With multiples in the Biotech & Pharma industry at record highs and forecasted health and economic uncertainties fed with global geopolitical conflicts, supply shortage, breathless health systems and pandemic issues, returns for any deal that isn't supported by real business improvement will likely come under pressure in the future.
In the meantime, the Biotech & Pharma industry is undergoing structural changes, with a rapid technological disruption and ever-growing diversity of modalities moving towards personalized therapies. The supply chain is more complex, the value chain more fragmented. Globalization and digitalization are catalyzing competition escalation. The ongoing boom in mergers and acquisitions is also upending the ratio of power by consolidating a supplier base or offering a customer or competitor more market traction for instance.
Our industry is entering a new era, shifting profit sources and distribution along the value chain and reshuffling cards between winners and losers.
All of it increases the likelihood that BioPharma companies, Contract Services Organizations - CRO, CDMO, CMO - and suppliers will need to develop dynamic, agile and very different strategies, enhance innovation, optimize technical operations, upgrade quality standards, redesign organization and manage costs, resources and capital allocation in ways that are highly interdependent. Yet, most Private Equity firms do not approach due-diligences that way.
Instead, Private Equity firms tend to structure due-diligences as a succession of unrelated questions and topics, dividing the effort between internal resources and a selection of various advisors, with limited interplays between each group. One adviser might perform a commercial assessment that gauges market opportunities and competition threat, while another produces a separate technical or operational assessment looking at quality and regulatory or organization structure, capacity utilization and CapEx plan for instance. Too often, conclusions from one group do not integrate the analysis, findings and intelligence from another, blurring the understanding of key interdependencies between strategy, operations, capabilities and impact quantification.
And while it's hard to argue that private equity's performance has been impressive over the past decade, it should be pointed-out that most players' performances in the BioPharma field had more to do with conducive macroeconomics and acquisition's multiple expansion than business improvement and organic value creation.
Overall, the way Private Equity firms approach due-diligence creates blind spots as it fails to catch the interdependencies and synergies between strategic, commercial, technical operations and organization capabilities, limiting their understanding of the full business potential, and their ability to activate the right margin improvement and value creating levers.
Value creating insights, especially in the BioPharma industry, come from an integrated, 360-degree view, diligence process that aggregates strategic, commercial, technical and organizational analysis and gauges how pulling a lever in one specific area of the business will affect all other operations and assumptions within the whole organization.
Larka has developed a unique Integrated Due-Diligence solution for Private Equity firms, built on nearly 30 years of in-depth strategic, commercial, technical and organizational diagnostics performed on hundreds of industry players: BioPharma companies, CROs, CDMOs, CMOs, analytical testing Labs, raw material and equipment suppliers.
Our clients leverage an unmatched industry knowledge, privileged insights and proprietary benchmarks and valuation tools on all critical aspects of the industry by combining Commercial Due-Diligence, Technical Due-Diligence and Operational Due-Diligence under one roof.
Our Integrated Due-Diligence solution provides PE firms 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 will take to run the optimal post-acquisition plan.
At Larka, we make sure every deal achieves its full potential. Our track record in the field is unrivaled, so does our clients' deal success rate.