360-degree diligence process to spotlight all value-creation levers

case studie integrated due diligence

Thanks to our Integrated Due Diligence solution - combining Commercial, Technical and Operational Due Diligences -, a Private Equity firm gets a full appreciation of the capabilities, synergies and risks involved and a full-potential vision for the business.

A private equity firm required Larka to be its strategic advisor for an M&A deal involving a bio-CDMO offering GMP services for gene therapies and biopharmaceuticals. The biotech and pharma industry being increasingly competitive for buyers, our client wanted to partner with an advisor having a real knowledge of the industry and able to provide them with both a full appreciation of the capabilities, synergies and risks involved and a full-potential vision for the business, along with the capital, time, resources and organization it would take to run the optimal post-acquisition plan. This way, our client could properly strategize competitive purchase prices and formulate sustainable strategy to sellers and bankers.

Indeed nowadays, with multiples in the Biotech & Pharma industry at record highs and forecasted health and economic uncertainties, deals must be supported with real business improvement and organic value creation.

Our client knocked on the right door. Indeed, at Larka, we offer a unique Integrated Due-Diligence solution for private equity firms combining Commercial, Technical and Operational Due Diligence under one roof, giving our clients a 360-degree view of their target and its potential. Our clients benefit from our unrivaled expertise of the biotech and pharma industry, our privileged insights, proprietary benchmarks and valuation tools.

In a 4 weeks due-diligence, we have provided our client with an Integrated Due Diligence that gave them all the keys to make a sound investment decision and value proposition to the target. Our team covered three streams in parallel - Commercial, Technical and Operational Due Diligence - treating them as interdependent pieces of a whole in order to catch the synergies between strategic, commercial, technical operations and organization capabilities and activate the right value creating levers.

In order to understand the target's business plan, risk and opportunities and identify value creating levers, we performed a Commercial Due Diligence. The objective was to find the synergies and interdependencies between commercial opportunities, target's technological capabilities and market environment pitfalls. Our analysis covered the following topics :

  • Introduction to Biologics CDMO market
  • Target's addressable market
  • Competitive landscape & Target positioning
  • Customer environment & Market Feedbacks
  • Business plan review
  • Growth Strategy options

Our Commercial Due-Diligences rely on advanced analytics and extensive proprietary benchmarks across the whole drugs' supply and value chain, leading to unparalleled insights on market dynamics, customers environment and competitive landscape. This allowed us to draft the target's SWOT, assess its business plan and present growth strategy options to our client and the seller, over management meetings.

Our team simultaneously performed a Technical Due Diligence of the target. The investment bank had allowed a one-day on site due-diligence, in addition to the data room review and the Q&A session that Larka executed before the site visit.

Based on a thorough data room review and on-site visit preparation, Larka could challenge the target's team on the following items during the on-site visit, in order to benchmark its technical, quality and regulatory performances with industry standards:

  • Equipment and technological capabilities
  • Technical Operations and personnel expertise
  • Quality Management Systems
  • QC & Analytical Systems
  • IT Systems
  • Regulatory Compliance

Through this Technical Due-Diligence, Larka could provide a full appreciation of the internal technical capabilities, synergies and risks involved, and a value-potential assessment based on industry benchmark and gap analysis.

Finally, our team performed a sound Operational Due-Diligence in order to assess the target's operations, processes and organizational design, and its internal capabilities to convert the value potential, identified by Larka during the due-diligence process, into concrete results. We have made an in-depth analysis of the following items:

  • CapEx plan
  • OEE and capacity utilization
  • Organization & Management Structure
  • Technical teams and resources
  • Business development & Marketing capabilities
  • IT systems

Through Operational Due-Diligence, we analyzed historical and current operating performances of the target - people, process, equipment, systems and technologies - and tested them against industry standards. We also spotted operating bottlenecks, analyzed capabilities of current and planned operations and compared them with the target's projected goals - top line or cost reduction - and capital expenditure requirements.

As a result of the Integrated Due-Diligence, which combined the analysis and findings of Technical and Operational due-diligence, Larka provided its client with a strong value creating post-acquisition plan, and the target's management with a very attractive and value-creating growth strategy for the future.

Key value drivers identified by Larka during the 4-week due-diligence process were the following:

  • CHigher revenue growth potential than business plan forecasts, based on the combined assessment of the target's technical and operational capabilities, and the market opportunities, which pointed-out a room for additional revenues within a new addressable and profitable market segment
  • Strong value creation with implementation of a proper Marketing & Sales strategy and organization - Commercial excellence -, that included the development of a compelling inbound marketing and digital strategy, as well as a robust business intelligence platform.
  • Substantial cost savings on CapEx plan and strong value creation thanks to:
    • Implementation of Operational Excellence and optimization of OEE, capacity utilization and resources
    • Realignment of a part of the CapEx plan towards a more attractive and less capital-intensive segment of the Biopharma market

The target decided to select our client as partner for the future thanks to the compelling post-acquisition plan they developed with Larka, and the competitive offer our clients could make.

Following the acquisition, the private equity firm and the target hired Larka for the development and implementation of the value drivers identified and introduced during the due-diligence process.