As part of the contingency planning for your organization's exit strategy, you have researched and analyzed a potential alternative buyer. As the possibility increases that the original buyer will wit

Buyer Research Report, Acquisition Road Map

Rabie Elzein

Professor Davis

4-27-2025

Buyer Research Report, Acquisition Road Map

The organization in the provided scenario should select Novartis Pharmaceuticals Corporation as their acquisition target. The corporate size of Novartis Pharmaceuticals Corporation exceeds both of the two alternative acquisition candidates. The larger scale of Novartis Pharmaceuticals Corporation implies it possesses extra resources to allocate toward the acquisition process. The second key advantage of Novartis Pharmaceuticals Corporation stems from their global business footprint which surpasses the domestic scope of the other two candidates (About Novartis, n.d). Novartis Pharmaceuticals Corporation extends its customer range because of its broad international business operations. Novartis Pharmaceuticals Corporation maintains an excellent financial ability shown through its market capitalization that exceeds $200 billion. The acquisition would succeed because they possess enough financial capabilities. The research report delivers an acquisition direction method to Novartis through comprehensive organizational planning.

Novartis Pharmaceuticals Corporation Current Market

Novartis Pharmaceuticals Corporation operates worldwide as a healthcare organization which develops and distributes its products throughout more than 140 nations including over-the-counter medications and prescription pharmaceuticals and vaccines as well as diagnostic devices and consumer health products. Novartis dedicates its Research and Development (R&D) activities to developing novel treatments which target cancer along with immunology diseases and infectious conditions and cardiovascular and metabolic disorders. The core group of business activities at Novartis includes pharmaceutical manufacturing and consumer healthcare production together with generic drug development (About Novartis, n.d). Novartis company operates its pharmaceutical segment through two business units named Innovative Medicines and Sandoz. The patented prescription drug division of Novartis operates under Innovative Medicines yet the generic drugs business runs as Sandoz. The consumer health sector of Novartis concentrates on selling products such as over-the-counter medicine as well as food supplements and animal health products. The company operates a generics business which manufactures generic pharmaceutical products from expired patented drugs.

The organizational structure of Novartis includes four main divisions that consist of Pharmaceuticals and Consumer Health and Sandoz and Alcon. The Innovative Medicines and Sandoz businesses operate within Novartis Pharmaceuticals division. Consumer Health consists of three main divisions including OTC drugs, food supplements along with animal health capabilities. The Sandoz business unit operates within its division. The Alcon division operates as the division that handles eye care functions (About Novartis n.d). The diverse product range of Novartis extends across cancer medications and treatments for cardiovascular disease and central nervous system alongside dermatological medicines as well as diabetes, digestive health, ear and throat disorders, gene therapy substances, hematology drugs, immunological medications, infectious disease treatments, ophthalmology medications, respiratory treatments, and transplantation drugs. Novartis generates maximum revenue from its top products Gleevec/Glivec and Afinitor alongside Diovan/Valsartan together with diabetes drug Galvus/Metformin, multiple sclerosis drug Gilenya and two eye care products Lucentis and Restasis while Myfortic functions as the transplantation drug.

Financial Situation

The company divides its operations between Innovative Medicines, Sandoz and Alcon segments. The Innovative Medicines segment of the company represents its largest business area consisting of prescription medication products. The Innovative Medicines segment at Novartis enjoys its most successful drug sales from four drugs particularly Cosentyx, Entresto, Gilenya, and Jakavi. The oncology medication portfolio of the company achieved over $10 billion in revenue during 2021 (Novartis, 2022). The generic drug operations of the company are managed through Sandoz. The healthcare market features generic pharmaceuticals at lower rates than brand-name pharmaceuticals as these drugs enter circulation following brand-name drug patents ending. Sandoz generated sales greater than $9 billion during its performance in 2021. Allcon operates as the core medical device subdivision of Novartis organization. Alcon produces medical eye-care products which include both contact lenses and vision correction surgical solutions together with ophthalmic pharmaceuticals. The company achieved $6.7 billion in revenue during the year ending 2021.

The total income recorded by Novartis during 2021 amounted to $47.5 billion. The company achieved $8.7 billion in net income and an operating margin amounting to 22.4% during 2021. Novartis' return on equity was 20.5%. Since the past five years Novartis achieved a compound annual growth rate (CAGR) of 5.5% for its revenue. Net income from the company increased by 9.2% annually throughout this same time frame (Novartis, 2022). The operating margin at Novartis showed minimal change despite a slight enhancement of its return on equity results. The financial analysts anticipate that Novartis will maintain revenue growth between 1% -2% in 2021. The company expects its net income to grow rapidly through various cost-reduction measures. The operating margin forecast for the company indicates possible growth.

The financial state of Novartis is robust because it possesses a market valuation exceeding $200 billion while displaying a firm balance sheet. Outside of the United States, Novartis derives more than 60% of its total revenue. At the end of 2020 the company maintained more than $13 billion worth of cash and equivalents on its balance sheet. Novartis operates profitably and maintains an impressive financial foundation. Novartis maintains a solid history of financial growth which indicates similar positive performance in the future.

