Take the M&A Train

By Vet-Advantage
August, 2017
But watch those headwinds

For better or worse, mergers and acquisitions (M&A) are an unstoppable force. Some fear them, believing that runaway M&A activity leads to the loss of competitive options and price pressures. But others view it as a means to growth, R&D and pipeline opportunity, strategic and tactical expansions and financial improvement.

A new report from Fountain Report/North American Veterinary Community and Fountain Agricounsel LLC provides a strategic and wide-angle view and deep-dive analysis about the many recent M&A deals and their competitive market effects. The report is titled “Animal Health Industry Consolidation Continues in Overdrive: Looking at Q1 2017 while Analyzing What Occurred in 2016 and the Competitive Implications.”

Mergers and acquisitions have been in overdrive for the past several years, with hundreds of deals worldwide, according to the authors. “Every company wants to grow, and M&A is traditionally seen as one of the key drivers for growth. Buying assets has proven easier to do for growth than total dependence on technical development and organic market growth.”

 

Headwinds
Despite the tidal wave of M&A activity, potential buyers, sellers and financial investors will face some headwinds, the authors say.

The fact is, putting together good M&A deals isn’t easy. “Experience helps, but is not a guarantee of success, as each merger is different,” the authors say. “The people and the culture are different from company to company, and operating systems differ, and integrating them can be challenging and risky. Financial
synergies are the lifeblood of many deals, but only some – typically, those based on cost savings – are likely to be realized. Synergies that depend on revenue enhancements from cross-selling, bundling products or creating a one-stop shop in key markets, are more difficult to realize. In assessing a deal’s potential, carefully evaluate where the synergies are coming from and discount the risky ones, advise the authors.

“Savvy acquirers know that the merger/integration process is messy, time-consuming, requires careful planning and execution; integration mistakes can be killers to synergy capture and potentially dangerous in terms of lost customers from defection and loss of key employees and conflicts.”

Overvaluing a deal and overpaying is another hazard. “The buyer needs to carefully ask itself and clearly answer: What is the strategic rationale for the deal?” according to the authors. “Why are we the right buyers? How will we create value? How will we manage the downside risks? Just because your competitors are doing deals, it doesn’t mean you should, too.”

A third challenge are regulatory and anti-competition barriers, which are looming larger as deals get larger and oligopoly powers keep increasing.

“Animal Health Industry Consolidation Continues in Overdrive: Looking at Q1 2017 while Analyzing What Occurred in 2016 and the Competitive Implications” covers both the food animals industry and the companion animals industry, the veterinary and over-the-counter (OTC) trade channels, the feed industry, food processors and retailers, animal genetics providers, and crop chemicals and seed providers. It discusses the ever-changing landscape and market power of leading animal health industry companies, including regulated healthcare products (pharmaceutical drugs, insecticides, biologicals, medicated feed additives, nutritional products, diagnostics), generic suppliers, distributors, pet products and retailers and the shifting competition intensity between online retailers versus brick-and-mortar retailers and veterinarians, hospital chains, food animal producers, processors & food retailers.   


For more information on how to obtain the full report, contact Angelina Varagona at (404) 552-9563, [email protected]

Topics: Trends, Mergers and Acquisitions

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