So, You’ve Acquired A Company… Now What?

For CDMOs, growing inorganically through an acquisition offers advantages such as instant capacity growth, new customers through the acquired company’s order book, and access to new manufacturing technologies.

Companies or sites for sale are presented usually in one of two manners: through an official tender process, where suitors are shown the background information to the company (sometimes anonymously at the start) to garner interest before proceeding to open discussions; or through opportunities that come through conversations in companies’ investor networks that seek to ascertain whether interest exists in buying or selling.

An acquisition target will need to align with the acquirer’s growth strategy and customers’ needs, whether this involves extending or expanding a current product, service or technology offering, gaining new geographic traction, or enhancing core capabilities. The potential to grow the business and add value should be at the core of any acquisition, and detailed due diligence of all aspects of the business is critical to ensure a full and rounded understanding of the acquisition target. Beyond the key commercial, technical, operation and financial due diligence consideration, a deep understand of the people and culture is also key.

Once a company has been acquired, its potential should be realized as quickly and as smoothly as possible through efficient integration, which means you need to take a close look at people, systems, technologies, and inherited customers and projects.

Keeping employees calm and informed
 

On completion of the acquisition, clear messaging for the new employees is vital, and must be carefully considered and agreed on by all stakeholders. The message will need to communicate the new owner’s plans, visions, and ambitions for the company. Naturally, the new people will be concerned as to how they and their families may be affected. What will change? Will they still have a job? What will be expected of them? Will their terms of employment change?

Clear messaging can give reassurances as appropriate and offer realistic answers to many of the initial, reactionary questions. Being empathetic to concerns and sharing with new employees this clear vision, and the corporate values and beliefs, is instrumental in creating the right environment for the business to succeed in the future. Building trust, by doing what you say you will do, and introducing existing employees who demonstrate these values and having transparency will help motivate and integrate new employees.

Due diligence of a company is undertaken prior to acquisition and will give a good insight in terms of performance, capabilities, and commercial/financial track record. However, it is only when the acquisition is complete that the site can be observed over a period of time, giving the opportunity to thoroughly evaluate the culture of personnel, operations, management, productivity, efficiencies and working practices. Key senior leaders and managers will often be retained post-acquisition, but the purchaser needs to review the structure and look for where changes and/or improvements can be made to it. Going into this with preconceptions about the changes that should be made can be damaging and lead to unnecessary operational disruption. New ownership will undoubtedly make staff uneasy, but recognizing and retaining key members of personnel with experience at a site is important.

Integration is not about implementing changes and forcing new working practices onto people; it should be a two-way process, with the opportunity to discuss and share best practices across all employees across the combined companies. Evolving as an entire business, rather than looking to mend something that is not broken, can keep new employees feeling valued and positive about future opportunities in the business, as well as bringing benefits to the whole organization such as introducing improved processes and systems, or developing best practice methods of working using collective knowledge and experience.

It is good practice to establish an integration team, with experts from all areas of the business, and representatives from the existing organization and the acquired company. These work streams can assess differences in working, effectiveness, and find a way forward for the future. A collaborative way of working ensures every voice is listened to, and every impact on employees, the business and its customers is considered before changes are made to either organization.

Systems: not everything has to be identical
 

There can be very high levels of standardization within drug manufacturing across different sites within a company, without doing everything identically. During integration, however, the company’s high-level global policy will need to be implemented across the new sites, and aspects such as management, customer interaction, presentation of documents (proposals, reports etc), websites, and branding will need to be the same to create a single, harmonized user experience for customers when working with the company, irrespective of which site carries out the project. It’s okay for day-to-day operational procedures of each site to differ under the policy, as long as the same common goal is achieved.

Mandating change unnecessarily is a costly and inefficient task. Examples of differences between sites may include analytical instruments and equipment. Procedures should be harmonized only where necessary and practical, and should always be viewed through the lenses of whether it is beneficial to customers, helps employees, and/or increases efficiency. For example, across our network, there are many different QC laboratories that all use different chromatographic instrumentation. As part of the integration, data from each system now communicate through a common systems application product that handles, collates, and processes the data to generate identical-looking customer reports.

Efficient integration involves respecting what has come before and worked, and only making modifications if essential. Without careful consideration to the effects of change, what may seem like a minor amend to a practice or a system can have knock-on consequences to other departments, causing unnecessary work and expense. It is also important not to assume that the acquiring company has the best possible practices; understanding the values of practices in the acquired business and the possibility of changing practices across the organization can bring added value.

Inherited technologies and customers
 

As part of an acquisition, either by choice or as a supplemental consequence, new technologies can become part of a company’s portfolio. Although not always the main business factor or motive behind an acquisition, in cases where they can add value, there should be a pre-formulated plan as to how these technologies will be marketed and offered to customers, in-line with anticipated sales growth.

For example, when Sterling acquired a facility in Deeside, UK, to add antibody-drug conjugate services to our portfolio, there were established analytical and development laboratories in place, but the site had yet to receive authorization from regulatory authorities for GMP manufacturing, which limited the potential offering to customers. A priority was implementing changes to gain regulatory approval for the site. An investment plan was put into place as soon as the acquisition closed, and now the Deeside facility is a vital part of our global network, adding value as a complementary technology.

Acquisitions of facilities or companies can also come with an array of projects and customers at various stages of development; indeed, part of inorganic growth through acquisitions can come through access to previously unattainable customers. However, when integrating sites into a wider network, some legacy projects may prove to be uneconomical in the long term, or may be better being relocated to another site to free up capacity for higher value projects, or to leverage more efficient manufacturing assets.

Customers must be a priority during acquisitions, both from a communication point of view and also during decisions that could impact on future ways of working. Whilst of course employee relations and investor relations are key, customer needs should be at the heart of decisions made from the start – so that you don’t lose them! Always ask, how can this organization add value to existing customers and open up the opportunity for new customers?

Early Impact, Long-Term Goals
 

When acquiring a new company and expanding a network of sites, it is important that the end result is not a collection of individual facilities, albeit with the same company name on the buildings. The ethos and values of the whole company should be integrated across the multiple sites, whilst each retains their own individual niches and skills. Communication with all stakeholders throughout the integration process is crucial. Having the core messaging clear and consistent as to why an acquisition is strategically beneficial to all involved, ensures continuity with new and existing stakeholders.

The integration process then starts by setting the new top-level governance of the site(s), which sets the foundation for harmonization to continue into areas such as quality, health and safety, engineering, manufacturing, communications, and commercial operations to ensure consistency, transparency, and sharing of best practices.

Integration is a learning process and practices evolve over time. Experience brings iterative changes for future implementation, either through recognizing what has worked well, or what could have been improved upon. This should include getting feedback from employees of the acquired companies and understanding their experiences, but the exact process will always vary based on individual circumstances. For example, when Sterling acquired its Germantown facility in Wisconsin, it was at the height of travel restrictions during the COVID-19 pandemic, meaning that building relationships with the site in the initial period post-acquisition was difficult. In an ideal scenario, there would have been more personal interaction by Sterling representatives to allow for sharing of culture, strategy and values, but because of travel limitations, this had to be carried out through teleconferences.

Fundamentally, integration is recognizing the equity and strength that the acquired company or site has built independently, and merging these strengths into an existing infrastructure to grow together and reach new heights of customer service and efficiency.