Archive for category: In the News

By Gail Dutton
January  16, 2023

If the letter of intent to acquire your company has been signed and the news made public, you might be asking what happens next.

If so, you’re not alone. With several acquisitions announced during JP Morgan week and the IPO window all but sealed, M&As will be a top exit strategy for 2023.

How to Prepare if Your Company is Being Acquired

Company executives will hustle to accumulate the relevant documents into a data room and prepare for the transition, and employees will likely wait and worry. Here’s a look – for employees and the overall company – at how to not only survive, but thrive during and after an acquisition.

What Employees Can Do to Prepare

Expect the company culture, policies and procedures to change. Buyers often allow the company they acquired to operate much as it has for a period of time after the deal closes, but eventually, it will be folded into the larger organization.

When the terms of the acquisition are announced, look at the details surrounding compensation, bonuses and stock options. The provisions of the acquisition can be complicated, even for employees. Therefore, “Make certain you understand the rules, and that you get good advice (that’s pertinent to) your own tax situation,” Dave Roberson, president of RoseRyan, a ZRG company, told BioSpace. Roberson has led 25 acquisitions as either buyer or seller throughout his career, including the April acquisition of RoseRyan by ZRG.

The objective, he said, is to make decisions intentionally. Some windows of decision may be open for only 30 days, so it behooves employees to understand their deadlines and act in their own self-interest rather than assuming someone will look out for them.

Looking Out For Your Own Best Interests

Once the acquisition is complete, employees who were acquired should make it a point to prove their value to the acquiring company.

“One of my mentees has been acquired twice in the past 18 months,” Roberson said. “I’ve advised him to really understand the universe he’s moving into. The best thing someone in that position can do is to execute each task very well, so your value is clear to the acquirer.”

That helps you create a place for yourself within the larger company over time, thus enhancing career stability. Remember, he said, “The acquired company will go away at some point.”

In practice, this means positioning yourself for your next career step. This may mean developing a special area of expertise that is likely to become valuable within your industry.

In the case of Roberson’s mentee, it meant transitioning from a generalist to a cloud computing specialist. When his second company was acquired by a cloud company, his new skill set suddenly became more valuable. “The goal is to help the company that just bought your company succeed…and to exceed the targets that were set,” Roberson said.

This entails not only adding value but expanding your network into the acquiring company.

“As soon as you go to a new place, get to know your team, get to know everyone your team works with, and then get to know people who don’t work with your team. Start building a network within this new company, so people know you and what you do. That goes a long way toward helping you succeed,” Roberson said.

Ultimately, even if you leave that organization, you will have a larger network that may bring opportunities to your attention.

How Managers Should Prepare

When an acquisition is in the discussion stages, the information should be tightly controlled – not only to stem any insider trading concerns but to staunch the rumor mill and retain staff. “By the time the deal is announced publicly, you already will have briefed your staff and probably will have had at least one town hall meeting to let employees know what’s happening and what to expect,” Ira Leiderman, managing director, healthcare, Cassell Salpeter & Co., told BioSpace.

Retention plans and packages already should be developed, and any new roles for staff should have been identified. At this point, “Internal working groups form to plan for integration while the finance and legal teams work toward closing the transaction.”

“When preparing your staff for the take-over, start (early-on) by formulating a strategy to identify and retain critical talent,” Mike Knowles, a managing director specializing in HR and M&A at BDO, advised BioSpace. Retention bonuses, paid upon the transaction’s closing, are key incentives.

“Non-financial retention strategies also can be effective,” he continued. “They include providing opportunities for high performers to gain valuable transaction knowledge and experience with specific transaction project roles.”

Establish Open Lines of Communication and Build Trust

What generally is more challenging is blending the cultures of the two companies. “Some of the smaller companies are a cross between corporate, family and academic culture, so there’s a lot of camaraderie. That may go away in a more structured or more bureaucratic organization…yet those little cultural things could make a big difference for people,” Leiderman pointed out. “People hate change.”

Establishing an environment of trust is important, and that starts long before any acquisition. “Employees need to trust not only what you’re saying now, but that the deal is good for employees as well as shareholders,” Margery Fischbein, managing director, healthcare, Cassel Salpeter & Co., told BioSpace.

To that point, Knowles elaborated, “Communicate regularly and as transparently as you can with employees who are not ‘inside the tent’ without disclosing sensitive information, even if it’s to say there are no new updates. It helps maintain credibility and trust among employees.

For managers, provide talking points, FAQs and coaching sessions to help them answer direct and challenging questions and concerns from employees.” Be sure to coordinate communications with the buyer’s communications team to ensure consistency in messaging and to foster cooperation.

During the transition period, Roberson said he updated his staff monthly for at least six months.

Importantly, “Make sure the employees understand what’s in it for them,” Roberson said. “They know that the shareholders, owners or founders gets lots of money when they sell the company, but what do they get? Stability? More career opportunity? A bonus?” Unless employees understand the value the acquisition brings to them, resentment can build.

