Bormioli Pharma recently completed the acquisition of GCL Pharma SRL. What were the strategic considerations behind this investment?
We consider this acquisition as an opportunity to cement Bormioli Pharma’s position as a leading partner for the global pharmaceutical and nutraceutical industry rather than filling a 'missing gap.' It’s part of our corporate strategy to become a 'one-stop-shop' solutions provider of pharmaceutical and nutraceutical packaging. It so happened that GCL Pharma fit perfectly into the scenario forecasted by our market researchers and current industry trends.
Our market analysis shows that the global demand for parenteral containers is expected to increase with a 7.7% CAGR reaching a total value of $19.5 billion by 2023, meaning 97.8 billion units sold. This rate is faster than the expected industry average and is driven by strong fundamentals. The GCL Pharma product portfolio complements our glass vials and bottles range by adding aluminum closures and rubber stoppers, thus creating a complete packaging for parenteral applications. The acquisition also offered the opportunity to better serve other strategic markets segments such as food supplements and nutraceuticals, broadening our premium closures rage with tamper evident aluminum solutions.
What capabilities made GCL Pharma attractive in relation to Bormioli Pharma's future expansion?
Over the years GCL Pharma has demonstrated strong innovation capabilities with the continuous improvement of its product range in order to meet the most stringent pharma standards, and now possesses technological competence on aluminium closures and rubber stoppers that are quite unique to the industry. Through this acquisition, we strengthen our industrial footprint by introducing new technologies that allow us to better serve our customers, especially in the oral, nutraceutical (from food supplement up to vitamins) and parenteral segments, activating further business synergies. We can now leverage on a global presence in more than 100 countries and on an industrial footprint that currently includes eight production plants to secure deliveries of best-in-class primary packaging solutions for pharmaceutical applications, whenever they are needed.
What was the timeframe from market examination to final acquisition?
Scouting for new businesses and opportunities is an ongoing process—a collaborative effort conducted together with our shareholders. Being part of the portfolio of a private equity fund has great advantages, and they continuously support us in either scouting or evaluating new opportunities as they come along.
This particular acquisition process went quite smoothly. In November 2019, we started with preliminary meetings between senior management and shareholders. The first steps were dedicated to better understanding the product range offered by GCL Pharma and its match with our current product portfolio, as well as the potential for commercial and industrial synergies. We then moved to more tangible discussions in January 2020—just before the COVID-19 impact. In this time of great uncertainty, all our efforts and attention were diverted to securing our employees' safety and maintaining the continuity of operations. Nevertheless, we decided not to put a pause on the acquisition and rather to move forward.
We also invested time in on-site visits to have a more realistic picture of the current industrial footprint and of the opportunities for further expansions. This phase was fundamental for reviewing and confirming the initial assumptions and for the final risk assessment. After these preliminary positive steps, we started a four weeks due diligence process, checking all the main areas and functions and covering all the legal aspects of the acquisition. Then, we issued a so-called binding offer and—after a few weeks of negotiation—we came to the final acquisition agreement.
In spite of the challenges that came along with this crisis, the operation has been accomplished and everything worked as planned with the completion of the acquisition in April 2020.
After the completion of the formal acquisition, we changed the company name from GCL Pharma to Bormioli Pharma Vasto and inducted a dedicated 'integration team' to start aligning organisations and procedures and to better identify all the potential synergies to be exploited.
What are key considerations common to merger and acquisition activity?
As for any other industry segment, an acquisition target must be carefully selected among all those that share either the same distribution/market or the same kind of industrial process/ technologies. Acquiring a target that does not share either of these is a very dangerous move that very often leads to the 'addition' of a second company rather than 'integration.' In these cases, there are very few exploitable synergies, so that even integrating the two organisations in a single operation becomes very difficult.
The first thing to consider is carefully assessing the strategic fit of the target company within the context of the acquiring company's development plans. After this initial assessment, a reasonable degree of attention over the expected market reaction need to be addressed—especially if you are dealing with companies that operate within the same sector. The objective should always be to combine two different companies to achieve growth in market share either by reaching new markets and geographies, or by adding new technologies, or simply enlarging existing industrial footprints.
How is employee integration managed?
It's important to consider that different organisations will have unique culture and management practices, making the integration phase absolutely key in order to create an efficient and common business culture, and to enable shared values, objectives and strategic direction. This process is a crucial step that has to happen at the very beginning and should be driven by senior management.
As mentioned, our integration process starts with the creation of dedicated integration teams responsible for each key company function, made up of staff from both companies. For every acquisition that the company has completed thus far, we have created teams able to facilitate business integration practices.
Another point is to define a solid retention plan for the employees who are considered key for future development. It's crucial not to lose anybody from the core team that runs everyday business and maintain customer relationships.
What guidelines can you share around successful integration?
It's very difficult to define strategies for success that are applicable to every acquisition—there is no one-size-fits all model. However, our personal experience demonstrated how important it is to have a compelling vision about what the new company will be through the integration, and which synergies are going to be exploited and by when. This is a phase during which fact-based analyses have to take the lead of any discussion—failing to confront hard facts or underestimating the ability to execute may be fatal to success. This phase would result in integration planning and in the appointment of dedicated integration teams.
Executing the plan is the top priority of any team and it is vital for the acquisition success, thus appointing more than one team, specifically one for every area of the company, and a dedicated project leader is essential in successfully managing the project. Integration teams need to be able to share the values and the common principles to be adopted by both companies, support employee communication, solve problems that might occur, and ensure that no blind spots have been left unseen.