Transaction Execution Risk: A Major Focus in Life Science Transactions

Transactions that seem interesting during their initial phases are not uncommon. In life sciences financing events, partnerships and other strategic transactions, transaction execution risk remains a major consideration.

The above issue is fueling the growth of the advisory and strategic investment banking services in the industry. The businesses understand that, besides finding opportunities, the ability to manage transactions is crucial in achieving success.

Most of the life sciences transactions require a lot of preparatory work. Information collection, due diligence activities, and stakeholder communication may be time-consuming tasks that may slow down a transaction.

Most of the time, the companies enter into the process while being responsible for other things. Managing the research projects and conducting the business activities at the same time can cause problems.

Advisors are usually employed to manage the above issue. The involvement of advisors may include coordination of transaction workflow, creating necessary documents and managing procedural requirements during negotiations.

Transaction execution risk is an especially significant problem in life sciences due to the specific nature of the transactions. Potential investors or partners may need comprehensive information before starting any activity. Preparation of such information is not an easy task.

Transaction execution is a more complicated process than document preparation. Scheduling may have an effect on transaction execution. Problems in one phase of the process can change the schedule of all the participants.

Companies that decide to choose an advisor pay attention not only to the strategic skills of an advisor but also his/her ability to manage transactions. Finding new opportunities is a critical aspect, but transaction management has become an essential value-added service.

The above problem is caused by the specific situation on the market. Most of the companies realize that transaction complexity increases when the transaction process starts officially. Proper coordination can help to decrease the friction in negotiations.

In response to the demand of the customers, the life sciences advisory and investment banking firms are increasing the emphasis on process management. Often, clients ask for help with the transaction process.

As can be seen from the above discussion, transaction execution risk shows a very important aspect of the market. It is clear that despite the strategic opportunities and interests, the ability to manage a process is crucial.

Transaction execution will remain an important aspect of future advisory engagement. Companies interested in significant transactions will value the ability of the advisor to deal with the execution risks.