Finding efficiencies after mergers and aquisitions in pharma

How can technology drive cost savings after two companies combine?

At the end of 2015, PwC’s Health Research Institute published a report predicting trends in the health economy for the following year. It stated that 2016 would be “the year of merger mania” with pharmaceutical companies “looking beyond traditional M&A by acquiring ‘beyond-the-pill’ products and services to bolster their portfolios and pipelines of drugs.” This trend was predicted to continue into 2017.

Despite Pfizer’s ultimately unsuccessful $160 billion bid to takeover of Allergan, the pace of mergers and acquisitions in 2016 was indeed frenetic, with dozens of deals taking place in markets around the world.

This is not a new phenomenon; as with any large scale industry, the pharmaceutical sector has seen numerous acquisitions and mergers over the decades, as those companies with the biggest product portfolios swallow-up their smaller, less flexible competitors. The PwC report makes this point very clearly, suggesting that “smaller, niche players without well-defined strategies quickly become targets.”

Successful precedent is also a factor driving structural change within the industry. There’s a long history of successful mergers in the pharma space: Glaxo Wellcome’s union with SmithKline Beecham to become GSK in 2000 is now seen as a triumph and Pfizer has proved many times over that it’s committed to broadening its reach still further with acquisitions including Pharmacia, Wyeth and in mid-2016, Medivation.

Such enormous corporate undertakings bring with them numerous logistical and financial challenges, often on a scale that that can take years and significant expense to overcome. One area in which Tungsten Network has proved itself to be a useful ally in meeting these challenges is in its ability to provide tools and insight to help streamline both supplier bases and accounts payable departments.

Andrew Nichols, Head of Tungsten Network Analytics explains: “When two large companies merge it’s almost certain that their portfolio of suppliers and buyers is going to cross-over; what our technology can do is identify these duplications with very little effort. This instantly saves the new company money and frees up time for the new AP Department to concentrate on other matters.”

Tungsten Network’s expertise in global compliance also brings significant benefits to newly-merged companies, as Abigail Myers Antiaye, Head of Compliance at Tungsten Network outlines: “It may be that the merger has resulted in previously unexplored markets suddenly becoming viable but each of these will have their own country-specific tax requirements. This can become a minefield that merging businesses struggle to negotiate.”

Tungsten Network offers a solution to these challenges by operating a portal that guarantees compliance in 47 countries worldwide

Abigail Myers Antiaye concludes: “We don’t simply exist as a singular entity but as a hub that connects buyers and suppliers all over the world. This foundation of connectivity brings benefits to a newly-merged company by aiding effective communication across its buyer-supplier portfolio. We can facilitate effective, seamless financial processes that bring an efficiency to every element of the pharmaceutical supply chain.”

The pace of research and development in the pharmaceutical industry remains very high and larger companies continue to acquire smaller rivals in an attempt to safeguard their longevity. At these points of structural change within a business, procurement teams have an opportunity to use new technologies to ensure that its newly-emerging financial processes are as efficient and effective as possible.