M&A deal value in MENA spikes in H1 2019, says new report

BY Fraser Tennant

Deal value in the Middle East and North Africa (MENA) region increased by 220.8 percent to $115.5bn in H1 2019 – up from $36bn in H1 2018 – according to a new EY report.

In its ‘H1 MENA M&A’ report, EY reveals that, while deal value increased significantly. deal volume witnessed a decrease of 10.7 percent, with 216 announced deals in H1 2019, down from 242 deals recorded in H1 2018.

Among the key deals in H1 2019 was Uber’s acquisition of Careem Networks for $3.1bn, the largest technology sector transaction to date in the Middle East, as home-grown technology start-ups find themselves being pursued by global players. The largest deal during H1 2019 was Saudi Aramco’s acquisition of a 70 percent stake in SABIC worth $69.1bn from PIF.

“MENA corporates are finding innovative ways to raise capital and have stepped up the frequency of their portfolio reviews,” said Matthew Benson, MENA transaction advisory services leader at EY. “Companies are reviewing their portfolios every quarter or more frequently – more often than global executives. With more frequent portfolio reviews, several non-core businesses are set aside for divestment thereby fuelling deal activity.”

In terms of domestic M&A activity, deal value in H1 2019 was driven by mega deals, with 111 deals amounting to $79.3bn, compared with 96 deals amounting to $5.5bn in H1 2018. In comparison, MENA witnessed 65 outbound M&A deals worth $21bn, compared with 77 deals worth $18.2bn in H1 2018.

As far as inbound investment is concerned, H1 2019 witnessed a fall in M&A deal volume in the MENA region, with 40 deals amounting to $15.1bn, compared with 69 deals valued at $12.3bn in H1 2018. The United Arab Emirates (UAE) was ranked the highest in terms of inbound M&A investment in the region, with 20 deals amounting to $14.4bn.

The EY report also reveals that the oil & gas sector was the top target sector for inbound activity, accounting for $10.8bn. Furthermore, four out of the six inbound deals in the sector were in the UAE, including three mega deals.

“Large sums of inbound M&A reinforce the MENA investment thesis,” said Anil Menon, MENA M&A and equity capital markets leader at EY. “We continue to believe that these are good times for strategic acquisitions in MENA.”

Report: EY H1 MENA M&A

AbbVie acquires Allergan

BY Richard Summerfield

In a deal that is likely to be one of the largest healthcare mergers of the year, US drug manufacturer AbbVie has agreed to buy Irish Botox producer Allergan in a deal worth $63bn. The company will pay $120.30 in cash and a portion of AbbVie stock for each Allergan share held. This amounts to $188.24 per share, around a 45 percent premium on Allergan’s closing stock price on Monday.

AbbVie shareholders will own 83 percent of the merged company, while Allergan shareholders will own the remaining 17 percent. The company will be headquartered in Chicago and will be led by Richard Gonzalez, chairman and chief executive of AbbVie.

The deal, which is expected to close in early 2020, is forecast to add 10 percent to AbbVie’s adjusted earnings per share over the first full year following the close, the companies said in a statement. Furthermore, AbbVie expects annual pre-tax savings and other cost reductions of at least $2bn in the third year after the deal closes. Abbvie remains committed to paying down its debts by $15bn to $18bn by the end of 2021.

“This is a transformational transaction for both companies and achieves unique and complementary strategic objectives,” said Mr Gonzalez. “The combination of AbbVie and Allergan increases our ability to continue to deliver on our mission to patients and shareholders. With our enhanced growth platform to fuel industry-leading growth, this strategy allows us to diversify AbbVie’s business while sustaining our focus on innovative science and the advancement of our industry-leading pipeline well into the future.”

“This acquisition creates compelling value for Allergan’s stakeholders, including our customers, patients and shareholders,” said Brent Saunders, chairman and chief executive of Allergan. “With 2019 annual combined revenue of approximately $48bn, scale in more than 175 countries, an industry-leading R&D pipeline and robust cash flows, our combined company will have the opportunity to make even bigger contributions to global health than either can alone. Our fast-growing therapeutic areas, including our world class medical aesthetics, eye care, CNS and gastrointestinal businesses, will enhance AbbVie’s strong growth platform and create substantial value for shareholders of both companies.”

News: AbbVie looks beyond Humira with $63 billion deal for Botox-maker Allergan

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

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