Rodney Ferguson, J.P. Morgan Partners
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Mergers, acquisitions, alliances, licensing deals—call them what you will. No matter the form and attendant differences, there
is, in this post-millennium world, a common thread running through them all. In a word, just about every deal is about relationships.
Until recently, most deals were essentially transactional: A large company purchased technology from a smaller one, commercialized
it, then paid royalties. But times have changed. For one thing, the playing field has become more equal. With easier access
to money, smaller entities—for example, biotechnology, biomedical, or specialty pharmaceutical companies—are able to bring
a product to market themselves. In effect, they're saying, "If you want our product, buy the company—or involve us more intimately
in co-development or co-marketing."
Big Pharma is getting the message. "Larger companies are opening themselves up more to the insight contributions of small
partners," says David Brinkley, senior vice president, commercial development for Theravance. "Just as these companies have
understood the need to integrate functions to come out with a better product, they also realize that there's much to gain
by tapping the acquired company's knowledge and wisdom. Integration is key."
Tracy Lefteroff, PricewaterhouseCoopers
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Relationship building (a more descriptive term than partnering) is difficult in any context, but especially one in which a
cash-flush Goliath sits across the table from a less endowed David. The complexity of partnership building is not for the
managerially-challenged, which may explain why so many deals head south for no technical reasons. In survey after survey,
culture clashes, lack of senior-level commitment, poor communication, and other "soft issues" surface as the key elements
that pollute a merger or alliance. It must be said that this doesn't have to happen, especially when so many of these issues
fall within the control of executives from both parties involved in the deal.
This article identifies 10 tips for forging successful partnerships—10 things to keep in mind the next time your company heads
down the acquisition or alliance trail.
1 Stay Strategically Aligned
Tracy Lefteroff, global managing partner of PricewaterhouseCoopers' life sciences industry services, recalls the case of a large medical device company that
embarked on an alliance with a smaller one. Soon after the deal was signed, a violent disagreement erupted between researchers
in the smaller company and management of the larger one over marketplace trends and future strategic direction. It did not
matter that the researchers had data from their advisory board of world-renowned experts to back up their conclusions; the
other side refused to listen and insisted on charting its own course. Eventually, the partnership broke up over these irreconcilable
differences.
In the world of partnerships, strategic congruence is next to godliness. Every deal should include a thorough review of each
partner's strategic goals and an assessment of how well the partnership will meet those goals. If there's no match, there
should be no deal.
Even when there is agreement on strategic goals at the beginning of a project, changing conditions can cause strategic rifts.
Robert Wills, PhD, vice president of alliance management for Johnson & Johnson's (J&J's) pharmaceuticals group, recalls one
such situation:
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