In what ways can the Board be an effective deal sourcing tool?
A well designed board of directors will consist of a variety of professionals with complementary backgrounds. This breadth is a useful asset when considering corporate and business development strategy. Executives with a reputation of technical success can readily open a dialogue with academic key opinion leaders and research centers and thus allow for ready access to emerging technologies. Board members with a strong history of commercial success can similarly be essential to start deal discussions with investors, banks and partner companies (big and small) even when opportunities are not actively in play.
Is it more effective to open a prospective deal discussion with introduction or other involvement by a Director?
How to leverage your board will depend on the nature of your company, the target company and the desired discussion. Smaller companies seeking transactions (likely sell-side efforts) frequently will utilize their directors to provide an “in” with potential larger partners. This high level introduction will provide validation of the need for the discussion and sometimes catalyzes quick action. That said, this approach can limit the ability to develop mutual interest in both parties at the grass roots level before getting visibility with executives. Larger companies can use their board to make inquires of a more corporate nature (e.g., business divestment or M&A) while maintaining close confidentiality around these sorts of sensitive discussions.
What preparation should management do in advance before enlisting a director or advisor?
Before seeking the active participation of your board members in a corporate or business development effort, be sure to have the following in hand:
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A precise understanding of why board involvement is the optimal approach to the potential transaction so that this can be communicated as part of the request for support.
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A clear sense of the desired result is for the outreach. This will then inform the amount and type of preparation that will be required to fully brief the board member.
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In the case of M&A overtures, it will be important to have completed thorough diligence and opportunity assessment so that if the board-to-board outreach turns to value, this is a conversation that is well-informed.
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Finally, a roadmap for desired next steps which sets forth the amount, if any, future involvement expected from the board.
To learn more about how to leverage your board of directors for business development, register for MassBio's forum on December 5th.