When considering the sale of your life sciences business, preparation is key to achieving a smooth process. There are several preparatory steps you can take before advisors are engaged or a buyer is identified, including the following:
1. Organise your information
It is likely that you will have numerous contracts with customers, suppliers, employees and providers of finance. A buyer will want to review these contracts as part of their due diligence. Ensuring they are clearly documented and easily accessible will save a lot of time down the road. When a company is in its early stages and there is a limited legal budget, ensuring that written contracts are accurate, properly executed, safely stored, and kept up-to-date is not always viewed as a priority. Neglecting these tasks can however lead to contractual agreements being lost, incomplete, unsigned or even undocumented.
Ensuring your contractual arrangements are accurately captured from the outset, as well as being aware of any gaps and doing what you can to plug them, will therefore reduce the strain of the due diligence process when the time arrives. If your legal information is well organised, it also presents a good impression to prospective buyers about your management of the business.
2. Identify intellectual property rights
Many businesses in the life sciences sector are highly innovative, IP-rich organisations. A buyer will therefore want to know what intellectual property rights (IPR) the business owns and what it is authorised to use under a licence. Owned IPR may include registered rights such as patents and trade marks (where a buyer will also be concerned with scope and duration of protection) and unregistered IPR and related rights such as copyright, trade secrets, know-how and rights in data. Analysing IPR can be time consuming and complex, so ensure your IPR portfolio is well-managed and consider instructing intellectual property specialists to conduct an IPR audit of your business if required.
3. Identify regulatory authorisations
Depending on the nature of your business, you are likely to interact in some way with the regulatory authorities in your jurisdiction(s), such as the MHRA, EMA or FDA. Having a good grasp of the authorisations required for carrying on your business, and any pending applications or upcoming renewals will assist a buyer. If you are selling only a portion of your business, ensure you know which group entity holds the relevant authorisations and consider if any need to be transferred.
4. Review contracts and licences
Businesses in the life sciences industry will undoubtedly be a party to various contracts and licences, with sector-specific examples including research and collaboration agreements, manufacture and commercialisation licences, and technology transfer agreements. A buyer will typically focus on a number of key areas when reviewing contracts and licences, including ownership of IPR, assignment and termination clauses (including whether the counterparty may terminate on a change of control of the business), exclusivity of supply chains or product distribution, minimum volume commitments, indemnities and so forth. Having a good understanding of these terms will save time.
Need help?
Ultimately, preparation and forethought will provide the greatest chance for a smooth due diligence process, leaving time for you to focus on other aspects of the transaction. Our multi-disciplinary life sciences team has extensive experience advising businesses in the sector on all stages of the sale journey and would be delighted to answer any questions you have on preparing your business for a sale.
James Floyd
Charlotte Lane