The Post-Pandemic CRO Landscape

None is inconsequential: advancing digital technology, globalization of clinical trials, changes in clinical trial design, the inflow of private equity dollars, fewer sponsors lost to mergers and acquisitions, more CROs, the costs of clinical trials, precision medicine, lack of available talent, and-an under the radar trend-the continuing challenges of chronic disease. A 2020 report called them a "primary factor" in the growth of global CRO services market.2 Casey McTigue, an executive director at SRS Acquiom, an M&A services firm, put it this way: "We have seen record setting volumes for M&A." Market attention In 2019, the life sciences recruiter Pr°Clinical considered the following CROs worthy of close attention from investors and pharma alike: PPD, Medpace, PRA Health Sciences, KCR, ICON, IQVIA, PSI, Parexel.3 Of the eight, three still stand alone;the rest have merged or been acquired. Combined, their network covers 2,800 hospitals, clinics and long-term care facilities, and 200 research and pharmaceutical companies, a press release says. Since the combined R&D outlay of the top pharma houses now hovers at the $100 billion-and that majority of trials have CRO involvement-even the math challenged can appreciate the CRO industry's losses, or gains, depending on the road chosen.6 But the CRO industry has already proved its resiliency. Despite changes in market conditions between 2008 and 2019, SRS Acquiom found that of the 227 private life sciences deals in which it was the shareholder representative, 163 had earnouts, the potential dollar figure more than $37 billion.

At the Frontier of Sustainable Finance: Impact Investing and the Financial Tradeoff, Evidence from Private Portfolio Companies in the United Kingdom

Drawing from the extremely novel impact investing landscape and the limited existing literature on the topic, it appears that investing in social enterprises should come at the cost of partially sacrificing financial returns to invested capital. This paper investigates the existence of this tradeoff by assessing how the performance of impact investing funds compares to that of traditional private equity and venture capital operators. Focusing on portfolio firm operating performance, we construct a dataset of 85 impact-investing observations and 5310 traditional observations over the period ranging from 2009 to 2020, in order to compare the performance of the traditional investor-backed firms with those of sustainable companies participated by social impact investors. Advanced matching methods such as Radius and Kernel matching suggest that the composition of the shareholding structure significantly affects the profitability of the company, with traditional firms outperforming their socially-concerned counterparts. Looking instead within the subsample of impact investor portfolio companies, and focusing only on the post-investment observations, we analyze how the percentage owned by the impact investors impacts the performance of the owned companies. The results show that, similarly to traditional ownership, a greater share controlled by impact investors leads to higher returns.

Stakeholder Capitalism in the Time of COVID

This Article tests the claims of supporters of stakeholder capitalism ("stakeholderism") in the context of the COVID pandemic. Supporters of stakeholderism advocate encouraging and relying on corporate leaders to use their discretion to serve stakeholders such as employees, customers, suppliers, local communities, and the environment. The pandemic followed and was accompanied by peak support for, and broad expressions of commitment to, stakeholderism from corporate leaders. Nonetheless, and even though the pandemic heightened risks to stakeholders, we document that corporate leaders negotiating deal terms failed to look after stakeholder interests. We conduct a detailed examination of all the $1B+ acquisitions of public companies that were announced from April 2020 to March 2022, totaling 122 acquisitions with an aggregate consideration exceeding $800 billion. We find that deal terms provided large gains for the shareholders of target companies, as well as substantial private benefits for corporate leaders. However, although many transactions were viewed at the time of the deal as posing significant post-deal risks for employees, corporate leaders largely did not obtain any employee protections, including payments to employees who would be laid off post-deal. Similarly, we find that corporate leaders failed to negotiate for protections for customers, suppliers, communities, the environment, and other stakeholders. After conducting various tests to examine whether this pattern could have been driven by other factors, we conclude that it is likely to have been driven by corporate leaders' incentives not to benefit stakeholders beyond what would serve shareholder interests. While we focus on decisions in the acquisition context, we explain why our findings also have implications for ongoing-concern decisions, and we discuss and respond to potential objections to our conclusions. Overall, our findings have significant implications for long-standing debates on the corporate treatment of stakeholders. In particular, our findings are inconsistent with the implicit-promises/team-production view that corporate leaders of an acquired company should and do look after stakeholder interests;on this view, fulfilling implicit promises to protect stakeholder interests serves shareholders' ex-ante interest in inducing the stakeholder cooperation and investment that are essential to corporate success. Our work also supports the agency critique of stakeholder capitalism which suggests that, due to their incentives, corporate leaders cannot be relied upon to look after stakeholder interests and to live up to pro-stakeholder rhetoric.

