Cerberus’s investment in a U.S.-based biotherapeutics company powerfully demonstrated the advantages of the Firm’s approach to control investing, which is based on operational improvement and long-term value creation.
The company, a producer of plasma-derived protein therapeutics products, had been a non-core division of a large European chemical and pharmaceutical company. At the time of its acquisition by Cerberus and a minority investor, the business faced significant challenges: its industry was suffering from overcapacity and price competition; it was plagued by manufacturing and operational inefficiencies; it lacked a culture of performance and accountability; and, because it was simply a part of a division of the parent company, it had virtually no management team, IT systems, sales and marketing resources, finance and accounting infrastructure, regulatory and compliance processes or systems, or other elements of the business functions necessary to run a complex, highly regulated global business.
After acquiring the company, Cerberus moved quickly to install an experienced management team consisting of a number of COAC executives as well as new recruits. The team then implemented the operational improvement plan that Cerberus had developed during the due diligence process, which involved strengthening the company by:
- Building standalone systems, processes, culture and organization, and transitioning the business to independent status
- Improving production quality, reducing inventory write-downs by 75%, while increasing manufacturing margins through improved processes, yields and throughput
- Rationalizing distribution, building an international sales and marketing team, and implementing pricing discipline across a range of products
- Investing more than $125 million into plant improvements
- Introducing new products and increasing R&D budgets to accelerate the development of new products and technologies
- Reinventing the supply chain by moving to a vertically integrated model, which required an investment of $500 million to create a network of FDA-approved plasma collection centers and the hiring of about 3,000 employees
Cerberus’s actions transformed the company into a leading provider of critical care treatments to patients with life threatening illnesses. During Cerberus’s five-year stewardship, the company was placed on a solid growth path that more than doubled its revenue and increased its earnings before interest, taxes, depreciation and amortization (EBITDA). The company also tripled its workforce to 5,000 employees, expanded product offerings, built strong relationships with patient support organizations and launched a variety of charitable initiatives.
After taking the company public in a successful initial public offering (IPO) in October 2009, Cerberus negotiated a strategic cash-and-stock merger of the company with a European competitor in June 2010. Strongly supported by the biotech company’s public shareholders and analysts, this $4 billion transaction merged companies with highly complementary geographic footprints, synergistic manufacturing capabilities, and distinct therapeutic products.
Cerberus’s achievements in the operational turnaround and creation of long-term value were widely recognized, as was the firm’s ability to consummate an IPO and then execute a sale to a well-matched, strategic buyer at a time of global economic and financial uncertainty.