Crisis brings change. It is during times like these, of general economic duress, that one can see this in motion and experience its consequences. Pharmaceutical companies are experiencing perhaps the toughest times in many years as regulatory pressure, patent expirations, and public perception are all working against them.
This spells dire times for most companies, but also opportunity for those flush with cash. Big Pharma is currently eyeing M&A as the way to renew the drug pipeline. With fewer new drugs on their way to the market, the “Viagra times” are behind these behemoths, and they must now look to smaller drug firms as targets for acquisition and the opportunity to cure their revenue ills.
For small companies, this could be a threat or a blessing. Most small firms are not prepared to be approached for a merger or acquisition opportunity and need coaching to both prepare internally and be ready to negotiate effectively.
The usual pitfalls for small pharma firms dealing with M&A are:
- Prior Research: Everything from the strategic fit, to the possible cultural clashes to the possible regulatory or financing hurdles must be known before even starting negotiations
- Due Diligence: Mistakes in due diligence are common and most of them traceable to lack of experience
- Assumptions: There are several assumptions that can lead you to leave money on the table or perhaps end up in a losing position. For example, most companies assume they are negotiating an all or nothing deal – when in fact many possibilities might exist
- Regulatory: Lots of preparation must go into making sure regulatory hurdles won’t block a possible deal. FTC approval is usually a major issue, especially in deals with Big Pharma companies
The above are only a few of the aspects that must be taken into consideration. The use of a pharmaceutical consultant is quite advisable as these firms already possess a treasure trove of valuable information and expertise concerning all issues that may come up during your possible M&A, from expert research potential evaluation, to financing options, to regulatory navigation.