UNDERSTANDING PROPER
VALUATION AND KEY VALUE
DRIVERS OF TARGETS
GAUTAM AGGARWAL
Partner
Triangle Insights Group, LLC
DARREN BUCHWALD
Senior Vice President, Corporate Development & Strategy
Emergent BioSolutions
JACK M. MYCKA
Global President & CEO
Medical Marketing Economics LLC (MME)
Quality of The Business Case
Essentially all models are wrong,
but some are useful.
Are You Satisfied with the Valuation?
Valuation: Acquisitions
1/3 - not
satisfied
Very Satisfied
Somewhat
Satisfied
Neutral
Somewhat
Unsatisfied
Not Satisfied
Causes for Transactions to Fail
Deal Management Process
Corporate Development
Process
Integration Process
Strategic Process
Commercial Assessment
Process
0
20
40
60
80
Greatest Contributor to M&A Business
Forecast Quality
Honesty and objectivity of
forecast assumptions
M&A targets that are very
similar
Experienced people
responsible for the forecast
Comprehensive
identification of key value
drivers
0
20
40
60
80
What’s in Your Toolbox?
It’s 2015, why is everyone still using NPV?
Capturing the Uncertainty…
If I told you the average depth of the pool water is 10 feet,
would you dive?
Capturing the Uncertainty…
What if I told you 80% of the pool is 3 feet deep
and the remaining 20% of the pool is 38 feet deep –
so 10 feet on average?
If you dive, there’s an 80% chance you’d crack your skull…
Measures of Uncertainty in M&A Business
Case Forecasts
70% use just one method of uncertainty analysis
11% using three or more approaches
Monte Carlo Simulation
Heat Map or Risk Matrix
Scenario Analysis
Sensitivity Analysis
0
20
40
60
Predicting the Future is an
Exhausting Business
Pricing Reform
Patient Advocacy
Value Based Pricing
Biosimilars
Pacific Trade Pact
Parallel Imports Obama Care
Biologic Exclusivity
Corporate Tax Reform