Mergers and acquisitions must be concluded as soon as possible. Consideration must be given to creating a plan that will lead to success for both parties, otherwise an already long and complex process may spiral out of control. It is generally accepted that shorter transaction terms lead to higher premiums and ratings.
Prolonging the due diligence phase of merger and acquisition transactions in life sciences (mergers and acquisitions) is a proven tactic that leads to a practice known as “price chipping” (reducing the transaction price). This delay is intended to create uncertainty for employees, customers and the market due to the longer transaction time than expected, thus forcing the buyer to use a more aggressive pricing strategy.
Mergers and acquisitions (M&A) are usually offered in four types:
- Horizontal – The company decides to buy another with similar products
- Vertical – The company decides to buy a supplier or customer
- Concentric – The company decides to buy another whose products or services complement its own
- Conglomerate – The company decides to buy another that will expand its attractiveness in the market
Mergers and acquisitions, whether licensing, cooperation, outsourcing or sale, take at least three months and can take years, depending on size, complexity or regulatory requirements. Maintaining the security and integrity of related sensitive corporate information documents is crucial and can be tedious as well as time consuming.
Plan or fail
But one thing common to all transactions of any type is that it is imperative to prepare a comprehensive plan outlining the necessary financial, legal and corporate disclosures to maintain a timely and managed process.
Here is a sample of end-to-end information requirements and components of a typical M&A sale. Ensuring compliance with most, if not all, of these steps will ensure success and reduce unforeseen complications.
A Guide to Sequential Step-by-Step Planning for Mergers and Acquisitions from a Seller’s Perspective:
- Prepare a sales strategy – This demonstrates on board that there is a plan for mergers and acquisitions and what it is designed to gain for the company
- Prepare the asset (s) for sale – make sure you understand and can demonstrate the engines of value
- Detailed criteria for mergers and acquisitions – to identify potential target buyers and on what basis
- Identify potential target buyers – Use identified search criteria to find and analyze companies
- Sales Planning – Contact target companies to discuss mergers or acquisitions
- Assessment and in-depth analysis of objectives – Ask the target companies through a Memorandum of Confidentiality (CIM) for details on the financial and corporate structure, together with additional related information that they believe will support the successful conclusion of the deal for both parties
- Negotiations – Prepare an offer document after you have a complete understanding of the target company and decide to continue. After the initial offer, the two entities can agree on the terms in more detail
- Due diligence – Starts when the offer is accepted. This aims to support the company’s assessment of the target company in terms of finance, valuation and additional operational areas such as its financial performance, assets and liabilities, customers, human resources and more.
- Sales contract – A final decision is made on the style of the purchase contract (purchase of assets, purchase of shares, licensing of assets, etc.)
- Financing strategy – Details of financing after signing the contract of sale
- Closing the acquisition and integration of the goal – The management teams of both countries are working for a smooth merger with the goal and its operations
The market for mergers and acquisitions is lively
According to Company Valuation Services UK, corporate buyers and sellers see opportunities in the future after Brexit, after Covid. Following a sharp decline in early 2020, low interest rates and optimistic high demand showed growth in early June 2020. In fact, the market for life sciences mergers and acquisitions grew very strongly to reach a 70% increase in transactions in February 2021, as compared to February 2020
Mergers and acquisitions can quickly become a mess if the complexity inherent in these transaction processes is not understood and mitigated by a stable, comprehensive and well-managed plan.
A key point of failure can be the data room.
The VDR platform supports a secure and flexible transaction
Traditionally, data rooms have included stacks of printed paper and bound documents covering the full range of corporate information of the seller / buyer companies. Ensuring security and tracking the use of these documents by company / person / department, etc. it was complicated and time consuming.
Historically, it has also been difficult to obtain information about which documents are read in the data room, which have been taken as a copy (returned?), How many questions and answers have been generated, and from which document / information, etc. .) and above all maintaining a level playing field for the seller’s / buyer’s staff in terms of access.
A solution that continues to gain momentum in connection with complex transactions of all kinds is the provision of “virtual data rooms” (VDRs). Unlike physical rooms, the virtual version is a controlled, secure and always available environment that is ultimately flexible. Each stage of a merger and acquisition transaction may have different levels of security, availability and size.
Sterling Technology is Europe’s leading provider of premium VDR solutions for secure content sharing, business process automation and community collaboration for mergers and acquisitions.
Questions that Sterling’s VDR can answer:
- Want to know who watched the finances? No problem
- Who withdrew the transaction prospectus? Only registered users can do this
- How many people asked questions about the valuation of the deal? Again, only certain authorized personnel can request
- Do you need multilingual 24/7/365 support for the VDR platform and the deal? No problem
Adapting VDR to the specific needs of M& Deal
For the past 30 years, Sterling has partnered with some of the big names in the global field of life sciences as well as pedigree, experience and now technology package to provide secure, stable and flexible VDR formats in which field they have been leaders. for the last 10 years.
Whether you are in the market for licensing, collaboration, outsourcing or sales transactions, customers can engage with Sterling’s in-house experts to create a VDR solution that will be custom-designed for its exact needs.
Following the number of transactions they have successfully partnered with, Sterling has come up with a number of flexible but stereotyped solutions that will require a little tweaking to be applicable to a wide range of types of transactions.
This allows its customers to start with a “light” version of VDR, in which their team can assemble, review and approve announcements without having to build a VDR structure from scratch.
Built-in editing and translation tools significantly reduce the investment in resources needed to process sensitive disclosures.
Increase VDR functions for proper verification
As the transaction progresses, customers can maintain a comprehensive view of how these disclosures are accessed by managing the rights to named consumer information, audit trails, and activity reporting to monitor the acquirer’s / target’s activities. If necessary, even higher functions can be added:
- Question and answer function to provide records of questions, answers and other disclosures
- Comprehensive functionality for the due diligence phase
- Once the deal is done, the platform goes down to the file sharing and storage feature
- New documents related to the post-transaction transition process can be uploaded and provided securely (with audit trails and activity reporting), allowing indicators to be monitored and recorded for disclosure if necessary
By taking advantage of Sterling’s specially designed VDR, customers can focus on ensuring that the transaction goes through a completely secure, highly efficient process that maximizes the ability to generate value from the transaction.
Another by-product of such deals is that there may be many buyers who also take advantage of this platform and learn about it. They will experience its ease of use, security and reports (which can be shared for disclosure purposes) and will definitely see the flexibility of the system, which can start out as something resembling a file sharing environment (albeit extremely secure) in the beginning of the transaction, transform it into a full-featured SaaS software platform during the due diligence phase, and then return to a simpler repository of documents related to the successful completion of the transaction.