Final Steps in Creating Strategic Partnerships: Contacting and Contracting

4 Mins read

strategic partnership health marketingThis is Part 4 and the last in a series of blog posts on best partnering practices for life sciences and health tech companies.

strategic partnership health marketingThis is Part 4 and the last in a series of blog posts on best partnering practices for life sciences and health tech companies. Read the previous posts in the series for Part One, Part Two, and Part Three.

In our previous post on partnering steps, I outlined the creation of a matrix of potential business partners that reflects a well thought out process of evaluating your company’s and your potential partner’s strengths, weaknesses and interests. In this post, I’ll talk about initiating contact and structuring an agreement.

The initial approach to a potential partner is most often determined by the extent to which a personal relationship exists between you (or your advisor) and a decision-maker at that company. Where there is a personal relationship, a relatively informal approach can often be used to quickly determine interest in an exploratory meeting. Without a personal connection, a more formal approach is called for, with written queries and a more structured method.

Regardless of which scenario applies, your company still needs to formulate a pitch to deliver to your potential partner. Much has been written about how to develop a great pitch but I have found that three of the most important elements are:

  • Brevity. Quickly introduce yourself, your idea, product, or service, and what you can offer the target company. Don’t ask or expect your target to read a lot or to listen to a lot. Be concise and get to the point. This is particularly important if there is no existing personal relationship with the company.
  • Clarity. A clear description of how your asset/product/service can make a difference to the organization being contacted. How will it complement the product portfolio? How does it fit with the organization’s business strategy? Does it enhance their ability to compete for and win business? Are you a good bolt-on acquisition?
  • Familiarity. Do your homework. Be sure that your knowledge of the company you’re pitching is sufficiently complete and current. It is awkward to speak to a CEO and not know about the big deal he/she announced that morning. And, consider subtle flattery. Cater to the executive’s knowledge and indicate that you’re interested in his or her expert opinion.

Once you’ve made the pitch, it’s important to have a solid sense of what represents a successful outcome to you. Through every interaction with your potential partner, you’ll need to listen closely to what’s being said, and modify as necessary your vision of how a deal could work out. For example, if you think ABC Company could be a distribution partner, but during a phone call it becomes clear that ABC is looking for an acquisition, you will need to react and modify your position, as warranted.

There’s an art and science to negotiation that much has been written about. In general, the goal is to achieve the oft mentioned “win / win” outcome and, to do that, it’s important to know what really matters to you (or your board or investors). This knowledge enables you to compromise later on things that aren’t critically important to you, but may matter a great deal to your potential partner. This list of items may be grouped into those that you consider to be core principles that cannot be compromised, items that you would prefer not to concede but that you are willing to trade for something of value, and items that are essentially meaningless to you but that may be currency to be used later in the negotiation. It is important when developing this list to think through the future implications that certain deal terms may have on your business. For example, if you are about to grant exclusive rights to a third party, you need to be as certain as possible that you are working with the right partner. And you would also want to include a provision allowing termination of those exclusive rights in the event the partner does not perform as expected and agreed.

In addition, each side should be interested in quickly coming to terms. You don’t want to rush the process, but it is important that commitments (e.g., responding to a term sheet by a certain date) are honored throughout. The additional workload that this entails may be another reason to retain the services of an advisor; someone who can lead and manage the transaction process.

At Popper and Company, at this stage in the process, we often act as a liaison, working on behalf of our client to schedule and coordinate the activities of various specialists – attorneys, tax specialists, accountants, regulatory advisors and consultants, environmental advisors, etc. – that are often needed to address specific issues that arise during the course of the negotiation. In some ways our role is similar to that of a general contractor overseeing the construction of a house. Of course, the client makes all decisions but by managing the process we allow your company to stay focused on day-to-day business.

Once the documents have been signed, if the resulting relationship is collaborative, it is important that it be actively managed. Often, a mechanism is put in place to have some sort of governance established—a joint steering committee, for example, with reps from both sides that meet regularly to review progress and make major decisions.

Looking back at our partnering steps, I’d say that the most important element is an understanding of what you need from a strategic partnership – cash, technology, development expertise, market access – which in turn will inform your thinking as you prepare the list of potential partners.

(Strategic partnership / shutterstock)

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