Effective IT integration key to successful M&A, claims new report

 BY Fraser Tennant

One of the most critical ingredients for successful M&A is a differentiated ability to integrate IT and related systems effectively, according to a new report by Bain & Company.

In its ‘Process and Systems Integration: A New Source of Competitive Advantage’ report, the firm notes that successful post-acquisition IT integration requires investments that many companies fail to make, leading to complexity and spiralling costs further down the line.

Furthermore, Bain & Company’s research states that 70 percent of processes and systems integrations fail in the beginning, not in the end – burdening poor-performing companies with far higher IT costs as a percentage of revenues. The report also notes that companies find it more costly to do the next deal or add new IT applications.

“We have seen that frequent and material M&A activity contributes to higher shareholder returns,” said Laurent Hermoye, a partner at Bain & Company and co-author of the report. “This finding holds up every year, across industries. In order to bring such a repeatable M&A capability, companies need to master the integration of business processes and related systems. Complex deals result in a tedious process and systems integration, with costs that are often underestimated at the time of the due diligence. As a result, process & systems integration can make or break deal value.”

According to the report, there are six key areas companies should focus on when integrating IT systems: (i) align an IT integration thesis to guide the integration effort; (ii) integrate processes and systems with speed; (iii) appropriately allocate resources and budget; (iv) protect digital agenda while advancing integration; (v) adopt best of both IT talent, with consideration for transition needs; and (vi) reassess IT approach and costs at the time of integration.

“Serial acquirers that successfully integrate process and systems have managed to create a ‘secret formula’,” continues Mr Hermoye. “This formula delivers a more efficient and effective integration, creating the optimal set-up for moving on to the next deal.”

Report: Process and Systems Integration: A New Source of Competitive Advantage

Legacy Reserves files for Chapter 11 to facilitate RSA

BY Fraser Tennant

In a move designed to significantly reduce its debt and realign its operations, energy company Legacy Reserves, together with its subsidiaries, has filed for Chapter 11 bankruptcy. The filing is to facilitate a global restructuring support agreement (RSA) with its lenders, announced just days previously.

Legacy’s bankruptcy woes are a direct result of uncertainty in the oil industry, with fluctuating oil prices doing much to saddle the company with massive debt as it attempted to continue operating through the market’s peaks and troughs.   

Moreover, Legacy has stated that it sought Chapter 11 bankruptcy protection in order to implement its RSA and cut more than $900m of its debt. The RSA will provide the company with liquidity and capital structure, while minimising operational disruptions.

“We explored a wide variety of alternatives to address our balance sheet and looming bank maturity during a sustained downturn in oil and gas prices,” said Dan Westcott, chief executive of Legacy. “After concluding this process, we felt that the financial restructuring negotiated with our creditors provides the best path forward for the company. Through the proposed terms of the plan of reorganisation, we believe our right-sized balance sheet will enable us to successfully compete in the current environment.”

The company has also stated that it intends to operate ‘in the ordinary course of business’ throughout the Chapter 11 process and has filed a number of first-day motions to this effect. Specifically, Legacy has requested authority to pay in full employee wages and honour existing employee benefit programmes, vendors and other operating expenses, joint interest billings for non-operated properties and royalties to mineral interest owners under terms of applicable agreements.

An independent energy company engaged in the development, production and acquisition of oil and natural gas properties in the US, Legacy’s current operations are focused on the cost-efficient management of shallow-decline oil and natural gas wells in the Permian Basin, East Texas, Rocky Mountain and Mid-Continent regions.

Mr Westcott concluded: “Following the negotiated restructuring, we look forward to having substantially less debt and significantly enhanced prospects for our company, our employees and our future."

News: Oil and gas producer Legacy Reserves to seek Chapter 11 protection

Pfizer acquires Array in oncology focused deal

BY Richard Summerfield

Pfizer Inc is to acquire Array BioPharma Inc in a deal with a total enterprise value of $11.4bn, pending customary closing conditions, including regulatory approvals.

Pfizer has agreed to pay $48 per share in cash for each Array share held. The agreed price represents a 62 percent premium over Array’s closing price on Friday. The deal is expected to complete in the second half of 2019.

The deal will significantly improve Pfizer’s pipeline of drugs in the increasingly profitable oncology space. Array’s product portfolio includes two drugs in more than 30 clinical trials for different kinds of cancer, particularly colorectal cancer, which, the companies said, is the third most common form of cancer in the US.

“Today’s announcement reinforces our commitment to deploy our capital to bring breakthroughs that change patients’ lives while creating shareholder value,” said Albert Bourla, chief executive at Pfizer. “The proposed acquisition of Array strengthens our innovative biopharmaceutical business, is expected to enhance its long-term growth trajectory, and sets the stage to create a potentially industry-leading franchise for colorectal cancer alongside Pfizer’s existing expertise in breast and prostate cancers.”