Recent Developments

Network news recently spotlighted Novartis Pharmaceuticals Corporation through several important developments. A corruption scandal involving the top executives of the company continues to entangle Novartis. Your organization should be cautious because the ethical allegations about the company could lower its appeal as a purchasing target. Novartis faces litigation by the United States government for giving doctors improper financial incentives. The organization could view this less favorably when considering the company as a purchasing option because noncompliance with rules might be indicated. Research organizations applaud Novartis because the company developed a breakthrough cancer drug. Novartis becomes a more desirable acquisition target due to its innovation commitment to develop new treatments (About Novartis, n.d). In the past year Novartis launched new pharmaceutical product Cosentyx together with establishing a Google partnership. Such company milestones enhance Novartis' appeal for our organization's procurement choices by demonstrating its innovative capabilities as well as its partnership with the established brand Google.

Buyer Rationale

The life sciences organization should select Novartis Pharmaceuticals Corporation as their best partner because it operates as a leading multinational pharmaceutical organization based in Switzerland. In 2017 Novartis achieved over $50 billion worth of sales making it one of the largest pharmaceutical organizations worldwide. The life sciences market contains over 1,000 products from the company according to Novartis (2022). Novartis Pharmaceuticals Corporation demonstrates experience in acquiring life sciences businesses because they also possess substantial financial power to handle large-scale acquisitions. Novartis has established a successful pattern of buying and assimilating life sciences businesses throughout the years.

Acquisition Road Map

Acquisition-Related Tasks

The Tasks and Steps Already Taken

The complete acquisition of a company demands an extended duration to complete. Among the tasks several have already completed their execution. The business decides on methods of growth and the acquisition requirements while seeking potential companies for purchase. The team initially determined whether another corporation should acquire the organization before accomplishing stage one (Wangerin, 2019). We need to examine possible acquisitions and determine if they fulfill the requirements. This method enables organizations to identify selection criteria for purchasing companies.

The Tasks and Steps That Would Need to Happen

A thorough investigation followed by evaluation of prospective buyers represents the first phase. Study of buyer financial data combined with business structure and industry competitors becomes the fundamental step of this process. Evaluation of prospective buyers' drive to buy the company should also be included in this assessment. The research and evaluation process needs one to two months for completion. The business development together with strategic planning teams bear the responsibility to execute these tasks. The second project objective includes creating an acquisition road map. The acquisition process implementation will be defined through a road map that contains necessary action steps and timelines (Moneva‐Abadía et al., 2019). The execution of this plan will need between one and two months to finish. The business development along with strategic planning teams will take responsibility for this task. The third action centers on running due diligence activities. Buyers need thorough investigation to discover possible acquisition risks connected to their business. The completion of this procedure demands three to six months for execution. The business development team together with legal team and the financial team will handle these responsibilities.

The execution of the acquisition agreement follows negotiation procedures. The team works to establish important conditions for the acquisition agreement negotiation process while working with the buying entity. After signature completion of the agreement the company becomes owned. The entire duration needed to finish the job extends from six months to twelve months. The business development group and legal sector and financial department together constitute the responsible parties (Rashid, 2020). The last duty involves integrating the acquired company with the original organization. Companies need to integrate acquired employees with their internal systems and organizational processes that belong to the acquired business. The entire integration process spans from one year to two years.

Integration is the final step. A prolonged duration needs to be allocated for this phase because it encompasses every individual from both organizations. Business success requires that every employee together with board members and additional stakeholders understand the new performance demands.

Figure 1: Gantt Chart

Conclusion

Novartis company maintains facilities across more than one hundrend countries where it develops various products including drugs. It further offers diagnostic consumer health products for worldwide distribution. Acquiring a company normally requires extended time duration. Several responsibilities within the process have already been completed. The process of growth together with acquisition criteria search and company selection are all integrated. Integration is the final step.

References

About Novartis. (n.d.). Novartis AG. Retrieved From https://www.novartis.com/about

Moneva‐Abadía, J., Gallardo‐Vázquez, D., & Sánchez‐Hernández, M. (2019). Corporate Social Responsibility as A Strategic Opportunity for Small Firms During Economic Crises. Journal Of Small Business Management, 57(Sup2), 172-199. https://doi.org/10.1111/jsbm.12450

Novartis. Novartis Financial Results – Q1 2022. (2022, April 26). Retrieved July 6, 2022, From https://www.novartis.com/news/novartis-financial-results-q1-2022

Rashid, M., Ali, M., & Hossain, D. (2020). Strategic Management Accounting Practices: A Literature Review and Opportunity for Future Research. Asian Journal of Accounting Research, 6(1), 109-132. https://doi.org/10.1108/ajar-06-2019-0051

Wangerin, D. (2019). M&A Due Diligence, Post‐Acquisition Performance, and Financial Reporting for Business Combinations. Contemporary Accounting Research, 36(4), 2344-2378 https://doi.org/10.1111/1911-3846.12520