Why do they go to the peripheries? Studying the relations between the real estate market and coworking spaces in the peripheral areas of Germany

Purpose>The study was designed to investigate the bidirectional causation between the real estate market characteristics (residential property prices/rents (including PTR), office rents) and the rise of coworking spaces (CSs) in the peripheral areas of Germany.Design/methodology/approach>Based on the desk research, the authors constructed their own database of 1,201 CSs. The authors gathered data on the residential and office prices and rents on a district level. To identify real market differences between districts with and without CSs, the authors applied the t-test for independent samples.Findings>The second-highest number of CSs were found to operate in the office market peripheries. This phenomenon should be explained by a search for lower office rents, which CSs seek. Most CSs in the peripheral areas of Germany were only recently established in tourist-oriented regions in the south and north of Germany. In this paper, the authors confirmed that the strength of peripheral CSs lies in the hybridity of their operations: for the majority of CSs, running a CS is a non-core business. The authors argue that the role of CSs is rather limited in attracting real estate investors and boosting the real estate market in the peripheral areas of Germany.Practical implications>The research shows that peripheral locations are attracting CSs to significant extent. The study shows that CSs can be part of corporate real estate or workplace strategies. As the majority of peripheral CSs are located in tourism areas, the subletting of vacant spaces could be a lucrative business model for hotels, particularly in the times of pandemics. Therefore, further research should focus on the role of tourist areas in the implementation of CSs model.Originality/value>The focus of this study (CSs in peripheral areas) is original. Additionally, applying the real estate perspective to study the location of CSs is novel as well.

Are private equity and venture capital helping small and medium-sized enterprises during the COVID-19 pandemic? Evidence from China.

The rapid spread of COVID-19 worldwide since 2020 has, undeniably, negatively influenced the global economy and environment. Small and medium-sized enterprises (SMEs) are among the worst-hit victims of COVID-19, particularly in developing countries. As primary channels financing SMEs, what roles have private equity and venture capital (PE/VC) played in this crisis? Using the 2010-2021 data of 4462 listed companies, we aimed to assess the impact of PE/VC on financial risk among Chinese SMEs. We constructed a capital structure selection model to assess the risk preference of PE/VC and explored the roles of PE/VC in the financial risk management of enterprises during COVID-19. Based on both theory and empirical evidence, PE/VC negatively impacts the financial risk of enterprises, implying that intervention by the management of PE/VC can aggravate the financial risk. However, in reality, PE/VC positively impacted enterprise financial risk during COVID-19. Thus, the government should implement some easing policies to stimulate access and investment policies of PE/VC as well as provide more practical policies to support investment institutions in China and other counties.

Private equity and Covid-19

We survey more than 200 private equity (PE) managers from firms with $1.9 trillion of assets under management (AUM) about their portfolio performance, decision-making and activities during the Covid-19 pandemic. Given that PE managers have significant incentives to maximize value, their actions during the pandemic should indicate what they perceive as being important for both the preservation and creation of value. PE managers believe that 40% of their portfolio companies are moderately negatively affected and 10% are very negatively affected by the pandemic. The private equity managers—both investment and operating partners—are actively engaged in the operations, governance, and financing in all of their current portfolio companies. These activities are more intensively pursued in those companies that have been more severely affected by the Covid-19 pandemic. As a result of the pandemic, they expect the performance of their existing funds to decline. They are more pessimistic about that decline than the venture capitalists (VCs) surveyed in Gompers et al. (2021). Despite the pandemic, private equity managers are seeking new investments. Rather than focusing on cost cutting, PE investors place a much greater weight on revenue growth for value creation. Relative to the 2012 survey results reported in Gompers, Kaplan, and Mukharlyamov (2016), they appear to give a larger equity stake to management teams and target somewhat lower returns. © 2022 Elsevier Inc.

Editor’s letter

The first four of the six articles in this issue offer innovative approaches to M&A. In his interview with Ron Adner, “Strategic guidance for a new world of ‘ecosystem disruption,’” Brian Leavy spotlights this eminent researcher’s unique perspective on corporate growth through diversification and M&A strategy. In his article “Employing lesser-known corporate development strategies while avoiding problematic blind spots,” Joseph Calandro, Jr. warns that “All too often M&A deal making falls into the trap of head-to-head competition that drives valuations to ‘sky-high’ levels … IBM Institute for Business Value researchers Cindy Anderson, Christian Bieck and Anthony Marshall report on their recent extensive executive surveys in their article, “Are post-COVID return-to-growth plans gaining priority over transformation?” A significant finding is that “organizations are not only participating in platforms and ecosystems, but more than half of CEOs now report that their operations have moved to these much more open and collaborative environments.”

Quick takes

[...]they give that goal an idealistic cast, committing to the fulfillment of broader social duties. First and foremost, the objective of any business must be to help its customers achieve their goals. [...]it is to help employees achieve their full potential. [...]there should be benefits to the communities that the firm serves.