Biopharma M&A in 2024 — Five Considerations for Deal Execution

It’s no great secret that M&A activity in biopharma has been on the rise over the past 12 months. Analysis from EY found that life sciences M&A spend was up 34% last year relative to 2022, despite a reduction in deal volume. Activity among Big Pharmas in 2023 (Merck + Prometheus; Pfizer + Seagen) dominated headlines, and major deal announcements around this year's JPM Healthcare conference (including Merck's acquisition of Harpoon Therapeutics, J&J's acquisition of Ambrx, and GSK's acquisition of Aiolos Bio) present signals that this trend will only continue into 2024.

Beyond these major headlines, there has been a flurry of small- and mid-sized deals. This includes, in particular, continued big- and mid-sized pharma divestitures and out-licensing deals as a glut of early-stage programs compete for limited R&D capacity and capital within these companies' portfolios.

As a result, many of our clients who have emerged from 2023 with cash on-hand and/or good access to capital are seeing opportunities to accelerate their own portfolio strategies via asset, program, and platform acquisitions, as big pharmas divest and deprioritize "non-core" elements of their portfolios. And, unlike their larger sell-side counterparts, we are seeing companies on the buy-side that have not yet built their infrastructure, processes, and playbooks for M&A activity. Those considering acquisition in this context (and frankly, all of us engaged in M&A integration) would do well to remember that some 70 - 90% of deals fail to meet their objectives. We can increase our likelihood of success by keeping the following in mind:

1. Maintain laser-focus on the deal thesis (your "why") - These big bets should tie directly to strategy, and the implementation of integration activities should focus on how we're setting ourselves up to accelerate strategy. Identify synergies early, and manage them alongside other key metrics for your business.
2. Integration planning starts early - Do not wait until deal-close appears imminent to figure out how integration will happen. Integration management offices / teams should be stood up well before diligence is completed, and should have clear objectives and timelines for delivery (aligned to synergies - not just to contractual obligations).
3. Integration (and transition) is a joint activity - Amid divestitures and out-licensing, big pharmas tend to be urgently working to shift resources away from these deprioritized programs, which can create risks to integration success. Determine well before deal-close, through diligence and integration planning, what is needed from your partners, and build joint plans, commitments, and incentives to ensure collaborative execution.
4. Alignment is never "overkill" - Integration tends to be highly cross-functional and interdependent. Be wary of assuming that everyone knows the strategy, and therefore is ready to execute in an aligned way. If we're already aligned, agreeing on documented roles and responsibilities should be easy (and if its not easy, we're not that aligned!). Slow is smooth, smooth is fast.
5. People come first - Integration is disruptive. When we begin working with a new leadership team on an integration effort, we often joke that we're the only ones who actually want this additional work. Early and ongoing engagement with your people is essential to maintaining employee experience, productivity, and retention through integration periods.

Vantage Partners' Integration Management team is focused on helping our clients align and advance through interesting times in the biopharma space. We are always open to a conversation — please let us know if we can help.

Visit our Integration Management page to learn more.