Driving international expansion for healthcare and life sciences companies
Inflexion’s Healthcare Advisory Board helps drive value across healthcare investments, both in the UK and internationally. Robin Senivassen, an Investment Director in Inflexion’s Healthcare and Life Sciences team, spoke with Charles Woler, who holds non-exec roles across various life sciences businesses in Europe and the US and was previously CEO of Roche France and Cadus Pharmaceuticals; and Mukhtar Ahmed, an industry veteran with 30 years’ experience in biopharmaceutical, health sciences and technology industries.
Robin: Can you provide examples of international expansion in your respective industries?
Charles: In the pharma services industry, our primary consideration is whether to make or buy. Buying is often the preferred option as it provides a foundation with market share – you know what you’ll end up with. However, it's crucial to have a clear business case for going abroad, such as achieving critical mass, acquiring technology, or gaining market share.
Mukhtar: In clinical research and especially medical device R&D, my focus was on conducting international trials. When sponsors wanted to conduct trials across multiple continents, CROs would often commit and then scramble to build the necessary multi-national capabilities. This expansion was usually of a geographic nature and organic; and it involved a host of activities such as site selection, negotiating with hospitals, and obtaining regulatory approvals. In life sciences, the internationalisation of product and service offerings entailed strategic market access decisions, for example whether to adapt a European product for the US market, or a US product for the Asia Pacific market, and the pursuit of incremental revenue streams through either red ocean or blue ocean strategies.
We’ve helped most of our portfolio expand globally, with our portfolio now reaching over 160 countries. When deciding between organic growth and M&A for international expansion, what do you see as the key considerations?
Charles: M&A is a complex process with no one-size-fits-all approach. Think firstly about what you want to achieve in terms of international objectives. If you don't have a specific target in mind, you should create a pipeline of a few targets. Once you’ve narrowed down the list, you can start thinking about transaction, and then you need to develop an integration plan, considering the personalities and personal agendas involved. Maintaining focus on this integration plan is crucial to achieving your overall target. This is the most important bit – you need focus on this since if you deviate, you can miss your overall target. It’s a tough job.
You often underestimate the time, effort and risk in all of this. It looks easier to go organic but it’s not. If you lose time and money, you can get it back but if you lose opportunity, that’s everything.
Mukhtar: Both options require careful planning, due-diligence and a clear executable strategy. It’s not just about selecting one route for expansion; both have merits and can be pursued in tandem, so long as they fit into the strategy. One consideration for the M&A route during integration is cultural fit and retaining business agility, and nurturing businesses through any change. For both organic and inorganic expansion, presenting a compelling case to the board for expansion is critical, and it's vital to keep the strategy simple and achievable since incremental progress is often more effective than long-term planning alone. In other words, long-term strategies are ultimately achieved by meeting the short-term tactical milestones.
Culture integration is a significant aspect of M&A. Can you share any examples or advice on how to approach cultural integration effectively?
Charles: Overcoming cultural differences often comes down to building relationships through face-to-face meetings and socialising. In time, people from different cultures can become accustomed to each other's ways of working. Start this process early because waiting too long can hinder integration efforts.
Mukhtar: When integrating acquisitions, regardless of their size, a considerable amount of preplanning and attention to detail is necessary. It’s often de-prioritised or missed in the grand scheme of things. One should not solely rely on external consultancies for conceptual integration guidance, as a real-world perspective is also necessary. What’s best is involving individuals from across all levels and parts of the business to help define and execute the cultural integration plan.
Where are common pitfalls management teams should be mindful of with international expansion?
Mukhtar: One common pitfall is starting with unrealistic expectations. You need one or two simple objectives for internationalising a product or service, accompanied by a realistic and achievable plan. If a channel strategy is applied to accelerate the expansion, then its important to develop the right performance and quality governance framework around your partner network so that your business brand and reputation is protected.
Charles: There are large mistakes and small mistakes. If you work with a PE firm, you don’t usually make big mistakes. But you may miss a small thing and then you need to address it as soon as possible so it doesn’t escalate and become big.
Inflexion’s flexible approach allows it to back both majority and minority investments, typically investing £10m to £400m of equity in each deal. Healthcare forms one of Inflexion’s six key sector focuses, with 13 firms backed to-date and recent successes including Pharmaspectra, a provider of medical affairs data backed in 2019 before it was sold to a NYSE-listed trade buyer in 2022, and Medivet, a UK veterinary pet-care business Inflexion provided minority capital to in 2016 to fund acquisitive and organic growth in the UK and Europe before its sale to CVC Capital Partners in 2021.