A recently published article on Law.com❶ takes an interesting approach as to the
role of regulatory lawyers in M&A transactions.
The gist of the article is that firms with Regulatory (in short: “Regs”) expertise are
upbeat about their ability to retain M&A clients and work.
Our take on this?
Obviously, the same applies to firms with access to (life sciences) Regs expertise.
To highlight what is happening; fewer deals may on the horizon, increasing
competition in the M&A industry.
However, it is questionable whether this also goes for the life sciences industry, as
the past pandemic may either have demonstrated and/or strengthened the solidness
of the sector in the context of M&A and investments.
Moreover, deals in life sciences are heavy from a regulatory perspective.
Furthermore, there is more government engagement globally which requires more
Regs expertise. Therefore, clients on both buy- and sellside favour firms able to
provide solid regulatory advice. As a result, corporate lawyers are now marketing
regulatory prowess as a strength.
However, looking at the firm structure of many M&A law firms, the regulatory chair
is often stretched thin, knowing a little about a lot of things. Getting your hands on
an experienced regulatory lawyer in a specific industry, such as the life sciences
industry with on-point regulatory knowledge is hard. Most M&A firms do not even
have a regulatory department.
The insight that proper Regs advice from the outset of a deal is crucial and can
truly make a long-term success of a deal, is sinking in. A corporate lawyer who
demonstrably understands the value of Regs expertise is more likely to win pitches.
Fortuitously, The Genotype Network plays an important role in this interplay. With
a network of regulatory lawyers and corporate lawyers, the knife cuts at both ends:
resulting in a solid and well-thought through due diligence. Buyers need to have
(access to) top-quality advice on both the transaction side and the regulatory side.
“Regulatory issues often go to valuation,” said Delphin-Rodriguez of Crowell and Moring. “Part of the due diligence process is identifying potential issues with respect to a company’s compliance with whatever rules are applicable to it in its industry. If there is a significant or material problem, it is something that could go to price.” ➋
Our recommendation is as follows. M&A lawyers (but also investors) need to be
aware of the essential regulatory components of a deal, and the added value of a
Regs lawyer begins at the outset of any trajectory. This is because the value-add of
regulatory advice spans beyond the process. It also impacts deal values and deal
quality.
Moreover, in the pharma & biotech industry, there is even an ethical argument to
bring to the table: a thorough due diligence – for instance involving
pharmacovigilance aspects – is likely to benefit patients’ wellbeing and lifespan on
the long-term.
➊ & ➋ Bruce Love, Despite slowing M&A market, firms with Regs expertise are poised to stay busy
- 5 August 2022, to be found at: www.law.com
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