Take Care of Your Employees

Reductions in Force (RIFs) are common features of acquisitions. When they happen, “People need to be treated with respect,” Roberson stressed. That means financial respect, through severance or other financial packages, as well as respect for their capabilities and careers, through references and networking connections. Also, “When you have to do a RIF, get it over with quickly…so people can move on.”

Acquisitions are a fact of life for innovative biopharma companies. When they’re executed with care, they truly can be win-win situations.

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Enabling more team members to travel by private jet or charter makes sense— except when it doesn’t.

By Dale Buss
July 29, 2022

The boom in corporate travel on private aircraft is taking on a new dimension: It’s not just for CEOs and board members any longer.

More executives and managers at lower levels now are getting on company planes or taking charters as a productivity measure. A growing number of companies also are using the prospect of private flying as a perk to lure executive or managerial talent. Employers are scrambling to formulate policies to cover this new twist: Who gets to go private, and when?

“Larger aircraft for longer range are still mainly being used for board activity,” says John Owen, CEO of private-flight provider Airshare. “But we’re also seeing engagement teams using smaller aircraft. There’s a little more carte blanche for them to use private aircraft when they need them, versus the previous practice of having to travel [only] with someone who ranks above them.”

Doug Gollan sees this expansion as founder of Private Jet Car Comparisons, a buyer’s guide for time-share seats. “Companies, having bought 25 or 50 hours for a CEO, now are buying a couple hundred hours after the CEO sees how efficient it is, and allowing more of the management team to fly privately,” he says.

The practice has caught on in part because the productivity benefits of private aviation have become more apparent in the last couple of years. “Face-to-face meetings have become really important again,” says Ramy Sidholm, head of PNC Aviation Finance. Meetings are easy on planes and insulated from distractions. Executives don’t get snarled in the vagaries of commercial travel or exposed to its riskier environs while Covid still rages.

The difficulties of airline travel have shunted more lower-level corporate travel to private aviation. Even as commercial schedules have recovered, pilot shortages and other factors mean airlines have drastically culled routes to many of America’s secondary and tertiary cities.

“If you’re a large, multinational corporation and you’re putting a factory, a switching station or a data warehouse in a relatively inexpensive place like Tucson, Arizona, or Alliance, Texas, you stuck it there because it’s inexpensive to build and operate there,” says Greg Raiff, CEO of Private Jet Services. “But it’s tough to get there by air.”

In fact, dangling private flights has become a recruiting tool. “With the Great Resignation, so many people are looking for perks, certainly at the senior level, and if a company has a vast footprint, it’s something many executives are considering more than ever,” says Joseph Smith, aviation director for the Cassel Salpeter investment-banking firm.

Essentially, more companies are pivoting to the sort of approach that Walmart has used for decades. America’s largest retailer employs its fleet of a couple dozen private planes as a corporate livery service, dispatching lower-level executives and managers to string together visits to its 10,500 stores in 24 countries. In the U.S., per Walmart’s business model, most stores are still in smaller places like Gardner, Kansas, and Easley, South Carolina.

But not every company is going in this direction. It’s understood, for instance, that General Motors hasn’t budged on its private-flight policies lately, though the automaker operates 118 facilities scattered across the United States.

Here are some ideas for dealing with this trend:

• Work it forward. The broadening of private air travel within an organization should cascade back into any planning for new aircraft or budgeting for time shares on planes, especially at a time of continued tight supplies of both planes for purchase and time-share seats.
  “We work with new prospects to give them a total trip and cost analysis on an annual basis before they buy anything,” Owen says. “This will help them build a budget for each department or individual, which creates a little more structure around what they’re going to put into effect.”
• Ponder the perk. CEOs and boards can use private flying as a lure or reward on an individual basis, or open up the practice to new categories, such as vice presidents. “Companies need to think about the development of their people, their business, whether they want to convey a change in culture that the best and brightest are going to be allowed to use these kinds of assets to do their job and to do it right and fast,” says David Mayer, partner with the Shackelford, Bowen, McKinley & Norton law firm.
• Expect pleasant surprises. Private flying is increasingly cost competitive with airline flights these days, especially if the destination is a second- or third-tier city, the travel is frequent and regular, and a number of employees are involved. “If you start seeing that the company has four or more employees traveling the exact same route two days a week, for instance, chances are you should be looking at some version of a corporate shuttle,” Raiff says.
  Joseph Smith, Cassel Salpeter Adds Smith, “You may not do it for one person unless it’s an emergency. But for a team performing due diligence or looking for a new acquisition, it can be very efficient to pack six to a dozen people on a private plane.”
• Attune the bureaucracy. Many corporate travel departments planners have stayed away from private aviation “because it’s high stakes and highly visible; they don’t mess with it,” Raiff says. But with more of their traditional internal clientele now becoming eligible for private travel, this part of corporate operations may need to rise to the occasion.
  “Find a consultant and get smart before you start spending money,” he says. “Learn about the private-aviation space. It’s here and it’s not going away.”
• Beware tax snares. With expanded rosters of individual participants comes potential exposure of more travelers to the IRS. So aircraft-use policies should take into account the tax ramifications of business and personal transportation of permitted passengers on an employer-provided aircraft.
  “It can involve the flight’s ‘fringe-benefit’ value to these new travelers unless they otherwise pay for the flight,” Mayer says.
• Don’t over-glamorize. C-Suite and board members may still get to ride on bigger, faster and more expensive planes than underlings. But the differences in their on-board environs are mainly going to be a matter of a little more personal space and maybe a guaranteed bathroom on the plane, or the presence of a flight attendant.

