Ask These Questions Before Pursuing an M&A Transaction

Ask These Questions Before Pursuing an M&A Transaction

For life sciences companies, M&A and collaborations are a key strategy for growth, building product pipelines and getting products to market as quickly as possible. According to BDO’s Life Sciences CFO Survey, 33% of CFOs planned to pursue M&A in 2022, up 25% from the 2021 survey. With valuations coming down from record highs and uncertainty around future market trends, it’s important that life sciences organizations begin to carefully prepare for a transaction well in advance, whether they’re on the buy- or sell-side.

To help you determine if now is the right time for M&A, we’ve provided a list of questions related to strategy, due diligence, integration and operations for both buy- and sell-side life sciences transactions. While this is not a comprehensive list of all considerations for pursuing M&A, these questions can be used to help build a strong foundation for any pursued deal.

 

M&A questions to ask for life sciences companies looking to acquire a company:

Strategy

  • What synergistic opportunities does this acquisition present?

  • What are you looking to achieve from the transaction? Have you clearly defined what success looks like and how you will measure it?

  • Does your strategy for the transaction align with your overall corporate strategy?

  • How much risk are you willing to take on?

  • Have you been realistic about your ability to do the transaction in terms of access to funding or availability of resources?

 

Due Diligence

  • What is the reputation of the company you’d like to acquire?

  • Have you completed diligence related to:

    • Synergies – Deal value drivers

    • Product –  Plans for commercialization, scaling production

    • People – Compensation strategy, culture

    • Technology – IT systems, 3rd-party solutions

    • Finances – Quality of Earnings (QOE) analyses, forecasted profitability, working capital, capital expenditures, strategic initiatives

    • Operations - SG&A, supply chain

    • Regulatory Compliance

    • Go to Market Strategy

  • Was enough information provided in order to properly complete due diligence?

  • Are there any outstanding issues with the company that need to be addressed?

 

Integration

  • Have you defined the integration goals and priorities? Are they aligned with your transaction rationale and deal value drivers?

  • Have you defined the target operating model for the combined company (e.g., degree of integration)? Are you prepared to provide your integration teams a roadmap to facilitate integration planning?

  • Have you defined an integration management structure to support the integration and synergy capture planning and execution process?

  • Do you have a good understanding of the concerns that your stakeholders (e.g., employees, customers, partners, etc.) may have about the transaction? Have you developed a communications and retention strategy to address your stakeholder concerns?

  • What will it take to integrate the acquisition into your company’s culture? Are the cultures aligned, and are they a good fit?

  • How will employee roles and responsibilities change with the deal? Have you taken steps to ensure the right people will be in the right roles?

  • Are your technology systems compatible? What support will be needed to integrate the technology systems, and what is the timeline for doing so?

  • What cyber and data privacy risks will come with the integration process? Do you have a plan to address and mitigate them?

 

M&A questions to ask for life sciences companies looking to sell a company:

Strategy

  • What are you looking to achieve from the transaction?

  • Have you clearly defined what success looks like and how you will measure it?

  • Have you considered other exit strategies before deciding on selling?

  • Do you have a clear sense of your company’s value?

  • Would you prefer a strategic or PE buyer? Is the potential buyer the right fit?

  • What is the expected impact on investors, employees and resources?

  • How will the transaction impact the company’s reputation?

  • When and how will the deal be announced?

 

Due Diligence

  • Is your organization prepared to go through a robust due diligence process that encompasses legal, financial, operational and compliance concerns?

  • Who can management tap to support the due diligence process?

  • How resilient are processes and systems throughout your organization? Is any infrastructure single-person-dependent?

  • Have you completed a sell-side QOE report?

  • Have you had an independent party do diligence on your company? Have you proactively addressed areas of risk they identified?

 

Operations

  • Has the transaction perimeter or “what’s in and what’s out” been defined? Which executives, key employees, customers and assets will be part of the transaction?

  • Do you have any operational imperatives for the buyer (e.g., do you want a soft landing for your employees, how will you maximize customer retention during the transaction, what is the buyer’s corporate culture, etc.)?

  • Are there any strategic, revenue enhancing or cost reduction initiatives that have been identified or are already in-process that could increase the company’s valuation at exit? What is the status of those initiatives? Should you continue in-process initiatives?

  • If you are divesting a business that will need to be carved out, how entangled is the business with the rest of your operations? Have you developed carve-out financials and defined the standalone costs for the business? Have you determined what transition services you are willing to provide the buyer? What will it take to operationally carve-out the business by transaction close?

 

 


 

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