Five4 Capital

Pharmaceutical M&A

Industry overview

Industry Brief History

The pharmaceutical industry is responsible for the development, production and marketing of medications. Thus, its immense importance as a global sector is inarguable. In 2014, total pharmaceutical revenues worldwide had exceeded one trillion U.S. dollars for the first time. North America is responsible for the largest portion of these revenues, due to the leading role of the U.S. pharmaceutical industry. However, as in many other industries, the Chinese pharmaceutical sector has shown the highest growth rates over previous years.

Pharmaceutical Industry subsectors

  • Prescription branded drugs
  • Generics
  • OTC

Largest global pharmaceutical markets

The world pharmaceutical market was worth an estimated € 763,101 million ($ 844,676 million) at ex-factory prices in 2016 and currently valued at $1.1billion. The North American market (USA & Canada) remained the world’s largest market with a 49.0% share, well ahead of Europe and Japan. Distribution margins, which are generally fixed by governments, and VAT rates, differ significantly from country to country in Europe. On average, approximately one third of the retail price of a medicine reverts to distributors (pharmacists and wholesalers) and the State.

Global Pharmaceutical Sales

The global prescription drug market grew a little (+0.8%) in 2017compared to 2016 due to the depreciation of the USD against most of other currencies, especially Asian ones, as the US is the largest outlet for foreign medicines with a world market share of 33%. All drug makers have to cope with governments’ tightening cost controls over drug price fixing as it is one way to keep new medicines v affordable for patients in spite of their growing criticism about too expensive health prices have become recently.

Pharmaceutical sales Market Growth Drivers

The key growth drivers are as follows:

  • Recurring high level of M&A activity aimed at bolstering big pharmaceutical’s pipelines as a more efficient alternative to internal R&D investments
  • Competition from generic and biosimilar drugs eating away at patented drugs market shares
  • Continuous rise in the number of new drug launches in 2018
  • Negative regulatory fallout from drug price gouging in the US

Mergers and acquisitions

M&A can include a number of different transactions, detailed below.

  • Merger
  • Acquisition
  • Consolidation
  • Tender Offer
  • Acquisition of Assets
  • Management Acquisition

Difference between a Merger and an Acquisition

Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. A merger occurs when two separate entities (usually of comparable size) combine forces to create a new, joint organization in which theoretically both are equal partners.

Varieties of Mergers

From the perspective of business structures, there is a whole host of different mergers. Here are a few types, distinguished by the relationship between the two companies that are merging:

  • Horizontal merger:
  • Vertical merger
  • Congeneric mergers
  • Market-extension merger
  • Product-extension merger
  • Conglomeration
  • Purchase Mergers
  • Consolidation Mergers

Details of Acquisitions

In an acquisition, as in some mergers, a company can buy another company with cash, stock or a combination of the two. Another possibility, which is common in smaller deals, is for one company to acquire all the assets of another company. Company X buys all of Company Y’s assets for cash, which means that Company Y will have only cash (and debt, if any). Of course, Company Y becomes merely a shell and will eventually liquidate or enter another area of business.

Another type of acquisition is a reverse merger, a deal that enables a private company to get publicly-listed in a relatively short time period. A reverse merger occurs when a private company that has strong prospects and is eager to acquire financing buys a publicly-listed shell company, usually one with no business and limited assets. The private company reverse merges into the public company, and together they become an entirely new public corporation with tradable shares.

Mergers and Acquisition Valuation

There exist many legitimate ways to value companies. The most common method is to look at comparable companies in an industry, but deal makers employ a variety of other methods and tools when assessing a target company. Below is a few:

Comparative Ratios

  • Price-Earnings Ratio (P/E Ratio)
  • Enterprise-Value-to-Sales Ratio (EV/Sales)

Replacement Cost

Discounted Cash Flow (DCF)


Mergers and Acquisition Reasons

By merging, companies hope to benefit from the following:

  • Becoming bigger
  • Preempted competition
  • Domination
  • Tax benefits
  • Staff reductions
  • Economies of scale
  • Acquiring new technology
  • Improved market reach and industry visibility

A merger can also improve a company’s standing in the investment community: bigger firms often have an easier time raising capital than smaller ones. Synergy opportunities may exist only in the minds of the corporate leaders and the deal makers. Where there is no value to be created, the CEO and investment bankers – who have much to gain from a successful M&A deal will try to create an image of enhanced value. The market, however, eventually sees through this and penalizes the company by assigning it a discounted share price.

