Mergers and acquisitions have come to define both growth and consolidation in pharmaceutical manufacturing over the last decade. Often, a merger or acquisition is the quickest, most cost-effective way to realize advanced capability without building a facility from the ground up. Buying specific capacity that either is lacking or will bolster a company’s overall offering generally makes more sense for both budgets and bottom lines — especially when dealing with an undervalued company. However, even a successful merger or acquisition of manufacturing facilities creates a range of asset management issues, including determining the fate of redundant operations and equipment.

Strategic Repositioning via Mergers and Acquisitions

This past year helped reestablish mergers and acquisitions as a go-to pharma strategy. With approximately $100 billion spent on mergers and acquisitions by mid-2018,¹ this industry standard practice has led to a continuously shrinking landscape — that is at the same time experiencing unprecedented growth. Most notably, 2019 has already witnessed one unprecedented mega-merger, Bristol-Myers Squibb acquired Celgene for $74 billion — potentially a harbinger of a predicted boom in mergers and acquisitions activity. 

As the number of top pharma companies shrinks, and the industry landscape becomes more compressed overall, the supply chain has also experienced a marked narrowing. The ongoing growth of the contract manufacturing segment is also a significant driver of merger and acquisition activity in the industry. As big pharma companies increasingly look to outsource specialized technologies and manufacturing capabilities, they are divesting facilities and other assets that they no longer need in their streamlined in-house operations. CDMOs continue to strategically acquire operations at multiple steps on the supply chain to position themselves as a “one-stop shop” with the ability to tackle a handful of processes effectively, either through multiple facility acquisitions from big pharma companies or through consolidation among CDMOs with different capabilities and technologies.

Divesting Assets Following a Merger or Acquisition

Divestment of equipment is often a by-product of a merger or acquisition, as some of the assets that have been acquired may be redundant with existing operations or may not suit the strategic goals or business of the new owner. As a result, the company must redeploy or eliminate redundant assets, which often involves unexpected challenges. 

Partnering with a trusted used equipment supplier is a crucial step for any pharma company that does not want to risk being overwhelmed by the effects of a merger or acquisition on the facility (whether for the company taking over the facility or the organization that has been purchased). Prolonged timelines are probably the most pressing issue when dealing with equipment removal. Post-acquisition integration of the facility will require determination of the fate of surplus assets. Failure to remove redundant or otherwise unnecessary assets in a timely fashion can cause many issues and incur both hard and soft costs. In addition to the cost of storing idle equipment and the valuable footprint space that it requires, which can crowd a facility and prevent optimal operational efficiency, idle equipment still incurs insurance costs, and the resale value of the equipment will continue to depreciate –– resulting in lower returns the longer it sits in storage. It is advantageous to sell redundant or otherwise idle equipment as soon as it is determined superfluous.

Treating Machines Delicately During Removal

Removing equipment not only takes time, it also requires a reliable and knowledgeable workforce. Most damage to equipment occurs during the installation or removal processes. If an equipment handler is not appropriately delicate with a machine, it can easily be rendered irreparable and therefore useless — this is an expense most organizations are likely unable to justify. Companies that do not rely on a strategic equipment partner to both serve their equipment requirements and streamline the equipment removal process are tasked with dealing with the many steps involved in relieving a facility of equipment following a merger or acquisition — from start to finish — with no expert advice on best practices.

Partnering With a Trusted Equipment Supplier for Best Results

A strategic partnership with a used equipment dealer can not only help simplify equipment removal and sales, but can also provide the guidance needed to help any company through the process of a merger or acquisition. As this trend expands throughout the industry and impacts all business sectors, from CDMOs to CROs and big pharma or even virtual pharma, issues related to the disposition of surplus equipment are best addressed through the right partnerships. A used equipment partner can help with the challenges associated with equipment removal, taking care of the equipment and migrating machinery to their warehouse space or holding an auction so that surplus assets are immediately cleared and all parties involved, from the seller to the buyer, walk away from the transaction with a fair deal.

The Federal Equipment Company Difference

At Federal Equipment Company, we take pride in being dependable equipment partners that are there for manufacturers at all times, including during a merger or acquisition. We offer an array of services, from equipment removal to secondary equipment sales, advice on installation, training and troubleshooting and subsequent upkeep. With a large inventory of products and services offered to a targeted market, we are confident strategic partners that can be called on whenever there is equipment involved to provide the experience and the knowledge that many companies are lacking, particularly during the unpredictable period following a merger or acquisition.

Federal Equipment Company can remove assets immediately. We can either simply purchase and transfer the equipment to our warehouses or sell it at auction — one of the most effective ways to quickly liquidate equipment. The companies who have hired us to run these auctions are from some of the best-known manufacturing companies. It is our desire to exceed expectations for your timetable and financial return.

References

1. Weintraub, Arlene. “Pharma shells out $100B on M&A in 2018 so far, with more to come: report.” FiercePharma. 6 Jul. 2018. Web.