24.05.2024

Beatrice Vos claims personal touch can have major impact on animal health M&A

Beatrice Vos has a somewhat unique perspective of the animal health industry. She is using her experience as a corporate lawyer to provide M&A advice as part of SC Group. S&P Global’s head of animal health Joseph Harvey caught up with her to discuss the trends currently governing animal health M&A.

Beatrice Vos believes SC Transactions can become a go-to partner for animal health deals through its in-depth knowledge of the industry. She heads up a business that aims to be a one-stop-shop transaction advisor for the animal health space.

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Matthias Hofer

Managing Partner

Beatrice Vos

Partner,
SC Transactions

Prior to moving into animal health, Dr Vos worked in corporate law firms for nearly a decade. In these roles, she picked up experience working closely on M&A deals. Dr Vos was hired as an in-house lawyer at Eli Lilly in 2009, which saw her support Elanco in its M&A drive from around 2011 onwards.

This saw her lead the legal work for a diverse number and style of purchases – Lohmann Animal Health, Novartis Animal Health, Boehringer Ingelheim companion animal vaccines, Aratana Therapeutics and Bayer Animal Health. She noted the latter was a fascinating transaction that “totally consumed me for two years”.

Dr Vos joined SC Group – formerly Stonehaven Consulting – in 2023. The firm had already been involved in supporting M&A deals in the past. It created a separate subsidiary to focus on transactions with Dr Vos as its managing partner. SC
Transactions currently has multiple engagements in animal health and, after being formed around nine months ago,
recently finalized its first deal. Dr Vos told S&P Global Animal Health the firm is “actively working on several deals now”.

She explained: “There’s really nobody else that does what we do. For example, if a start-up wants to find a buyer, they have to go to a consulting firm to see if their financial model and their forecasts are correct. They need help to map the market accurately, as well as to assess their potential value. Then, they have to go to an investment bank – with or without animal health expertise – to go and find that buyer. The start-up has to hire a law firm to take care of the transaction agreements. This is difficult because, from a legal perspective, the industry is a very special animal.

“With us, they get it all – everybody that touches the deal from our side will have real expertise in animal health and excellent connections to senior decision-makers. That’s our unique selling point. Start-ups can have one firm that helps them from the very start and helps them finish the deal. This is very efficient, adding value for both seller and buyer, and it also makes for a smoother process. We really understand animal health and the businesses involved in a transaction. This means we can match the right parties, draft optimal contracts and guide a deal through to the end.”

Although Dr Vos noted the technicalities of deals tend to be the same across all industries, she picked up some differences when comparing transactions in human pharma and animal health.

She observed: “What I found very different in animal health were the deal dynamics. On the human health side, it usually involves a lot more money. They are very formal transactions and you have a very large group of companies that might buy a particular asset. On the animal health side, it is a lot like working with friends and family. Networks and personal connectionsreally impact deals in the animal health industry.

Tough time for start-ups

There is a mounting opportunity for SC Transactions to work with the growing number of animal health-focused start ups, especially at a time when many businesses might be looking to exit due to fraught global economics.

Dr Vos said it is currently “an uncertain and volatile world with major political elections coming up and armed conflict causing cautiousness” – making it an unstable environment for start ups. She pointed out diligence efforts from acquirors are increased at times of economic unpredictability, with the regulatory side of transactions also upping its scrutiny and making directives stricter. Dr Vos called on start-ups to “be realistic about their needs”.

She suggested pre-approval start-ups can be difficult to transact, as they naturally raise regulatory and commercial uncertainties for any potential buyers. Suitors may question how quickly the start-up can achieve regulatory authorization, the type of approval, customer acceptance and correct pricing, among a range of other concerns. However, Dr Vos noted start ups can alleviate this unease with “a robust commercial strategy and forecast”. She also pointed out companies should reveal positive signals from the relevant regulatory authorities on likelihood of product approval. Although she noted this is not always possible.

Dr Vos said creative transaction structures can help to some extent de-risk an acquisition of a start-up by deferring a significant amount of the purchase price. This type of deal may include a modest upfront payment and later earn-outs on the achievement of approval or significant revenues.

Start-ups can also opt to secure commercial collaborations instead of all-out acquisition. Many young businesses have scored distribution agreements with major firms in animal health before being purchased by their partner. This allows the bigger business to monitor the commercial success of a product or platform before deciding on a potential purchase. One example of this try-before-you-buy approach was Aratana’s license to Elanco regarding Galliprant, which preceded its acquisition by the latter.

Dr Vos said megamergers between the industry’s biggest business, which is something that was common in the last 10 years, is becoming more unlikely. Past consolidation has left the top of the sector’s rankings extremely concentrated among the animal health majors, with any multi-billion-dollar deals probably facing significant anti-trust hurdles. This trend does mean there could be more divisional purchases among the leading business – evidenced by Merck Animal Health’s acquisition of the Elanco aquaculture division and Phibro Animal Health’s recent transaction for Zoetis’ medicated feed additive assets.

While Dr Vos noted there are a limited number of major multinationals that dominate the animal health space, she also said the landscape of potential acquirors for smaller businesses is broader than these top four companies. She suggested the ideal owner for a particular asset or technology might be a private equity firm or a mid-sized animal health player.