Mergers and Acquisitions-Prone Industries

  • Health care
  • Technology industry
  • Financial services
  • Retail sector
  • Utilities sector

Merger and Acquisition Firms

  • Investment Banks
  • Law Firms
  • Audit & Accounting Firms
  • Consulting & Advisory Firms

Mergers and Acquisition Failures

It’s no secret that plenty of mergers don’t work. Those who advocate mergers will argue that the merger will cut costs or boost revenues by more than enough to justify the price premium. It can sound so simple: just combine computer systems, merge a few departments, use sheer size to force down the price of supplies and the merged giant should be more profitable than its parts. In theory, 1+1 = 3 sounds great, but in practice, things can go awry.  Different systems and processes, dilution of a company’s brand, overestimation of synergies and lack of understanding of the target firm’s business can all occur, destroying shareholder value and decreasing the company’s stock price after the transaction.


For the full market report please contact for further details.

Five4 Capital


1. Industry Analysis

1.1 Industry history

Factoring services can be traced historically to Roman times. Traders in ancient Mesopotamia (modern-day Iraq, Kuwait and Syria) use a form of factoring in their business dealings. Factors arose in England as early as the thirteenth century, as commissioned merchants for manufactures in distant, unfamiliar markets.

               Factoring is a financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital. In a typical factoring arrangement, the client makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) buys the right to collect on that invoice by agreeing to pay you the invoice’s face value less a discount—typically 2 to 6 percent. The factor pays 75 percent to 80 percent of the face value immediately and forwards the remainder (less the discount) when your customer pays.

Global market overview

Preliminary world factoring statistics indicate that the Industry has overall held its pace with many markets showing significant continued growth. These advances have however been offset by a continued reduction of volume from China, where the downturn has also affected international figures of trade counterparty countries such as the USA – although in this case the reduction appears to have mitigated with an increase in domestic business, at least in respect of FCI Members.

Global Factoring Volumes by Region

Geographical segmentation and analysis of the factoring market includes;

  • Americas
  • APAC
  • EMEA

Industry dynamics

2016 GDP figures remain to be fully finalised and so it is a little premature to be able to state for sure the GDP penetration of the Industry; however, it seems unlikely that the figure of circa 3.8% measured for 2015 will be substantially different this year.

Advances against invoices were estimated to be in the order of EUR 360 billion at the end of the year – this figure is drawn from actual reported advances where they are available and from imputed average days outstanding calculations. Again, this is broadly the same as last year’s figure.

Industry driver and Trends

  • Improved inventory management through factoring business
  • Increasingly attractive trade credit conditions, such as interest-free account payables at longer maturities
  • International cross-border opportunity
  • Technological breakthroughs like Internet access and cloud-based platforms
  • Instant access to working capital without jumping through the hoops or dealing with the lengthy waits associated with getting a business loan
  • The effectiveness of factoring receivables technique
  • Factoring industry’s awareness of supply chain finance
  • Developing potential for increasing protectionism

Industry challenge

  • Lack of expansion opportunities in developing countries
  • Perception that financing through factoring companies typically costs more than financing through traditional lenders such as banks
  • Maintenance of flexibility to react quickly to changing market circumstances.

Common factoring terms

Discount rate or factoring fee

Advance rate

Reserve account

Long-term contracts and minimums

Notification vs. non-notification

Accounts receivable discounting

Specialized factoring

With advances in technology, some invoice factoring providers have adapted to specific industries. This often affects additional services offered by the factor in order to best adapt the factoring service to the needs of the business. An example of this includes a recruitment specialist factor offering payroll and back office support with the factoring facility; a wholesale or /distribution factor may not offer this additional service. These differences can affect the cost of the facility, the approach the factor takes when collecting credit, the administration services included in the facility and the maximum size of invoices which can be factored.

Real estate

Medical factoring






2. Factoring and Commercial Finance Market Analysis

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.  Forfaiting is a factoring arrangement used in international trade finance by exporters who wish to sell their receivables to a forfaiter.  Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing. Accounts receivable financing is a term more accurately used to describe a form of asset based lending against accounts receivable.

Types of Factoring Facilities

There are three principal types of factoring facilities:

  • Maturity factoring.
  • Collection factoring.
  • Advance factoring.

Factoring Agreements

Factoring agreements are two-party agreements between the factor, as the purchaser of accounts, and its client, as the seller of accounts. They are variously called, for example, Factoring Agreement, Accounts Receivable Purchase Agreement, or Sale and Servicing Agreement. Factoring agreements cover a wide variety of legal and business issues, including:

Key Success Factors

  • Improved inventory management through factoring business
  • Improvement of trade growth globally, increasing influence of factoring operations.

Industry Size and Forecast

  • The global factoring market to grow at a CAGR of 11.03% during the period 2016-2020.
  • The market will grow steadily at a CAGR of greater than 13% by 2022.

Factoring Process

The factoring process can be broken up into two parts: the initial account setup and ongoing funding. Setting up a factoring account typically takes one to two weeks and involves submitting an application, a list of clients, an accounts receivable aging report and a sample invoice.

