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LOOKING BEYOND THE DEAL : WHAT YOU SHOULD EXPECT IN EFFECTIVELY INTEGRATING PEOPLE, PROCESSES, AND ASSETS INTO A VIBRAN

LOOKING BEYOND THE DEAL : WHAT YOU SHOULD EXPECT IN EFFECTIVELY INTEGRATING PEOPLE, PROCESSES, AND ASSETS INTO A VIBRANT BUSINESS. THE BAD NEWS: MOST MERGERS AND ACQUISITIONS FAIL TO REALIZE THEIR POTENTIAL.

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LOOKING BEYOND THE DEAL : WHAT YOU SHOULD EXPECT IN EFFECTIVELY INTEGRATING PEOPLE, PROCESSES, AND ASSETS INTO A VIBRAN

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  1. LOOKING BEYOND THE DEAL: WHAT YOU SHOULD EXPECT IN EFFECTIVELY INTEGRATING PEOPLE, PROCESSES, AND ASSETS INTO A VIBRANT BUSINESS

  2. THE BAD NEWS: MOST MERGERS AND ACQUISITIONS FAIL TO REALIZE THEIR POTENTIAL “Our analysis shows that 61% of buyers destroyed shareholder wealth” -- BCG, Business Week “Many studies of mergers, stretching back to the last century have shown that, despite some successes, the overall record is decidedly unimpressive” --The Economist “In 57% of these merged companies, return to shareholders lagged behind the average for their industries” -- The Harvard Business Review While catastrophic failures are rare, the majority of mergers and acquisitions do not achieve their goals Transaction itself absorbs most of the company's energy • Leadership focused on consummating the deal, not on making the combined business work Value is created not only in the transaction itself, but in successful implementation

  3. THREE FUNDAMENTALLY DIFFERENT OBJECTIVES NEED TO BE MANAGED FOR SUCCESSFUL INTEGRATION The measure of successful integration: "the increase in performance of the combined firm over what the two firms… accomplish as independent firms" 1. Continue to manage the current business 2. Design and build the new organization 3. Ensure expected "synergies" and value opportunities are realized

  4. M&A IN THE BIOTECH WORLD BRINGS PARTICULAR CHALLENGES... • For many biotechs, key resources are already stretched in “business as usual” mode • Typical concentration of on-market products and the portfolio pipeline means there is high vulnerability from disruption • Industry is highly networked, with a well-oiled rumour mill and highly mobile top talent • Much valuable intangible knowledge exists, which may be lost if key talent departs • Titles and incentives/compensation structures may be quite different • Cultures are fiercely cherished (at the company level, and in working teams) • Processes on either side may not be scaleable for the new company’s size ...Which means that a rapid, disciplined integration process is critical

  5. THE TYPICAL M&A PROCESS HAS MULTIPLE PHASESIllustrative Integration planning and data gathering Design and decision making Detailed implementation & progress monitoring Stage setting Pre-announcement Pre-closing and Month 1 post close Month 2-4 post closing Varying Read-out of • Integration principles • Team charters • Key dates and milestones Preliminary read-out of • Budget with synergies • Organization • Integration plan • Site strategy options Final read-out of • Budget with synergies • Organization • Integration plan • Site strategy Timing of phases varies significantly, not just with size and complexity of deal, but by function and geography

  6. CRITICAL CHOICES TO MAKE AND COMMUNICATE UPFRONT TO ENSURE SUCCESS • Make the "philosophy" of the underlying the integration effort explicit • Create a new business, combining the "best of both" • Or, default to a proven, successful formula from one side • Say explicitly if it is a real merger - or, if in some areas, it is a take-over • Define the balance between scope and speed • Focus on critical areas first then move to other fronts later • Or, proceed in parallel on all fronts • Decide how much resource will be focused on integration versus on day-to-day business and customers • Determine the principles of the desired organizations • Clean sheet, brand new • Or, build from one of the existing organizations • Will the feel be a new creation or an evolution?

  7. THE TYPICAL INTEGRATION TEAM STRUCTURE IS MATRIXED • Overall integration accountability • Set process, guidelines, timelines and integration focus integration Integration Steering Committee Integration Leadership • Seconded line manager • Day-to-day integration responsibility Functional Platforms e.g., HR, Communications, Finance, Legal, IT Operational Teamse.g., Research, Development, Manufacturing, Sales, Marketing Integration Program Management Office • Drive and co-ordinate the overall integration process and communications Team 1e.g., Research Alliances Team 2 e.g., Development portfolio

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