In biotech, M&A is a critical driver that unlocks value, capital, and resources and allows for efficient delivery of therapies to patients. Few moments in a company's life are as consequential as the one when a large pharma calls with an acquisition offer. Years of science, capital, and human sacrifice funnel into a negotiation that can conclude in weeks.
I have advised multiple biotech companies and helped them navigate the process. Drawing from that experience, I’ve put together a framework below, sharing key guidelines for companies to be prepared.
1. Prepare the Field Before Any Offer Arrives
Seed relationships with Pharma and engage early and broadly, even those without an obvious near-term interest. Probe repeatedly, from different angles, at different levels of seniority. These interactions serve multiple functions – generate intelligence on their interest, valuable advice to improve trial design, communicate the value proposition and clear any surface misunderstandings of the clinical program.
In my experience, consistency is key. Strategics are watching your every move - press releases, webcasts, and presentations – and share notes with investors. Implicitly, every investor update is strategic communication and Pharma BD will use it to build their internal model. Make your value proposition quantitative, public, and consistent.
2. Select Advisors Early and Carefully
Most companies select their M&A bankers after receiving an offer. This is too late. The quality of your advisory depends on their understanding of the clinical data, differentiation, value, and how it fits the narrative with potential acquirers.
Cultivate two or three banker relationships over the years, allowing them to present to your board, engage with your science, make introductions to potential acquirers, and develop a genuine view of your company’s worth. When an offer arrives, you will be choosing among people who already know your story.
3. Craft a Tight Process
One of the single most important principles in Biotech M&A is that companies are bought and not sold. Once an offer arrives, it is critical to manage the information asymmetry between potential acquirers. From the public filings, it is evident that premiums are higher when there is competition vs. a single bidder. The reason is structural – bidding histories are disclosed publicly, and Pharma wants to ensure they are disciplined on value.
When the first bid arrives, it is critical to ensure all other potential parties are current on data, milestones and narrative and not allow a single bidder to pull too far ahead in diligence. Maintain leverage on valuable information and note access is contingent on a serious offer. Exclusivity is the most powerful chip and should only be granted when you are genuinely close to a price you would accept.
4. Closing - Negotiating and Understanding Fine Print
Once a price is agreed in principle, the negotiation is not over. There are many critical clauses in the merger agreement, such as the Material Adverse Event (MAE), that sellers should be aware of. A poorly negotiated merger agreement can give an acquirer a credible off-ramp to walk away from the deal and it is paramount to ensure that these are priced in and explicitly carved out.
Similarly, it is important to understand that the true value of Contingent Value Rights (CVRs) - the earn-out payments tied to future milestones – is understood and negotiations should focus on a simpler structure with an intent to maximize upfront value.
Prepare with Optionality
Always build with optionality and maintain a standalone plan that the entire board believes in. When a real offer arrives, that preparation becomes leverage. A board that can credibly say “we do not need to sell” is a board that can negotiate.
The biotech M&A environment is active. The companies that will transact on the best terms are those that have been preparing for years: building standalone value, communicating it publicly and consistently, cultivating advisor relationships, educating potential acquirers, and ensuring their boards can confidently turn down a low offer.
The call will come. The question is whether you will be ready for it.