When Dutch company Royal DSM wanted assurance that it was getting fair value in its proposed joint venture with a U.S. private equity firm, its executives turned to BCG. They wanted truly independent input and they knew about BCG’s strong track record with due diligence in pharma and particularly in the pharma contract manufacturing space.

DSM – a global science-based company active in health, nutrition, and materials – wanted to merge its pharma contract manufacturing division with Patheon, a pharmaceutical services company based in the U.S. The proposed deal saw Patheon being withdrawn from the public market by JLL Partners, the private equity firm that owned most of its equity, prior to forming a joint venture that would be co-owned by JLL and DSM.

The Dutch company asked BCG to carry out an exhaustive due diligence exercise on Patheon, an effort that included examination of possible dissynergies. BCG worked hand-in-hand with the DSM team – putting time and energy into aligning processes and people from day one of the due diligence and sharing an office with DSM’s merger teams for several weeks – to arrive at a joint view of Patheon’s strengths and weaknesses.

The work included a revenue forecast based on a review of Patheon’s existing contract base and pipeline. This level of rigor provided significant new insights into the shape, risks, and upsides of the top line compared with the business-plan assumptions that were based on market growth. The outcome: DSM now had the confidence to go ahead with the highly leveraged joint venture.

The deal led to formation of DPx Holdings, a global contract development and manufacturing organization with 8,000-plus employees in more than 20 locations across North America, Europe, Latin America, and Australia.

Deal Outcomes

  • DSM was quickly able to see and size the synergies and dissynergies of a potential JV
  • DSM identified a key source of competitive advantage within a previously overlooked non-core and highly complex business line
  • Confronted with DSM’s rich base of data on the deal, the private equity firm revised its plan, making the deal more favorable for DSM
  • BCG’s thorough due diligence process gave DSK the confidence to go ahead with the joint venture
  • The result was DPx Holdings, a global contract development and manufacturing organization with 8,000-plus employees in more than 20 locations across North America, Europe, Latin America, and Australia