Slow Deal Flow? - Pharmaceutical Executive


Slow Deal Flow?
10 Quick Fixes for Getting Business Development Back on Track

Pharmaceutical Executive

Many business development executives are too frightened to ask for help—or if they do, run into access problems in getting the CEO's attention. However, in many leading companies, for the right deal, CEOs are only too delighted to help (and the problem sometimes turns to keeping them out once they are involved). Roche's Franz Humer and Novartis' Dan Vasella are both chairmen that are very willing to make calls when requested. The deal records of the companies are a testament to their timely interventions (see "Roche's Deals," above).

9. Create a better sell to the board

After licensing executives gain management's buy-in, they need to gain the support of the board of directors. But very often, business development execs wrongly assume that the same presentation they used to "sell" the deal to management can be used at the board meeting.

That's a big mistake. These audiences require a different focus and amount of detail—even the format should be different. At a simplistic level, management's challenge is to grow sales/earnings, while the board's is to evaluate the risk/reward equation of the proposed activity on behalf of the shareholders. Information should be articulated to help these key stakeholders answer their questions. What's more, in a world where poor oversight or weak corporate governance brings the threat of personal-liability law suits, directors now want much better transparency from their executives. This means presenting all aspects of the deal—good and bad, no exceptions.

Further complicating matters are the multiple demands put on directors' time. Apart from deals, boards also need to approve capital investment plans, environmental activities, diversity policies, and management remuneration, among other initiatives. How can directors in deal-hungry corporations effectively handle the information and time trade-off and meet their legal obligations?

At one company, with a reputation for the highest standards of corporate governance and an appetite for big deals, the answer is the deal memorandum. Ideally written by the deal champion and no more than four pages (and only then reviewed by the lawyers), it relays the essence of a deal, and should include information about what management hopes to achieve, what decisions are required from the board, the terms, financial impact on the business, and most critically, the risks—be they risks of doing the deal, or not doing it. Presenting the board with the right information to fully comprehend any transaction greatly facilitates its willingness to endorse deals, particularly in tight timeframes.

10. Track impact

En Vogue: Unique Agreements
Smart companies should always track the impact of their business development activities. In recent times, graphs showing the number of deals completed versus the competition have become standard fare in internal company-performance reviews. However, these can be misleading because deals are not about numbers, but rather about quality. Big teams can mean big numbers, and it's easy to convince corporations that their business development function is the partner of choice. But in the long term, the simplest and best way to create success is to track it. The best way to do that is to track the projected percentage of revenues to be generated from existing deals, each year over the next five years. Too high and the question begins to focus on the efficiency of the internal-development people. Too little and it's a lost opportunity to supplement growth.


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