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Takeovers: a tidal wave of buyouts is coming in 2021 – here’s what it means

Combine years of ludicrous leverage and the pandemic collapse, and many companies are living on borrowed time.



The famous jeweller Tiffany & Co has just sold for a cut-price bid. Grzegorz Czapski

Luxury goods giant LVMH has completed its US$15.8 billion (£11.6 billion) mega-deal to buy famous American jeweller Tiffany & Co. LVMH, which owns Louis Vuitton, originally agreed to pay US$16.2 billion for Tiffany in 2019, but the market has sufficiently changed since the pandemic that it was able to talk down the premium.

It’s just one example of the fire that the COVID-19 pandemic has ignited in many industries. There has been a surge in global mergers and acquisitions since the second half of 2020 as the strong snap up the weak. Driven by the tech, media, entertainment and telecoms sectors, total deals for the year were worth US$2.9 trillion.

Recent moves include Ladbrokes Coral owner Entain’s £250 million takeover of Swedish gaming group Enlabs, and US group Alden Global Capital’s US$520 million bid to take full control of Tribune Publishing, owner of the Chicago Tribune. This trend looks likely to snowball in the coming months. What will it mean?

Houses of cards

Many firms were vulnerable even before the pandemic. For over a decade, low or sometimes negative interest rates had driven businesses to reduce their rainy-day cash holdings and embark on a borrowing spree that left them heavily indebted.

The default strategy in advanced economies like in North America and Europe was often to maximise leverage – meaning to borrow as much as possible from banks and the markets to try and maximise returns from the capital employed. You can see in the graph below how leverage has steadily increased over the decades in the US, for instance.

US corporate debt as a % of GDP by sector

Graph of corporate leverage in US, explained in paragraph above.
The shaded areas indicate recessions; dark blue ≠ nonfinancial corporate; light blue = nonfinancial non-corporate. Federal Reserve of Boston

But in the low-growth environment since the 2008-09 financial crisis, times have been hard. Many companies experienced disappointing returns and rising portions of profits being diverted towards interest payments.

This left many businesses cash-strapped and unable to invest. This further weakened their profitability – in many cases turning them into zombie companies that would be put out of their misery when credit conditions tightened.

Many companies swapped long-term stability for short-term gains, relying on financial schemes with high hidden risks. For example, companies increasingly borrowed to buy back their own stock for an immediate uptick in the share price. With management teams often paid partly in share options, they had a personal financial interest in this strategy.

Life support

When COVID panic set in last spring, it threatened a financial crisis caused by corporate bonds being dumped by the markets. This could have driven up interest payments to ruinous levels and caused many corporate collapses. Central banks responded with a major new round of quantitative easing (QE), expanding the supply of money to effectively put a floor under bond prices. They then did more QE later in the year.

This kept many firms afloat, but pandemic lockdowns have also jeopardised many business models. The long buoyant conditions that many took for granted are gone. Low on cash reserves and buried by debt, companies in industries like hospitality or airlines, and manufacturers whose supply chains have been shredded, have joined the zombie hordes.

Display from a life support monitor
Touch and go.

Numerous governments have tweaked laws to keep companies on life support. For example, Germany relaxed the rules around over-indebted companies filing for insolvency.

Meanwhile, banks have made credit lines and interest payments flexible to allow companies to hang in there. And companies have been issuing new corporate bonds at record levels to get the cash to survive. But in the end, collapses are often unavoidable.

Distress, distress, distress

We are seeing three kinds of distress: owners, lenders and buyers. When owners can’t keep their cash flows positive, are refused cheap loans or are forced to accept higher loan rates on existing debt, they often fail. It happens to listed and privately held companies alike, and even those with strong underlying assets can get into trouble. They must either restructure debts, find a buyer or do both.

Lenders are under pressure, too. Corporate bondholders face being left with worthless bonds. Banks must decide whether they believe in a company’s ability to pay back their loans or to accept less than the full payment and get the debt off their books. Having just cleaned up their bad loans following the global financial crisis of 2008-09, they will be experiencing a bad case of deja vu.

In many cases, banks are being asked to accept less as part of a takeover. Just like the Tiffany shareholders must have concluded in the LVMH deal, it’s often better to have an end with horror than a horror without end.

For buyers, companies with good assets that are insolvent only because of the crisis can be a smart acquisition. Bloomberg is to raise US$1 billion to acquire prime commercial real estate from distressed sellers, for instance.

But many buyers are pushed to the negotiating table. Rather than seeing key suppliers sink, doing a deal that incorporates them into your business is often preferable. Otherwise your competitor might do the deal instead, threatening your competitiveness and bottom line.

It’s in the interests of all three groups to survive the current crisis by negotiating compromises, so a huge wave of mergers and acquisitions is inevitable in 2021. This boom will touch many people in society. Perhaps the most important reason why governments and central banks have been keeping zombies from going under is to prevent massive layoffs. When these distressed companies are bought and restructured, it will likely cost many people their jobs and force them to search elsewhere.

Yet at the same time, some employees will enjoy career advances by striving in the rejuvenated subsidiaries of new parent companies. M&A can also be a relief for taxpayers if zombies no longer waste valuable public resources that can be used more efficiently elsewhere. In short, more change is coming. It will produce winners and losers, but it’s better to expect it than be taken by surprise.

The Conversation

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…



To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….



Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 


About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. 

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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.



Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 


This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

More Travel:

With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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