The Life Sciences sector has seen a sharp increase in manufacturing site disposals as companies decide where in the value chain they would like to be. Capital intensive in-house manufacturing, increased manufacturing complexity and rising development costs have prompted corporate pharma companies to review their manufacturing footprint. Companies also need to trade off the risk and reward of control of the supply chain against having flexibility in the cost base. Overlay this with geopolitical considerations around the impact of Brexit, COVID-19 and other political fluctuations (as different governments negotiate back and forth on various trade agreements) and you find you’re entering a very busy and complex playground.

Moving technical operations to a hybrid model of both in-house and Contract Manufacturing Organisation (CMO)/Contract Development and Manufacturing Organisation (CDMO) allows companies to focus on their core activity of drug development and marketing. This means, they can also free up in-house technical resources for other major projects (i.e launches, remediations, studies etc) and increase the speed to market for new drugs.

As a result, we have seen a sharp increase in deal activity. The number of site disposals more than doubled between 2018 and 2020, with 73 percent of transactions being inter-corporates (often generic focused and Private Equity (PE) backed) and 24 percent being dedicated CMO/CDMO companies. PE, without an existing portfolio, accounted for less than 3 percent of all acquisitions.

With the growth in activity, sellers now need to clearly communicate the value of an asset to potential buyers. As separation can be complicated in this highly regulated sector, they also need to think about how to develop, operationalise and execute long-term agreements, to ensure continuity of supply during the post-deal separation process.

KPMG has extensive expertise in buy and sell-side transactions. We have worked on stand-alone site disposals and acquisitions, as well as transactions in which manufacturing sites are included as part of the wider deal perimeter. Based on our evidence and experience, we believe there are five practical areas which deliver maximum value from your divestment when you get them right:

1. Tailoring your credentials to the role increases your chances of a call back

Prior to going to market, try to understand your likely buyer universe to drive deal certainty and value. Who are the potential international and local players or companies with a history of site acquisitions? Are there any players to avoid (particularly if the site will continue to manufacture products for your company)? Knowing your best potential buyers, before you start, will help you package the business, articulate the value drivers and position the sale in the best way possible to achieve both greater interest and potential sale price.

2. The impacts of local market factors cannot be ignored

All markets are different, with different sets of considerations, especially around customers, suppliers, quality labour forces, transportation, tax and regulation. For example, tax outcomes vary by country and depend on the asset history. Site disposals can lead to significant capital gains tax (including de-grouping charges), property taxes (e.g. stamp duty) and have a detrimental impact on tax attributes (e.g. tax depreciation). Pay attention to how the sale(s) is structured, to mitigate avoidable tax leakage. Make sure you understand local nuances and more importantly, how they might impact the value of the deal, so you can be prepared and take mitigating action.

3. What are you prepared to put on the table?

Before going into negotiations, be clear on what you’re prepared to negotiate on in order to increase the attractiveness of the site, i.e. are you willing to enter into a long-term supply agreement with the buyer in order to give them time to fill the volumes from elsewhere? Selling a highly utilised site will be far less attractive if you throw in an accompanying technology transfer plan which subsequently strips out the volumes in twelve to eighteen months (not to mention the potential impacts of such action on the local labour force and subsequent work council commitments). Clearly articulate the plan for maintaining volume levels, how this will be captured in ongoing supply agreements, as well as opportunities for growth, including utilisation and capacity.

4. Any required interaction with local health authorities/regulators will impact your separation timelines

In the Life Sciences sector, external stakeholders can be critical to your deal timelines, especially when the deal involves legal entity name changes and subsequent updates to existing manufacturing and distribution licences. Anticipating the unpredictability in response times from these stakeholders (MHRA, EMA, FDA, other local health authorities/regulators etc.), as well as the areas of the deal they will touch, will allow you to anticipate and plan for long lead activities in order to mitigate delays to your overall deal timelines.

5. Keep the products flowing

You need to consider many factors when separating a manufacturing site from a parent or network. Without a plan to address them, you will increase the potential risk to post deal product supply. Key considerations that affect areas such as product release, artwork/dossier updates, product transfers, licence changes, Market Authorisation transfers (and associated bridging stock requirements) need to be understood. Identify all the areas that could impact supply, mitigate them early and where necessary, include them in any post-close agreements in order to decrease risk and increase speed of separation.


The manufacturing landscape is changing, and large corporates need a long-term view of their production operations, to keep aligned with the overall company strategy. If your plants are not adding value anymore, before winding down (and incurring excessive one-off closure costs) you should consider divesting to a buyer who may turn them around into higher performing and more profitable assets. Once you’ve decided to divest, consider the potential buyers, market factors, stakeholders and “knock on” implications. That way you can plan ahead, mitigate where necessary, accelerate the benefits and achieve your end goal – a successful disposal process.

Case study: Divesting entangled manufacturing sites with no disruption to supply

We provided expert support to a global Life Sciences organisation as it divested its medical device division. This included two full site divestments and one partial divestment (including full one site separation). In order to ensure no disruption to supply during the divestment process, extensive pre-deal planning was required in order to; successfully develop and operationalise a supply agreement covering 1,500 SKUs and 750 technical transfers, identify and separate over 100 shared chemical and packaging materials, re-map over 40 product and financial flows and implement a full site separation plan including people transfer, licence acquisitions and development of local site agreements. Following the transaction, both the seller and divested division suffered minimal impact to product supply, with the overall divested division achieving over 10% higher valuation than estimated pre-close.


  1. Site disposals by corporates increased at a CAGR of 13.6 percent in terms of volume and at a CAGR of ~31 percent in value terms in the period 2016-2020 (Source: KPMG Analysis, Mergermarket, Fierce Pharma, Pharma Projects)
  2. Corporates (excluding CMO/CDMO) players acquired 79 (out of 109) manufacturing sites disposed by other corporates (including big pharma players and CMO/CDMO) in last five years. On the other hand, there were just three deals involving private equity buyers in these years (Source: KPMG Analysis, Mergermarket, Fierce Pharma, Pharma Projects. YTD2021 is 21 Jan 2021. Undisclosed deals are also included in the data)

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