On January 2, 2018, CEE Legal Matters reported that Czech pharmacy chain Dr. Max acquired the entire A&D Pharma network in Romania, in a transaction that has been shortlisted for CEE Deal of the Year 2017 in the country. While the transaction awaits approval from authorities, we reached out to Ivo Senkyrik, Head of Group M&A at Dr. Max, to find out how his team made the deal happen.
CEELM: Did the A&D Pharma shareholders initiate the sale, or did Penta Investments? Does that effect the nature of the negotiations and the process of the sale in any way?
I.S: Dr. Max and our shareholder (Penta Investment) had been considering entering the Romanian market due to the current and expected development of the Romanian pharma industry and the macro environment. Our interest materialized through our first acquisition of 31 pharmacies, in the first half of 2017. As our strategy is to be the market leader in countries where we operate, we were considering several other acquisition opportunities. A&D is a leading player in the market thus it was clearly a primary acquisition target for Dr. Max. We initiated the contact with them.
CEELM: How is the integration of Dr. Max and A&D legal teams going?
I.S: Currently, there is no integration of any part of the business. The transaction will only be completed after the approval of the competition authorities in the relevant countries. The integration process will thus not begin until these approvals are received and the transaction is completely settled.
CEELM: You are based in the Czech Republic — how did you perform the search for a legal support in Romania? What led you to choose Musat & Asociatii for this deal?
I.S: Historically, we worked together with Musat on [a previous] pharma deal. Thanks to this historical experience, we believed that [the firm] could bring value to the A&D transaction, so we decided to select Musat as our legal buy-side advisors.
CEELM: What was Musat &Asociatii’s mandate in the matter, exactly? Did the firm exceed your expectations in any way, or was the mandate simple, and their execution functional and effective? Can you elaborate?
I.S: Their engagement included complete transaction advisory related to legal matters of the M&A process (assistance with legal due diligence and transaction documentation). The due diligence phase was fully covered by Musat given their experience with the local environment. In a later stage of the process, especially during the transaction negotiation, their team was cooperating very closely with our long-term law firm from the Czech Republic – Jan Evan – who has very good knowledge of our group and requirements. Legal due diligence of non-Romanian business were covered by other top tier law firms in respective countries.
CEELM: It seems that recently there is much consolidation goes on in the pharma sector in CEE. Do you think that this consolidation might raise competition concerns?
I.S: From my perspective, the consolidation is quite a natural process in almost any industry due the fact that the world is currently spinning faster. If you compare the development of industries several decades ago with the current pace and business changes which the industries are facing now, we can see big differences in many sectors. So if you want to be an industry leader you need to work continuously on organic growth but also to speed up the growth through acquisitions, while concurrently considering how to minimize the overall risk through diversification.
With respect to the competition concerns, I do not think that consolidation is wrong, [as long as] such consolidation does not result in the complete removal of competition in the market. I believe that if the consolidation is conducted at a reasonable level, ultimately the final customers should benefit from the consolidation. The market leaders can provide a different level of customer experience, broaden services, and provide higher quality to their customers. At least, Dr. Max can deliver these positive aspects to the customers thanks to the consolidation.
