Top 4 tips to maximise the value of R&D assets in your M&A deal
October 13, 2015
Research and development (R&D) organisations and the products and intellectual property (IP) they develop are critical sources of value in deals. Many companies are acquired just to gain access to and ownership of R&D talent, products and IP. No matter what the deal rationale, most companies respect and highly value the R&D that the acquisition of an organisation can bring, making it a key priority in many deals. However, maximising the value from these key assets poses specific challenges that M&A teams must address.
Top 4 approaches to maximise value in R&D integration projects:
1. Plan and launch the integration project with R&D in mind – get it right from the start
Due to IP protection and anti-trust laws, R&D target companies are often reluctant to share valuable product information until after the deal’s been done. As soon as the deal is done, integration teams need to hit the ground running to assess and execute the most important areas of concern. Some issues are less time sensitive than others, so a clear understanding of priorities is essential here.
2. Selecting the right operating model
How much should you integrate? You could opt for independent departments or organisations with optional collaboration; partial integration with planned collaboration and common operating elements; or a fully integrated operating model. When R&D organisations combine, development procedures, metrics and tools need to be co-ordinated and lined up. From my experience full integration brings with it the greatest upside, but also the greatest short-term risk.
3. Plan the integration and transformation roadmap using the 5 Ps
A full integration of R&D organisations will have far-reaching effects and presents an opportunity to transform new product development. Compared to many other functions, the full integration of R&D will be a longer-term effort demanding a consistent approach over time. A good way to structure integration activity is by using initiatives that address the ‘5 Ps’ – portfolios, platforms, products, processes and people.
4. Track integration and deal value through metrics
Integration measures such as milestones, R&D operational metrics and benchmarks can be used to measure progress against integration plans and value realisation. They are critical to safeguard the transparency of the overall integration process. Acquiring companies do, however, need to be careful about how or whether to apply existing metrics to target companies. Are they are fit for purpose? Do they foster rather than exterminate new ideas and new technologies?
Integrating R&D organisations is not like integrating other functions. It presents particular challenges and opportunities outside of the norm. Day one should see a team rapidly addressing specific R&D priorities such as organisation and talent, product and portfolio roadmaps, IP and product development execution. If managed properly, the usual disruption generated during an acquisition can be seized as an opportunity to drive improvement and best practice across organisations. Companies that focus on the ‘5 Ps’ will boost post-deal value of the newly-integrated entity when planning and executing integration of another R&D organisation. Finally, by using R&D-specific metrics and benchmarks you can ensure that leadership teams have the information they need to keep the integration on track.
For further detail on how to unlock product development value in M&A please click here.
What issues have you experienced in integrating research and development organisations? Share your thoughts below or schedule a meeting to discuss your situation in confidence.