It’s not like the top brass are receiving foot massages while a regional manager can only expect a bag of peanuts. “The wealthiest client we have only wants pizza and sour gummy worms on the plane; it’s not about the caviar,” Raiff says. “What people value about private aviation is that it’s a time machine. It gets there faster. It is, in fact, private, and it allows people to be more productive, and that goes for everyone.”

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By Gail Dutton
July 13, 2022

Today there are 1,170 unicorns across all industries – an all-time high, according to CBInsights. Nearly 8% of those are in healthcare, with many in biotech specifically.

The pace of unicorn creation – which is still quite fast – is slowing, however, as economists predict a coming recession. The IPO window is all but closed. Venture capitalists are holding tightly to their cash, and the Federal Reserve’s July meeting is considered likely to raise interest rates. In such a climate, is unicorn status still within reach of today’s young biotech companies?

At the investment bank of Cassel Salpeter & Co., managing directors Ira Z. Leiderman and Margery Fischbein told BioSpace there are compelling reasons why unicorn status – defined as a private startup company valued at or exceeding $1 billion – may, or may not, be possible today.

To Become or Not to Become a Unicorn

Noting the case in favor of achieving unicorn status, Fischbein said, “Public market valuations are low and only a limited number of IPOs are getting done. Although VCs are culling their portfolios and becoming more selective,” they are reserving cash for follow-on financings for their best portfolio companies. “Many VCs have plenty of money, and good science is always valuable.” In this environment, companies can raise funds without going public and may have extra time to gather more clinical data between financings, thus making themselves ultimately more valuable to potential investors.

“Many VCs have plenty of money, and good science is always valuable.” – Margery Fischbein

The case against becoming a unicorn is twofold, she said. Public company valuations are significantly lower than they were one year ago, and “that reverberates back to the private sector. So instead of having continuous financing rounds at higher valuations, the lower public market valuations may result in flat or down rounds.”

The growing appetite for mergers and acquisitions among big companies, combined with an unattractive environment for IPOs, could also result in earlier deals before innovators reach billion-dollar valuations.

“The things that drive valuations are great science that hopefully advances to great clinical data and a really experienced management team,” Leiderman pointed out. “Also, some acquirers are willing to pay a premium price for early-stage companies that have amazing data and sometimes they simply want to ensure their competitors don’t acquire it. That in turn drives VC investment in certain areas and also drives company valuations,” he said.

Meanwhile, “Generalist investors have largely left the biotech market. These are people who have more limited knowledge about the science involved and may have had very significant losses,” Fischbein acknowledged. That said, “Smart money is still in the biotech space, but it’s selective.”

As Frank Milone, co-founding partner at Fiondella, Milone & LaSaracina LLP, a Connecticut advisory and accounting firm active in the biotech industry, pointed out, “VC funding and acquisitions will continue, the criteria will just be different. There will be an increased focus on financial fundamentals.

“When the economy is hot, investors are more inclined to take risks. In the current environment, startups have to be crystal clear about how their technology is different and how it provides value. They have to back it up with data showing promising early adoption and scalability.”

Where Will Future Unicorns Come From?

Looking forward, Leiderman and Fischbein said the therapeutic areas they think may be most likely to generate the next herd of unicorns are cell therapy for multiple indications beyond oncology, neurological conditions and the orphan drug space.

Building a company to unicorn status takes more than good science and good management, of course. “Company leadership needs to know how to conduct clinical studies effectively and how to present that data and, therefore, attract the right investors. That’s key,” Leiderman said. By “right investors,” he means influential investment groups with proven biotech track records – “investors who can lead the herd.”

“Quite frankly, from recessions have come many unicorns, and biotech is no different,” Kisha Mays, CEO and founder of Just Fearless, a global business development firm focused on accelerating the growth of particularly womenowned firms told BioSpace. “Biotech hasn’t even begun to peak.” The question for investors is “how to find that needle in a haystack.” Mays says she is optimistic about the industry, “even as a recession looms.”

Ultimately, although investors would like to have a stake in a unicorn company, “There are plenty of other things that offer niche opportunities, or that bring incremental value,” Fischbein said. “People would love to have a unicorn, but that’s fairly unpredictable and is rarely necessary.”

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