Governance in Mergers and Acquisitions

Recently, I’ve been asked by several of my colleagues regarding the the structuring of the sale of AskBio Inc. to Bayer. Maintaining separate operating independence and control over therapeutic development after selling a biotechnology company requires proactive, legally binding structural mechanisms negotiated before the deal closes. The goal is to separate the economic ownership from the operational governance. The wholly owned operating subsidiary is the gold standard for maintaining independence. Instead of "absorbing" your company into their existing structure, the buyer keeps your company as a standalone legal entity. Key aspects are: 1. Maintain your own Profit & Loss statement. If you control your own budget and bank accounts, you retain the power to hire, fire, and invest. As we were not yet generating revenue, we negotiated a funding commitment for a period of years, where cash would be injected into the company to support product development. 2. Keep Distinct Branding and Culture: Contractually agree that the buyer will not rebrand the entity or force the adoption of their corporate HR/culture policies for a set number of years. 3. Implement "Arm's Length" Agreement: Ensure that any services the parent company provides (legal, accounting, IT) are governed by a services agreement so they cannot dictate how you operate under the guise of "integration." 4. Maintain Independent Board of Directors: Negotiate a Board for your subsidiary that includes representative from the company and the buyer, and possibly a neutral third party. 5. Create Reserved Matters List: Create a list of items that the parent company cannot vote on without your consent, such as: Changes to the R&D roadmap, discontinuation of products in development, clinical trial design and site selection, and key personnel appointments. 6. Negotiate Performance-Linked Budgets: Ensure that as long as you hit certain milestones, your funding is contractually protected and cannot be diverted to other corporate projects. 7. Require high legal standard for CRE (commercially reasonable effort efforts). If the buyer fails to put enough resources behind a drug in development, they are in breach of contract. 8. Consider a "Buy-Back" Option: Negotiate a right to buy the company or therapeutic back at a pre-set price (or for the cost of development) if the buyer decides to pivot away from your core therapeutic area. (Hard to get). Please include in comments any other suggestions. It took me three exits to figure out this list. Maybe next time I’ll get it exactly right! #biotech #companysale #therapeuticdevelopment #operatingindependence #exit #drugdevelopment #biotechnology

Leadership isn’t control. It’s governance. Especially when you’re gearing up to sell the ship you’ve been steering for 7+ years. Let me explain. In M&A prep, founders fall into one of two camps: 1. Those with governance frameworks (cool, collected, due-diligence-ready) 2. And those who “winged it” through scale and are now… well, quietly panicking Let’s normalise this: You can absolutely have a profitable, growing business and still be legally exposed. In fact, most founders do. Until about 12-18 months pre-exit. Then things get serious. ⸻ Here’s what cracks under pressure… (and how to fix it): • Board structure: looks legit on paper, but decisions aren’t minuted + authority lines are fuzzy → Create clarity: who approves what, how often + why it matters legally • IP + team contracts: “we’re like family” is beautiful… until one leaves with your systems → Lock in your core assets. Define scope. Register IP. • Founder as single point of failure: you’re the brand, the client lead, the CFO + sometimes HR → Build redundancy. Governance protects your time + exit valuation ⸻ Why does this matter? Because 70-90% of M&A deals fail to meet their intended ROI post-acquisition.¹ And many of those failures start long before the term sheet, in messy governance, patchy legal and cultural misalignment.² Want a real-life example? 🧨 AOL + Time Warner: Headline success, back-end disaster. Poor governance and no cultural due diligence wiped billions.³ ⸻ Practical fix-it list for founders prepping for exit: ➤ Run a pre-exit legal audit (cap table, contracts, compliance, IP) ➤ Start documenting decision-making (even if it’s just you + your ops lead) ➤ Get board-ready, advisors count (but governance is structure, not vibes) ➤ Don’t outsource to your lawyer last-minute. Prep now! ➤ Governance ≠ bureaucracy. It’s your buffer. Your calm in the storm. ⸻ Exits don’t fall apart at the table. They fall apart when what’s underneath doesn’t match what you’re selling. 👉 If someone did due diligence on your business tomorrow… what would they find? I’ve seen it all. Let’s fix it. 📩 DMs open if you’re in prep mode (or you’ve just realised you should be). ⸻ Sources (OSCOLA-style): ¹ KPMG, Unlocking Shareholder Value: The Keys to Success in M&A, KPMG International, 1999. ² PwC, Creating value beyond the deal: 2023 M&A Integration Report, PwC Global, 2023. ³ Yoffie D, The Rise and Fall of AOL Time Warner, Harvard Business Review, 2002.

