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Sometimes, the nature of the industry conflict, even hostile attitudes. Acquirer
defines the approach. The string of pearls companies also need to ensure regulatory
approach is very common in the IT/tech and legal compliance.
sector where large companies go on an
acquisition spree to gain niche Factoring all possible risks into the post-
capabilities very quickly. In fact, a lot of acquisition strategy entity is critical. In
startups go into business with the fact, today 90% of acquisitions fail in
understanding that they will eventually meeting the set time frames, and when
be acquired. That clarity has been built this happens, it destroys shareholder
into the organisation in its formative value. This shows the importance of
stage. getting your M&A strategy right.
The M&A ballgame The pharma landscape
To understand today’s M&A landscape, Cipla’s M&A strategy encompasses both
we must look at the business big ticket and string-of-pearls approaches
environment. In the last 4-5 years, India – we have done two big ticket
has seen a spurt in M&As and a change in acquisitions in the US recently and one
the culture that can be directly linked to small one valued at a couple of million
the blossoming of the entrepreneurial or dollars. We have developed a 5-year
startup space. decision matrix on what we will do and in
which geographies. Our M&As are a
The startup culture prevalent today reflection of our growth and risk appetite
means target companies often have a in specific geographies. Going forward,
very different business profile. Typically, we may take a bolder stance in certain
they are in the pre-profit stage, with less geographies where we want to achieve
than 5 years’ operational history. Earlier more meaningful scale in the
companies were built from a growth marketplace.
perspective and had a distinct track
record. Today companies are being built Divestment is also an important part of
from an exit perspective – the promoters all M&A strategy – it could involve
and founders of these young companies removing assets that are non-core or
look at short term value creation. These inviting external investors to spin out a
targets present a very different set of SBU as a separate entity with a different
challenges and risks (irrespective of business model. So to sum up, string of
whether the acquirer is following a string pearls approach, big ticket acquisitions,
of pearls or a big ticket approach). divestments, all of these are elements of
Cipla’s M&A strategy, which itself is a
Organizational culture is a huge factor in part of our vision and gameplan for the
any M&A. Target companies often have a future.
different style of operating, and post-
acquisition engagement can be a rough The pharma industry, much like the tech
patch. Acquirer companies have to industry, has built immense shareholder
carefully consider how to assimilate such value for 20 glorious years. Today, both
companies into the parent corporate these industries are at a challenging
culture; conventional practices for inflection point, and acquiring new
integration may not work. Leadership capabilities is going to be critical. Hence,
mindsets play a big role. One has to take M&A is and will continue to be a strategic
driver of inorganic growth.
the promoter/ founder’s mindspace on
both sides into account. There can be