For the full market report please contact for further details.


Five4 Capital

Construction of Biogas Plants in Serbia


The strategic direction of energy development in the Republic of Serbia is primarily determined by internationally assumed commitments. The Treaty Establishing the Energy Community is the first treaty between the Republic of Serbia and the European Union, whereby the Republic of Serbia has undertaken the commitment to implement EU regulations. Membership in the Energy Community (treaty entered into force in 2006) and the process of accession to the European Union are of vast significance. The importance of the Treaty Establishing the Energy Community was confirmed by the ratification of the Stabilization and Association Agreement in 2008.
The key priorities of the adopted strategy (until 2030) are the establishment of energy security, energy market development and an overall transition to sustainable energy.


According to verified reserves of oil and natural gas – unless significant discoveries are made, it can be expected that, by 2030, the exploitation of these energy resources in the country will have become low or entirely exhausted.
At present, the most significant domestic energy resource is coal – the reserves of which should, according to the projected level of consumption, remain sufficient for exploitation even after 2050.


The laws and bylaws that govern the majority of RES related activities are:
– Energy Law (Official Gazette of the Republic of Serbia, No. 145/2014)
– Law on Efficient Use of Energy (Official Gazette of the Republic of Serbia, No. 25/2013)
– Decree on Incentive Measures for the Production of Electricity from Renewable Energy Sources and Highly Efficient Cogeneration of Electricity and Heat (Official Gazette of the Republic of Serbia, No. 56/2016).
– Decree on the Conditions and Procedure for Acquiring the Status of Privileged Electricity Producer, Temporary Privileged Electricity Producer and Producer from RES (Official Gazette of the Republic of Serbia, No. 56/2016)


The potential annual production of biogas is estimated from the data on the annually available quantity of substrates. For this purpose, indicative literature data on biogas yields are used. Potential biogas yields are mainly expressed using the amount of fresh substrate mass. The potential yield of biogas varies depending on the moisture content of the substrate and also depends on the share of organic dry mass. The share of dry and organic dry mass in the substrate is determined for a more accurate measurement of annual biogas production.


The rapid increase in the world population and growth of the global economy have resulted in increasing energy consumption. It is estimated that total global energy consumption will have grown by 58% by the year 2040 as compared to 2010. The use of conventional technologies for the production of energy from fossil fuels has led to fossil fuel depletion, increased environmental pollution as well as increased greenhouse gas emissions causing climate changes. Greenhouse gas emissions increased by 70% between 1970 and 2004, thus necessitating the introduction of new energy sources that would lead to a secure energy supply, reduce environmental pollution and mitigate climate changes. One way of producing renewable energy and possibly replacing fossil sources is the application of anaerobic digestion and biogas production. The application of biogas has recorded a significant increase during the second half of the twentieth century, especially in developing countries. In addition to energy production, this also serves as a solution for sanitary problems through wastewater treatment.


By definition, SWOT analysis represents a suitable manner of observing the prospects or obstacles for project implementation in the form of a comparative overview of the main strengths, weaknesses, opportunities and threats. The Energy Development Strategy of the Republic of Serbia enables the identification of key positive and negative factors that could affect the achievement of objectives, an overview of items that may serve for stimulating the implementation of the Strategy, as well as what might lead to delays and issues, either due to internal weaknesses or external constraints.


Sources of financing for the construction of biogas plants play a significant role and thus strongly affect the financial assessment. In most countries of the European Union and beyond, such projects are encouraged via the award of grants, for all or part of the investment, or via granting particularly favorable loans. The reason for the above is quite simple, given that encouraging such projects contributes to the realization of national goals in terms of energy efficiency, use of national human and material resources and reduction of dependence on imports of energy generating products. This also applies in Serbia. There are numerous options available, albeit with many limitations. Below is a description of the major sources of financing, with particularly favorable conditions for the production and use of renewable energy sources, including biogas. Each option should be properly considered, and all the costs incurred during the provision of funds should be taken into account, as the seemingly lowest may eventually turn out as significant.


Pursuant to the analyses presented in the material, it may be concluded that, according to the current conditions of the Decree on the Conditions and feed-in tariffs, as well as raw material prices, INVESTING IN BIOGAS PLANTS IN SERBIA IS PROFITABLE.
Investments may be organized as standalone with the purchase or lease of the land required (400 ha for 1 MW) and self-organization of the entire operation – production, commissioning and maintenance for biogas plant development.
Another form of construction is possible through joint ventures with farmers, where the farmers would provide the land required for plant construction, secure the operation of the plant and uptake the post-fermentation mass and heat. The partner investor would provide the financing, documentation necessary for the commissioning of the plant and contract with the Electric Power Industry of Serbia (electricity supply).

For the full market report please contact for further details.