Cross-border M&A

How to utilize cross-border M&A to increase the operational efficiency

of Vietnamese pharmaceutical companiesLessons learnt from M&A worldwide

S3095371_ VU LIEN HUONG

Cross-border M&A

Research methodology

M&AM&A motives

Synergies, Tax, Defense, Geography…M&A type

Horizontal, vertical…M&A approach

mannerHostile vs. Friendly

M&A processPre-mergerPost-merger

FDIFDI types

Green field, M&A, Joint venture

OLI ModelOwnership

LocationInternationalization

Cross border M&A

Pharmaceutical industry

Cross-border M&A

Pharmaceutical industry

5 countries = 2/3 value 10 trading companies = 50% sales

Revenue structure

Cost- Mainly R&D hard to reduce

cost•Patent protection•High barrier to entry•Few giants occupy the world

High margin•Pricing•Market expansion•Add in product ranges

Cross-border M&A

FDI

Definition Advantages Disadvantages

GreenfieldBuild one new plant F F1

Best control Start with clean site

Most time and effort consuming opportunities lost

Cross border M&A

Acquire or merge with existed firmF + L = F

Shorten introducing timeUtilize local knowledge and existed facilities

No absolute control Time to synchronize two systems

Joint venture

Corporate with local firm to build a new oneF + L = L

Risk sharingPotential synergies

Risk of conflictsLack of full controlLack of trustCreating future competitors

Cross-border M&A

OLI model

• Ownership: features that is specific to firms Patent and technology, entry to international

market.• Location: Resources and market preference Low labor cost, crowded population, stable

environment. • Internationalization: able to transfer ownership

across the border and make profit Technology protection in inefficient patent

protection in emerging market.

Cross-border M&A

M&A

Cross-border M&A

Motives

Motives type, manners

Some… add value

Some…do not

Some…even destroy.

Cross-border M&A

Process

Cross-border M&A

Process stages

Pre-merger- Negotiation process

• Target identification

• Pricing– Find similar cases

– Payment/return

– “Blow out” bid

• Payment method– Cash/

bonds/stocks/combination

– Highly preferred cash.

• Approaches to manager

Post-merger- Integration process

• Human concern

Erosion of trust

Leader vacuum

Value destruction

Determinism

Lack human consideration from previous stage

Leader important role

Cross-border M&A

What does it imply

Vietnamese drug companies

• Lack of capital

• Lack of R&D

• Management

• Privatization

needs of outside resources

Pharmaceutical industry

- R&D intensive

- Patent protection

- Highly concentrated

- High barrier to entry

Oligopoly

Urge of consolidation

Cross-border M&A

Findings

• Which incentives

• Which type

• What to offer

• How to price

• Which payment method

• What to take care of

Cross-border M&A

HEALTHY INDUSTRYHEALTHY SOCIETY

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