Cross Border M&A Forum|The Valuation of Cross-border M&A, Legal Risk Management, and Experie

2019-12-02 09:13

Cross Border M&A ForumThe Valuation of Cross-border M&A, Legal Risk Management, and Experience and Lessons on M&A integration


On the afternoon of September 23, 2019, hosted by China Pharmaceutical Innovation and Research Development Association (PhIRDA), the Cross Border M&A Forum was successfully held on the 2019 China BioMed Innovation and Investment Conference (2019 CBIIC). The Cross Border M&A Forum consists of five keynote speeches and two panels, involving valuation and transaction of cross-border M&A, legal risk management, post-merger integration strategy, etc., and discussion on the significance, opportunities and challenges in cross-border M&A for Chinese pharmaceutical enterprises.

The forum was chaired by Joe Du, Chief Strategy Officer of Sanpower Group.

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Moderator: Joe Du, Chief Strategy Officer of Sanpower Group


The first keynote speech, ‘To Invest or not Invest? US Market Opportunities in the Age of Trump’ was shared by Lin Yanhong, Managing Partner of CTIC Capital. According to Ms. Lin, the United States boasts the largest medical and pharmaceutical market. The number of US-based biomedical pipelines is mounting steadily over the past six years, and the biomedical start-ups have become the push of drug innovation and development. The edge of innovation in American biomedical industry is developed from many aspects, including policy support such as the Bayh-Dole Act, drug pricing mechanism, market superiority, namely, the US-based biomedical venture capital is leading and getting far ahead of other regions and countries, more active withdraw option for venture capital institutions, as well as geographical cluster.


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Keynote speaker: Lin Yanhong, Managing Partner of CTIC Capital


The next keynote speech was delivered by Carl Peng, Assistant to President & General Manager of International Department Fosun Pharma, on the topic ‘Post Merger Integration of overseas Pharma M&A’. Mr. Peng noted that M&A integration pertained every links of transaction especially in overseas M&A, where the hardest barrier involved the valuation, negotiation and post-investment integration of transaction. It is generally agreed that the top priority should be given to achieve synergies and to realize trade value, especially when it comes to people and culture. Mr. Peng also emphasized that core links of M&A integration were corporate governance, integration team, political and economic environment, shareholder relations, organizational structure and corporate culture.

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Keynote speaker: Carl Peng, Assistant to President & General Manager of International Department Fosun Pharma


Li Yishi, Executive Director of Haoyue Capital, made a keynote speech on ‘China Pharmaceutical Innovation: The Strategic Perspective of Financing and M&A’, and pointed out that biomedical investment already became the first choice of medical investment, followed by medical devices and medical institutions. Mr. Li shared his personal experience from Haoyue Capital on financing M&A from two points: how to manage the pace of financing and what the key factors are in M&A.

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Keynote speaker: Li Yishi, Executive Director of Haoyue Capital


Huang Wei, Managing Director of Hong Kong Appraisal Advisory Limited, delivered a keynote speech on ‘Cross-border M&A Valuation of Biomedical Companies’. Dr. Huang noted that high operating leverage and high premium were common features of Chinese companies' M&A in overseas, and the valuation of M&A projects was higher than global level. According to Dr. Huang, the major challenge in assessing pharmaceutical biotech companies includes short market history, lack of similar companies, uncertain income and poor profitability. Dr. Huang shared the pipeline method with the attendees, which was the most widely established approach for assessing pharmaceutical biotech companies.

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Keynote speaker: Huang Wei, Managing Director of Hong Kong Appraisal Advisory Limited


The last keynote speech was ‘Negotiating M&A Deals: Traps for the Unwary’ by Charles Chau, Partner of Jones Day. Lawyer Chau presented major procedures of overseas M&A from the perspective of buyers and highlighted some common traps for the two parties in the negotiations of equity acquisition agreement or other agreement, e.g., term sheet/letter of intent, reverse break fee, material adverse change, earn-out agreement, purchase price adjustments, Anti-sandbagging clause and so on.

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Keynote speaker: Charles Chau, Partner of Jones Day


After the inspiring keynote speeches came two panels. The first panel was moderated by Joe Du, Chief Strategy Officer of Sanpower Group. Panelists had a full discussion on ‘Cross-border M&A of Chinese Biomedical Enterprises: Significance, Challenge and Achievements’, who believed that, as the key to cross-border M&A, synergies should be achieved not only among shareholders, but more important in products, markets and team members. The core interests of enterprises need to be clearly defined at the beginning of cross-border M&A and the talent pool should be established as soon as possible. Innovation is not only simply about products, but also team’s idea and concept, which will be demonstrated in every step of product development, clinical process, production, registration and commercialization.

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Panel: Cross-border M&A of Chinese Biomedical Enterprises: Significance, Challenge and Achievements

Moderator: Joe Du, Chief Strategy Officer of Sanpower Group (the first from the left)

Panelist: (from the second from the left to the right)

Felix Miao, Partner of Han Kun Law Offices

Rocky Shao, CEO of China Grand Pharmaceutical and Healthcare Holdings Ltd.

Sean Ni, Senior VP of Pfizer Upjohn


The second panel was themed on ‘Opportunities and Challenges of Cross-border Medical and Pharmaceutical Cooperation’, moderated by Ms. Tina Yu, Co-founding Partner of YuanMing Capital. After an in-depth communication, panelists agreed that, under the trend of internationalization, the enterprise should pay attention to risk aversion, especially about intellectual property rights and spot the highlands no matter for domestic or overseas subjects, and the oversea cost was still relatively low in both primary and secondary market. Taking the current international environment into consideration, the panelists warned against cross-border M&A in the United States and suggested for seizing new opportunities in Europe.


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Moderator:

Tina Yu, Co-founding Partner of YuanMing Capital (the first from the left)

Panelists (the second from the left to the right):

Shu Xiao, Partner and Head of Ascendin Fund

Li Bin, CIO & CEO of Ally Bridge LB Healthcare Fund

Zhou Feng, Executive Director of Investment Department of China State-Owned Venture Capital Fund

Chen Zhi, Partner of Jones Day

Sun Jigang, Original Partner of Oceanpine Healthcare Fund


The Cross Border M&A Forum successfully concluded on 2019 CBIIC. Thanks to the full support of new policies and reform on drug regulation and pharmaceutical investment, China's pharmaceutical industry is gaining momentum than ever before, and the pharmaceuticals cross-border M&A is showing vigorous development, bringing an important push for the transformation and upgrading of China's pharmaceutical innovation industry and development at an international level.

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 Cross Border M&A Forum


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 Cross Border M&A Forum