Best Practices to Prepare for a Sell-Side Process

If you are a business development professional, at some point in your career, it is very likely that you will be asked to organize and lead a sell-side strategic partnering process consistent with your company’s strategy and business development objectives. Having done this several times at various companies in my career, I have made some observations about executing a partnering objective:

  • There is a lack of formal training and education materials about how to conduct a strategic partnering process
  • Most companies have different approaches and lack formal processes or standards for how they conduct partnering activities
  • There are clear best practices that the top business development professionals and organizations utilize

At Locust Walk, we have standardized the approach that we advise our clients take when conducting partnering processes. We organize this approach into four consistent steps that should occur prior to conducting partnering outreach and beginning deal negotiations:

1.Clear statement of corporate strategy driving business development objectives
2. Grounded perspective on value
3. Compelling presentation of opportunity

4. Identifying potential partners

#1: Corporate strategy should drive business development objectives

When partnering an asset, the seller should be prepared to clearly articulate why they are partnering and how it fits into their strategy. There are several potential reasons that are often cited – e.g., access non-dilutive capital, geographic focus, validation of platform / technology, monetize one asset to fund the development of another, access capabilities to enhance value potential, mitigate portfolio risk, etc. By communicating the reasons for partnering to potential buyers, it makes the sellers interests and principles very clear, which is helpful when and if the discussions advance to deal structuring and deal terms. Furthermore, the seller should be prepared to articulate what it is seeking in a deal – e.g., desired deal structure, what (if any) rights it intends to retain, deal terms rationale, best alternative to a strategic deal (i.e., equity financing, capital allocation trade-offs, alternative funding sources, terminate / shelve the program).
Oftentimes, partnering companies will communicate that they are “flexible” on deal structure and terms. While adaptability and being opportunistic are important, the highest value and most transformative transaction are often grounded by clear corporate strategy objectives and related principles that translate to deal structure preferences and deal terms guidance.

#2: Grounded perspective on value

At Locust Walk, as well as previously in my career, I have seen countless examples of small companies that have unrealistic or over-inflated perceptions of the value of their technology. This often stems from a lack of having conducted a robust commercial assessment of the opportunity. By conducting a commercial assessment to gain an informed sense of value, the seller will be in an informed position to convey the following aspects of any compelling pitch:

  • What is the target product profile?
  • What unmet needs will be addressed?
  • How large is the addressable patient population based on segmentation analysis?
  • What do the treating physicians, payors and patients think about the product concept / data?
  • What assumptions are informed by market inputs and realistic to use as the basis of a revenue forecast that the buyer(s) can believe?

For more detail on the importance of and tactic for executing a commercial assessment, please refer here

#3: Compelling presentation of opportunity

A common experience we have when working with new clients at Locust Walk is the need to create, revise or update the way in which the partnering opportunity is being presented. We focus on three key aspects of how to present an opportunity, which should be standardized for any partnering process:

  • Non-confidential teaser document – this should accompany the initial outreach messages as an attachment. The goal of the teaser document is to provide enough information to get potential partners interested in learning more, scheduling an introductory meeting / t-con and signing a CDA. The teaser should be no more than one page printed (double-sided) and should contain content that describes the opportunity summary, partnering objectives, unmet need and value proposition, key data, market overview and target product profile.

  • Confidential management presentation – there are several best practices we have observed in creating effective management presentations:

    – Manage the clock – don’t have too many slides, estimate each slide will take ~2 minutes to present and leave at      least 15 minutes for discussion
    – Customize to the audience by getting questions in advance and addressing them explicitly in the presentation
    – Have clear takeaway messages on any data slides so the implications and importance of the data is clear
    – Grounded perspective on commercial opportunity and value (see above)
    – Formatting matters – it is worth investing in professional graphics support to have attractive, compelling formatting that enhances the audience response

  • Data room – it is critical that an electronic data room is created in advance of starting outreach. This is the norm in due diligence and the absence of a data room signals an unprofessional process and lack of competitive partnering interest. Once companies engage in due diligence, the information in the data room is critical to the function-specific review processes. As such, ample time and effort should be put into creating and organizing a comprehensive data room. Oftentimes, certain sensitive confidential information in the data room is stage-gated by indications of interest and term sheet proposals.

#4: Identifying potential partners

Prior to beginning outreach, a comprehensive contact log of potential partners should be created. There are several criteria by which potential partners can be identified – therapeutic area fit, commercial synergies, pipeline fit, technology expertise, deal-making history, etc. While there are usually a small group of potential partners that have the highest likelihood at transacting, we advocate creating a broad list of potential partners to target for outreach. At Locust Walk, we had a recent transaction close in which the 52nd company we contacted ended up doing the deal! By doing broad outreach, sellers often identify non-obvious partners for whom the timing, strategy and opportunity is a good fit.

As you prepare for or reflect on your own experiences with leading deal processes, I would be happy to exchange thoughts and provide more detail on how Locust Walk approaches partnering processes. You can reach me at 

Locust__0007_Josh_Hamermesh_EX  Written by Josh Hamermesh