optimizing integration following mergers & acquisitions: process and best practices ·...
Post on 07-Aug-2020
3 Views
Preview:
TRANSCRIPT
Optimizing Integration Following Mergers & Acquisitions: Process and Best Practices
James F. Grabowski, Ph.D. MBA: Director, Mergers & Acquisitions, AMRI
March 10, 2016
Overview
2
M&A Trends Continue to Grow
The ABCs of Communication During Integrations
Focused Integration for Company Benefit
Outcomes of Good Integration
Entering a New Growth Era as Outsourcing Trends Increase• Global pharma simplifying to core
competencies• Reducing internal resources• Generic competition • Divesting assets; Reducing fixed
cost structures• Vendor consolidation programs
benefitting integrated providers
• Early to mid-stage companies accessing outsourcing• VCs / Academia / Virtual pharma
• Increased funding fueling increase in early discovery and development
• Industry consolidation triggering interest in larger outsourcing partners
3
Service I
Service II
Service III
Service IV
CMO B
Pharma Co. 2
CMO A
CMO B
CMO C
CMO D
CMO E
CMO F
Merger DynamicsGrowth & Vendor Consolidation
4
As Pharma customers grow and merge, they will have to consolidate their vendors (Fig. 1) and work with larger CMOs that offer the capacity and breadth to handle their work (Fig. 2)
Pharma Co. 1
CMO A
CMO B
CMO C
CMO D
CMO E
CMO F
Service IService IIService IIIService IVCMO A
Figure 1
Figure 2
Pharma companies desire to work with fewer CMOs that they will need to visit, maintain relationships with and perform quality audits on
Pharma Co. 2
Pharma Co. 1
Pharma M&A Trends Effecting CRO/CMOs
5
SIZE OF CMO AVERAGEEBITDA-MARGIN
Source: IMAP research.
< US$ 50m
US$ 50m – US$ 100m
US$ 100m – US$ 250m
US$ 250m – US$ 1bn
> US$ 1bn
11%
12%
9%
16%
18%
Source: IMAP research /PharmSource, based on 194 leading CMOs globally.
100,0%
90,0%
80,0%
70,0%
60,0%
50,0%
40,0%
30,0%
20,0%
10,0%
0,0%
Number of CMOs
Size of CMO by sales
US$ < 25m
US$ 25m – 49m
US$ 50m - 99m
US$ 100m – 249m
US$ 250m – 499m
US$ 500m
Cum
ulat
ive
Sale
s of
all
lead
ing
CM
Os
(n=1
94)
FRAGMENTATION OF THE CMO MARKET
92
42
27
20
8
5
The ABCs of Integration Communications Keys to Communications During Integrations
6
Issue an announcement about the merger or acquisitionA.
Have meetings with customers or those affected by changes
B.
Provide informative communications throughout integration period
C.
What to Communicate and When
7
What to Communicate
& When
Formal talks between the company and customers; a good starting point for managing supplier & customer relationship
The company should keep an open dialogue internally and externally to allay concerns as soon as they arise
External and internal notification regarding the M&A as soon as they are allowed to legally:
• Joint statement by both companies involved in deal, or from acquired or acquiring business
• Company follows up the message with meeting requests to key stakeholders
AMRI Acquires Gadea Pharmaceutical GroupTimely and Targeted Communications
8
• AMRI Press Release distributed at 7 a.m. EST (1 p.m. Spain)
• AMRI and Gadea employees notified at 7 a.m. EST (1 p.m. Spain)• Translated materials sent to non-English-speaking employees
• Customer memo issued to AMRI Customers
Focused Integration for Company BenefitOverarching Goals
9
• The business acquiring and acquired must be unaffected throughout the integration process.
• The combined, post-merger business must be stronger than either of the companies prior to the acquisition.
• There is no “one-size-fits-all” approach to onboarding an acquisition.
How to Approach Integration Planning
10
M&A integrations have two broad goals:
• Firstly, the business must run as customers have come to expect from the companies throughout the integration process.
• Secondly, the combined, post-merger CMO must be stronger than either of the companies prior to the acquisition.
Integration Team Best Practices
11
• Rigorous integration planning is needed, but a “one-size-fits-all” approach to onboarding an acquisition does not exist
• Companies should empower their leaders at the acquired and acquiring company to shape a unique, tailored plan
• The first stage of the integration process, therefore entails learning about each other. The Team will be in a better position to draft a joint plan (example on next slide)
Enterprise Resource Planning (ERP) SystemsEvaluating Strengths & Synergies
12
Using ERP systems as an example, IT experts from each organization analyze respective strengths and decide how to proceed. • In one scenario, the larger company may move the acquired onto its ERP. • In another, there might be aspect of ERP that the acquired business does well and
move to incorporate it into the broader company. • Such discussions play out across IT, HR, sales, operations, and other units.
IT Acquiring Company
ITAcquired Company
Examples of SynergiesAMRI Case Studies
13
Analytical
Analytical
Analytical
Analytical
Now Provides Services Internally
AnalyticalAnalyticalAnalyticalAnalytical
AMRI
AMRI Acquires OsoBio
Realized Cost Savings
Greater Security for Customer
OsoBio
Gadea
Process 1
Process 2
Process 3
Process 4
Leverages SSCI and Analytical Department in Albany to Improve Manufacturing Processes, Related to Polymorph Stability
AMRI Acquires Gadea
Realized Cost Savings
AMRI
SSCI
AMRI initiated projects at SSCI to optimize the crystallization and create a process that has greater control
Example of an Integration Team
14
Executive Sponsor
Integration Lead
Sales and Marketing
Finance
Quality
Operations
IT
HR
Business Acquired
Integration Lead
Sales and Marketing
Finance
Quality
Operations
IT
HR
Acquirer
Operations
IT
Operations
IT
• Fears of supply chain disruption or price structure changes are the main concerns customers have when a service provider that they work with is acquired or makes a major purchase
• The company is responsible for allaying these fears and in ensuring they have no effect on the smooth running of the customers’ businesses
• Establishing an effective change management process can eliminate a lot of the uncertainties faced by internal teams in the weeks after an acquisition.
• In doing so, it reduces the likelihood that the business will be negatively affected during the integration.
• Change management ensures that a plan is formulated and executed as quickly as possible.
Why Change Management is Vital
15
How to Best Handle Change Management
16
• At AMRI, the goal is to have made and communicated decisions within two months of starting the integration process.
• By doing this, the integration team removes uncertainties by providing direction and answers quickly.
• The Team must keep the broader organization abreast of its progress, or lack thereof.
• Staff can become frustrated when the integration appears to be overlooking their area of the business.
• It is vital that staff understand why changes are happening
Outcomes of Good Integrations
17
The business comes first
Establish the must-have for a business vs. the nice-to-have
A more effective and efficient business
Process improvements
Benefits of Good Integrations
18
Acquisitions can deliver significant benefits to customers, for example:
I. Working with one company instead of three yields obvious efficiencies
II. A large company with a breadth of services can solve problems faster
Synergies that M&A can achieve for
companies and their customers make it an essential addition to
organic growth
Realization of such synergies is far from
assured when an acquisition deal is
first struck
At top-tier companies, a lot time/energy
ensures that, whatever happens, clients are
insulated from negative effects of integration
Placing business success at center of
decisions is key, while maintaining
clear lines of communication
However, There are Key Points to Remember
top related