M&A Insights – Major lessons learnt from advising a Public Sector Client

November 1, 2016

Bluebox recently advised on the high profile sale of Moorfields Pharmaceuticals, the commercial pharmaceutical business of the Moorfields Eye Hospital NHS Foundation Trust, to the ophthalmic manufacturer, Rayner Pharmaceuticals Limited.  The deal was particularly valuable in terms of ‘lessons learnt’.  It provided our team with real insight into selling businesses for public sector organisations, and the NHS in particular.

It occurred to me that there is a lot of negative press about process, policy and priorities in the public sector, but we experienced little of this. My team and I saw, first-hand, the excellent governance in a major NHS Trust and concluded that there a number of really important aspects of this governance and project management ethic that could be applied to private clients.

Specific points on which we believe that private sector vendors could learn from NHS practice are as follows:

1. Assessing objectives and considering options using a formal framework

In considering the potential sale of an NHS asset, governance processes meant that the Trust had to go through an extensive ‘options assessment’ exercise. All options were considered and an assessment of each option was made.  It was a time consuming process, but a process that did point to the right solution when options were considered against a set of previously determined objectives.

While this process may have been arduous, it was very valuable in laying out exactly what the objectives of the Trust were and what the key qualitative and quantitative benefits were.  After defining these objectives, and scoring and weighting each of the options against a set of benefit criteria, decisions were taken that were easy to rationalise and benchmark.

Setting out the qualitative and quantitative objectives of each of the stakeholders at the start of the exercise, and understanding the key ways that these can be measured, and the importance of each, is critical to allow businesses or business owners to maximise value and the speed and efficiency of an exercise.  As part of our unique Blue Diamond programme, we have since worked through a similar options appraisal process with a number of clients in the private sector and have found it to be very helpful.

2.Managing business and transactional reputation risk

The Moorfields Eye Hospital brand is, arguably, the leading brand in the world of ophthalmology.  A key objective of the Trust was to mitigate any reputational risk whatsoever from this transaction. It is not often one of the most significant priorities for a private company transaction, but given the benefits that accrue to a smooth deal, my team believe that it should be.

Performing due diligence on potential acquirers and their intentions allows a vendor to confirm that the offers on the table are ‘deliverable’ and match the key objectives of the stakeholders. In addition, insisting on specific clauses around the onward sale of the business being sold in a short period post transaction (often referred to as an anti-embarrassment provision) provides the vendor with comfort that they will be compensated should the buyer look to make a ‘quick buck’ soon after the transaction.

3.Getting specialists involved early

An issue very relevant to transactions in the public sector is pensions.  The NHS pension scheme, and particularly the transfer of employees from the public to private sector, was not simple in this transaction and required the help of real experts in their field. Not many private sector deals require such specific pension advice, but the lesson learned is that by getting specialist advice early we were able to manage issues on a timely basis and ensure that the timetable did not slip.  Specialist advice, however, does not have to be specific to pensions.  Since this deal has completed, a number of Fit4Sale Clinics have been added to the Blue Diamond Programme which help in the way described above.  We have introduced further clinics, provided by our Delivery Partners, in areas such as pensions, tax, structuring, intellectual property and environmental management to help at an early stage in the transaction process and ensure there are no delays.

4.Delegating authority where possible

The governance processes in the public sector are strict, extensive and robust. The Board are able to dedicate time to them at the outset of a sales process, but as the transaction moves towards due diligence and completion, it is important to recognise that momentum is key, and waiting for monthly Board meetings to make decisions would simply delay a process and lose momentum. Delegated authority, to trusted individuals and committees was a way to ensure that the transaction could flow smoothly without conflict.

Working alongside (and for) the Moorfields Eye Hospital Trust was a privilege for Bluebox and the fact that we have been able to take some lessons from the exercise is another reason why we were delighted to have been mandated on such a prestigious mandate.

 

For further details about the transaction, or Bluebox, please contact Nick Wallis, Associate Director.

nick.wallis@blueboxcfg.com

020 7872 4500

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