“We are incredibly proud that Pfizer has recognised the value Array has brought to patients and our remarkable legacy discovering and advancing molecules with great potential to impact and extend the lives of patients in critical need,” said Ron Squarer, chief executive at Array . “Pfizer shares our commitment to patients and a passion for advancing science to develop even more options for individuals with unmet needs. We’re excited our team will have access to world-class resources and a broader research platform to continue this critical work.”

“We are very excited by Array’s impressive track record of successfully discovering and developing innovative small-molecules and targeted cancer therapies,” said Mikael Dolsten, chief scientific officer and president of worldwide research, development and medical at Pfizer. “With Array’s exceptional scientific talent and innovative pipeline, combined with Pfizer’s leading research and development capabilities, we reinforce our commitment to advancing the most promising science, regardless of whether it is found inside or outside of our labs.”

Array is expected to generate $274m in revenue this year, and that figure is expected to pass $1bn by 2022.

News: Pfizer makes $10.6 billion cancer bet in cash deal for Array Biopharma

Dassault Systèmes and Medidata Solutions agree $5.8bn merger

BY Richard Summerfield                                                                                           

French software company Dassault Systèmes is to acquire American firm Medidata Solutions in an all-cash deal worth $5.8bn.

Dassault will pay $92.25 per share for Medidata, a price which represents a slight discount to the company’s closing price of $94.75 on 11 June, the day before the deal was announced. However, it also represents a premium of 6.6 percent to Medidata’s 50-day average price of $86.50 over the last 50 days.

“Today marks a significant milestone for the Life Sciences industry and the value of the virtual world to address the complexity of developing personalized medicine and patient-centric experiences. Multidiscipline scientific innovation and industrial performance call for a platform approach connecting the dots between people, ideas and data,” said Bernard Charlès, vice chairman and chief executive of Dassault Systèmes.

He continued: “Medidata’s leading position in clinical trials complements our life sciences solutions on the 3DEXPERIENCE collaborative platform. Medidata’s recent expansion into real world evidence and analytics coupled with the power of modelling and simulation demonstrates how the virtual world will catalyze the next generation of patient-inclusive therapeutics. We are now well positioned to be the enabler of the Life Sciences industry transformation, illustrating our company’s purpose of harmonizing product, nature and life.”

The deal for Medidata will strengthen Dassault’s position in the life sciences sector and boost earnings from 2020 onward, Medidata noted in a statement announcing the deal.

“Our mission to get the right treatment, to the right patient, at the right time has fueled our 20-year journey of innovation and commitment to the life sciences industry,” said Tarek Sherif, co-founder, chairman and CEO of Medidata. “We share common vision, values and passion with Dassault Systèmes, and our combined talents will empower the life sciences industry with an end-to-end business platform.”

“Facilitating new therapeutic innovations to become the next standards of care has been our commitment since day one,” said Glen de Vries, co-founder and president of Medidata. “Ultimately, we will unlock enormous opportunities for our customers and patients, advancing life sciences in the age of precision medicine.”

The deal is expected to close in the fourth quarter of 2019, subject to certain regulatory approvals, approval by the majority of Medidata’s shareholders and other customary closing conditions.

News: Dassault Systemes targets life sciences with $5.8 billion Medidata deal

Blackstone acquires US logistics assets from GLP in $18.7bn deal

BY Fraser Tennant

In a deal which is the largest-ever private real estate transaction globally, multinational private equity (PE) firm Blackstone has acquired three US logistics assets from transportation solutions provider GLP for $18.7bn.

The transaction totals 179 million square feet of urban, infill logistics assets – almost double the size of Blackstone’s existing US industrial footprint. Drilling down, Blackstone will acquire 115 million square feet for $13.4bn and its income-oriented non-listed real estate investment trust (REIT) – Blackstone Real Estate Income Trust (BREIT) – will acquire 64 million square feet for $5.3bn.

One of the leading owners of logistics properties, Blackstone’s real estate business has approximately $140bn in investor capital under management. It operates around the globe with investments and people in North America, Europe, Asia and Latin America. The firm has acquired over 930 million square feet of logistics globally since 2010.

“Logistics is our highest conviction global investment theme today, and we look forward to building on our existing portfolio to meet the growing e-commerce demand,” said Ken Caplan, global co-head of Blackstone Real Estate. “Our global scale and ability to leverage differentiated investment strategies allowed us to provide a one-stop solution for GLP’s high quality portfolio.”

Singapore-based GLP is a global investment manager with $64bn assets under management (AUM) in real estate and PE funds. Its real estate fund platform is one of the largest in the world, spanning 785 million square feet.

“GLP was able to leverage our deep operating expertise and global insights in the logistics sector within four years to build and grow an exceptional portfolio,” said Alan Yang, chief investment officer of GLP. “We are proud of the business our team built and are confident it will continue to flourish under Blackstone’s leadership. We are looking forward to expanding our footprint in the US to continue to seize key opportunities in the US market.”

Frank Cohen, chairman and chief executive of BREIT, concluded: “These properties are a complementary addition to our stabilised commercial real estate portfolio, which is oriented toward our highest conviction themes, such as logistics.”

News: Blackstone bets big on Amazon, e-commerce with $18.7-billion acquisition