Free,
Silver lining to the problem?
Since we're talking silver linings and since I'm an eternal optimist, let's look at the situation from another angle. As a disclaimer, what I'm going to theorize is all pure speculation and opinion. But, it's based on experience of working inside small and large businesses, buying and selling many a company or department.
Anyway, people keep talking about a potential partner and the fact that the board was considering adding folks. The natural and popular summation is that this means the company was very close to a deal before "the discrepancies". Personally having had a few "board addition" discussions with management over the years, I believe this thinking is on the correct path. And, even before the statement was made, I was of the belief that a deal was indeed close, prior to the issue.
So, if that's the case, a deal was close, let's examine the reaction from the prospective partner. Let's assume further that the potential partner was a big biotech or big pharma company. Now, let's understand that small and big companies are similar in many ways. But, they are often different in many ways. Smaller companies are more prone to be populated by risk takers. Big companies are populated by risk averse managers - people that have survived and moved up steadily over the years by avoiding the big mistake. There are committees to assess risk and committees to assess the risk of the committees that assess risk. Last thing you want to do in a big company is make a big mistake because there are plenty of people standing around who'll be more than happy to stick a knife in your back. But, I digress.
Bottom line of all the fluff is that if a deal was close, a high ranking official in the big partner company was convinced he was making a good deal. Risk was acceptable and the chance for reward must be high. Big companies have all kinds of possibilities and opportunities. They strive to only pick the best of the best. To determine that they are indeed taking the best option available, deals are vetted extensively. And, it is a big effort to sell the deal internally. Believe me, if a deal was close, it had been put through it's paces and run up the flag pole. I imagine a deal of this nature had already been run past the board of directors for initial thoughts.
So, if we assume this is where things stood prior to "the issue", how do you think the guy who was staking his reputation at PPHM's potential BP/BB partner feels? Well, I can tell you that if it was me (and this has happened to me), I would feel similar to how many of you probably felt. I'd feel like I just got screwed. The deal I'd had to examine, complete due diligence, negotiate, sell internally, lawyer through, etc. just got placed on hold. Now, rest assured, I know that I beat out other suitors to get the deal. And, with all the hurdles, it wasn't easy. Now this!
So, how would I respond? Well, I'd damn sure want to make sure one of my competitors for the deal can't now reopen the negotiations - get his toe in the door. So, I'd be open with my board, telling them the status of the problem and letting them know that I still wanted to do the deal - provided the data proved out. I'd tell them that I was worried that this might open the door to others. So, I'd want to stay involved, and possibly even help with the investigation. Needless to say, I don't want to let the deal get ripped away from me because I believed in the drug before and I probably believed in the extension of possibilities.
Now, some people have suggested that I might take the opportunity to jump on PPHM's misfortune to renegotiate and cut myself a better deal. Well, I can't lie and say that this thought didn't cross my mind. And yes, when I briefed the board, they even asked about the possibilities. However, in the end, we all agreed, in the scheme of things, this deal is only the start and small (relatively speaking) in the scheme of things. The main objective is to get the deal done and make sure that other parties aren't allowed to enter late in the game and screw me over. In fact, I'm a little concerned that the longer the investigation continues, the more confirmatory data PPHM will probably produce. This certainly reduces my risk if the data is good. But, it might also strengthen PPHM's position. Will it embolden them to change the deal, ask for more, or entertain other offers? I hope not. Best thing for me is to get the investigation over as soon as possible, have my team rapidly re-evaluate the data, sell the revised results internally and complete the deal. Darn CSM. I feel like suing them myself.
Anyway, all of this is theoretical and relies on data being somewhat salvageable, or at least corraborative with the other data that's being developed. But, I've been there before and lost a couple of deals at the last minute. After all the work and effort, it sucks. Wasn't my fault a buyer got sued by his limited partner and couldn't get financing. Wasn't my fault that a division's parent company got bought out when I was at the alter and their plans changed. Crap happens. In both cases mentioned above, I fought on trying to ressurect a deal. We'll see. But as an optimist, I've got to believe that if a deal was close, should the data be somewhat salvageable, the partner will still be there - foaming at the mouth.
How's that for a silver lining scenario?
Nice meeting you Free. Good stuff these last couple of days. The possibilities are mind boggling.
Regards,
WH
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