You closed 3 acquisitions in 18 months. Growth is ahead of plan. So why does everything feel harder than it should? You can source deals. Run diligence. Close transactions. None of that is the bottleneck. But once acquisitions start stacking up, something breaks. Decisions slow down. Roles blur. Issues sit unresolved. Reporting falls apart. The core business absorbs all the disruption. That's not a pipeline problem. That's a governance problem. And in a buy-and-build, governance isn't just board oversight. It's the decision-making system that defines: → Who owns what → Who approves what → What gets escalated → How progress is tracked → How risk is managed as complexity grows Good governance doesn't start with more meetings. It starts with clear decision rights. The board sets direction, priorities, and risk tolerance. Management executes within that framework. In practice, that means defining: → Approval thresholds → Escalation paths → Reporting cadence → Clear ownership across strategy, deal execution, and integration Because accountability breaks down the moment teams can't see decisions, progress, and risk clearly. The purpose of governance isn't control. It's to protect value, keep the core business stable, and let the company absorb acquisitions without losing speed. A buy-and-build doesn't become repeatable because you do more deals. It becomes repeatable when governance turns growth into a system. #Integration #PrivateEquity #valuecreation #Xpertegic

Board minutes are boring. Until the regulator, the buyer or judge reads them. Then suddenly they are the most important document in the room. The Crispin Odey story in the FT this week demonstrates why. He fired his executive committee twice. Installed himself as the sole member. Then held a meeting alone - with minutes recording an attendee who says they were not even there, with comments attributed to them that they say never happened. That is not a typo - it is alleged falsification of a legal record. Under s.248 Companies Act 2006, every UK company must record directors' meeting proceedings and keep them for at least 10 years. Fail and every director in default commits a criminal offence. But the stakes have quietly got higher. Since the Economic Crime and Corporate Transparency Act 2023, boards can defend against the new failure to prevent fraud offence by showing proper prevention procedures. Good minutes are part of that evidence base. Most boards have not connected those dots yet. And minutes disclosed to the CMA or FCA can be shared with overseas regulators. Your private boardroom discussion can end up in front of a regulator in a country you have never set foot in. What I look for in M&A due diligence Board minutes are where the real story lives. I check for: – Who authorised that acquisition, loan or dividend – Was the authorisation what was required by law (you'd be surprised how often it isn't!) – Whether conflicts were declared and managed – Whether directors considered solvency before distributions – Evidence of genuine debate, not rubber-stamping – How the board handled problems when they arose Good minutes can underwrite a valuation. Bad ones can be part of a thousand papercuts that kill deals by telling the story of poor governance. What to do when the draft minutes leave things out This is where most directors are far too passive. They get a draft - they skim it, approve it, move on. If the draft omits something that matters, ask for the change promptly and in writing. Especially if it leaves out: – A material concern you raised – Genuine challenge, not just consensus – A conflict disclosure – The reasoning behind the decision, not just the outcome – Your dissent or abstention Minutes should not be a verbatim transcript but they need to reflect what actually happened - not the sanitised or the politically convenient version. The real one. 𝗢𝗻𝗰𝗲 𝘁𝗵𝗲 𝘁𝗶𝗱𝘆 𝗱𝗿𝗮𝗳𝘁 𝗵𝗮𝗿𝗱𝗲𝗻𝘀 𝗶𝗻𝘁𝗼 𝘁𝗵𝗲 𝗳𝗶𝗻𝗮𝗹 𝗿𝗲𝗰𝗼𝗿𝗱, 𝗵𝗶𝘀𝘁𝗼𝗿𝘆 𝗯𝗲𝗰𝗼𝗺𝗲𝘀 𝘄𝗵𝗮𝘁𝗲𝘃𝗲𝗿 𝘁𝗵𝗲 𝗱𝗼𝗰𝘂𝗺𝗲𝗻𝘁 𝘀𝗮𝘆𝘀 𝗶𝘁 𝘄𝗮𝘀. If you doubt that, read the Odey coverage again. Board minutes look dull and they feel procedural. But when things go wrong they are the difference between "The board carefully considered this" and "The board, apparently, considered nothing." Boring documents save careers. 👉 What is the worst board minute mistake you have seen - too thin, too polished, or simply wrong?

83% of mergers fail. Not because the deal was bad... Because no one knew who was in charge the morning after. A few years ago, I consulted for a company just two weeks post-acquisition. On paper? It was a win. In the boardroom? Panic. → Department heads were doubled up. → Decisions stalled. → Senior leaders asked, “So… do I still report to you?” The numbers looked good. The structure? Not so much. This is the blind spot in most M&A playbooks: You can acquire a company... But if you don’t integrate leadership, you’re not merging. You’re layering. 🔍 What high-performing boards actually focus on: → Leadership mapping before the first joint meeting → Clear ownership of functions, not just job titles → A unifying cadence, so everyone moves in sync Because when you leave leadership undefined, you don’t just slow execution...you destroy trust. Ask yourself before the next deal closes: → Is every leader clear on their new role? → Do we have overlap, or invisible gaps? → Can this team drive results without friction in the first 90 days? M&A doesn’t fail because of spreadsheets. It fails because of silence, confusion, and clashing egos. That’s exactly what I unpacked in this week’s podcast: How boards evaluate leadership during M&A, and why culture clarity drives the real ROI. → Watch here: https://lnkd.in/eytrpZAM → Subscribe for weekly leadership strategy: https://lnkd.in/e4cem63q Leadership isn’t inherited in a merger. It’s architected. Deliberately. Follow Matteo Turi for more insights #MatteoTuri #MergersAndAcquisitions #LeadershipStrategy #PostMergerIntegration #CFOWisdom #ScalableGrowth #BoardLeadership #PodcastInsights #ExecutiveClarity #PeopleOverProcess

