquirer:
- Usually the buyer sees some things in smaller companies as valuable and others as not. Companies should understand what acquirers consider to be valuable.
- As the buyer, figure out how to retain company employees or you could lose the deal.
- Calculations of MPV are critical.
- Mergers (e.g. Orenia and Isotechnica) can consolidate intellectual property and take away the risk of bankruptcy if individual companies cannot raise enough capital.
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