In my experience advising boutique consultancies on M&A, the most expensive mistake a founder can make is equates ownership with reward for the past, rather than an investment in the future. I recently advised a high-growth US firm that was positioned for a premium valuation. The founders were adamant about maintaining 100% control. Their logic was that the leadership team was already well-compensated through high salaries and should feel lucky to be part of the journey. To "address" the issue of retention, they eventually conceded a combined 1% equity stake to the management team. In the context of a professional services exit, 1% is not an incentive; it is a rounding error. The market corrected this arrogance quickly. Twelve months before the planned exit, two of the three key directors resigned. They moved to competitors who offered meaningful equity and a genuine partnership culture. During their exit interviews, both directors used the word "respect". They did not feel like architects of the firm’s success; they felt like high-priced delivery assets. The financial fallout was clinical. The loss of talent stalled the pipeline and disrupted delivery. Growth flattened, and the valuation multiple contracted as buyers perceived an increased delivery risk. The exit was delayed by 18 months, and the final valuation dropped by approximately 1.5x EBITDA. By refusing to share the pie, the founders ended up with a much smaller, less appetising pie for themselves. This is a classic example of the "ownership trap" in professional service firms (PSFs). Research by von Nordenflycht (2010) identifies "human capital intensity" as the defining characteristic of our industry. When the assets "walk out of the elevator" every evening, the traditional capital structure must adapt. Firms that fail to institutionalise ownership often struggle with "knowledge bleed" and find it impossible to scale beyond the founders' personal reach. Furthermore, studies into PSF growth suggest that broader ownership structures act as a credible signal of quality to the market. A buyer is not just purchasing your current EBITDA; they are purchasing the probability that your leadership team will remain to deliver future earnings. If that team has no "skin in the game", the buyer assumes they will leave the moment the earn-out ends, and they will price your firm accordingly. If you are 24 to 36 months from an exit, you must view your cap table as a strategic tool. Equity is the most effective mechanism for locking in the value that a buyer is actually paying for: the collective talent of the firm. The trade-off is simple: you can hold 100% of a firm that may never reach its potential, or 80% of a stable, scalable, and highly attractive entity. If your key earners have no path to ownership, you are effectively subsidising the future recruitment drives of your competitors.

Most integration failures don’t come from strategy. They come from an under-budgeting reality. When a deal closes, leadership often believes the “heavy lifting” is over. It isn’t. That’s when a new cost structure begins. In this short video, I outline the real cost architecture of post-merger integration, including: • Employee redundancies and associated legal / HR advisory costs • Dedicated integration leadership and change management resources • IT system consolidation, data migration, cybersecurity alignment • Real estate consolidation and lease constraints • Communications, PR, and post-close legal support What many boards underestimate is this: Pre-deal advisors exit. Post-deal operators enter. And integration is not self-funding in the early stages. If you do not explicitly model integration costs upfront, you will either: Starve the integration effort, or Delay critical decisions that erode synergy realization Both destroy value quietly. Disciplined acquirers treat integration as a funded strategic program — not an afterthought financed by optimism. 🎥 In this 3-minute video, I break down the main cost elements leaders must plan for. Budget Element in Integration v… For boards, CEOs, and investors pursuing acquisitive growth, properly integrating budgeting is not a detail. It is governance. Curious how others approach integration budgeting in their deals.

One of the most important things to get right after acquiring a founder / family owned business is the governance and who owns decision-making. Many sponsors struggle with this, especially newer investors, independent sponsors, and those who keep the Founder/CEO as the CEO of the new company. There are a host of issues that can arise if this is not nailed down early: - Founder resistant to new changes necessary to scale / grow - Founder checked out after the transaction - "Old Guard" vs "New Guard" culture - Change management / Transformation crippled / stalled - Other non-founder execs fighting to enact change - Divergence of strategic vision / plan - Unclear reporting structure / leadership structure - Lack of strategic plan / alignment around the plan - Retention issues / employees resigning due to issues - Leadership churn + sunk costs - Etc, etc. There are obvious pros and cons for keeping a Founder post-close and each case is clearly unique. Issues arise when there aren't clearly defined roles and governance post-close. Not having this ironed out can literally stunt growth and erode value, killing returns and frustrating operators. Most operators have felt this tension and you will lose A-players. If you're an investor who acquires founder-owned businesses, how do you handle this transition? #PrivateEquity #GVentures #FounderTransition #LMM #ExecutiveSearch