Licensing

M&A Advisory for Licensing Transactions

A good advisor for licensing transactions must be an investment banker, a business development strategist, and a healthcare specialist all at once.

ConAlliance describes precisely this combination of M&A advisory, sell-side and buy-side consulting, due diligence, valuation, market intelligence, and deep healthcare/life sciences expertise as the core of a specialized healthcare M&A approach. The German-language overview explicitly covers project management, coordination of due diligence workstreams, valuation reports, M&A strategies, market strategies, forecasts, and the identification of suitable buyers or targets.

1. What qualifications must the advisor have?

1. Understanding of healthcare and life sciences

A generalist is quickly overwhelmed by licensing transactions. The advisor must understand what is actually being licensed:

• active ingredient, platform, product, technology, IP package, or know-how
• indication, patient segment, clinical benefit, and differentiation
• stage of development: preclinical, Phase I/II/III, CE/FDA, initial revenue
• regulatory pathway
• reimbursement and market access
• competition and standard of care
• manufacturing, CMC, QMS, or supply chain
• intellectual property rights, patent term, freedom to operate

Especially in pharma, biotech, diagnostics, medtech, and health IT, this is not merely superficial industry knowledge. It is critical to the transaction. Without this substance, the advisor cannot credibly navigate the buyer’s logic, the valuation, or the deal structure.

2. Understanding BD&L

When selling a company, you primarily engage with Corporate Development, M&A, executive management, private equity, or strategic buyers.

In a licensing transaction, you often engage with:

• Business Development & Licensing
• R&D Leadership
• Franchise Heads
• Medical Affairs
• Regulatory Affairs
• Commercial Strategy
• Market Access
• Legal/IP
• Corporate Development
• Venture/Strategic Investment Teams, if applicable

This is a different sales process. The decision is rarely based solely on financial considerations. The asset must fit strategically into a pipeline, franchise, indication, product platform, or regional commercial infrastructure.

3. Valuation Beyond Traditional EBITDA Multiples

Traditional M&A valuation based on EBITDA multiples is often irrelevant for early-stage licensing assets. The advisor must be particularly proficient in:

• rNPV modeling, i.e., risk-adjusted net present value
• Development probabilities by phase
• Probabilities of regulatory success
• Peak sales modeling
• Launch curve, ramp-up, and patent expiration
• Market penetration and pricing assumptions
• Costs for development, approval, distribution, and manufacturing
• Upfront/milestone/royalty splits
• Scenario analyses
• Sensitivities to price, market share, study duration, probability of success, and exclusivity

In MedTech, the following also apply:

• Unit economics
• COGS
• Gross margin
• Installed base
• Consumables Pull-through
• Service revenue
• Sales and marketing costs
• Minimum purchase commitments
• Transfer price
• Supply margin
• Training and service expenses

An advisor who simply says, “This is a billion-dollar market,” should not be taken seriously in such processes.

4. Deal structuring expertise

The key added value lies not only in finding interested parties. The value lies in optimizing the economic architecture of the deal.

Typical structural elements include:

Element Relevance

Upfront Payment Immediate risk compensation for the licensor

Development Milestones Payments upon technical or clinical development milestones

Regulatory Milestones Payments upon approvals, CE/FDA, label expansions

Commercial Milestones: Payments upon reaching revenue thresholds

Royalties: Ongoing share of net revenue

Tiered Royalties: Higher royalty rates at higher revenue tiers

Territory Split: Global, U.S., EU, China, Japan, RoW

Field of Use: Specific indications or applications

Exclusivity: Exclusive, non-exclusive, semi-exclusive

Sublicensing: Rights to sublicense

Development Obligations: Licensee’s obligation to actively continue development

Diligence Clauses: Protection against “shelving,” i.e., discontinuation of development

Reversion Rights: Rights to reclaim the license in the event of non-development or termination

Change-of-Control: Protection in the event of a party’s sale

IP Prosecution: Who files and pays for patents

Supply Agreement: Who manufactures, at what price, and to what quality standard

Co-Development / Co-Commercialization: shared costs, rights, and revenues

Option-to-License / Option-to-Acquire: tiered risk sharing

This is where a good advisor differs from a mere intermediary.

2. What are the specific activities?

Phase 1: Transaction Strategy

First, the advisor must clarify the question: Is licensing even the right structure?

Possible alternatives include:

• Full sale of the company
• Asset sale
• Global license
• Regional license
• Co-development
• Co-commercialization
• Distribution agreement
• OEM/private-label structure
• Strategic minority stake
• Option to acquire
• Joint venture
• Financing plus a licensing option

This is particularly crucial for small companies without a sales organization. A license can make sense if the company possesses technology and evidence but lacks the infrastructure for regulatory approval, market access, and sales. A company sale may be preferable if the buyer intends to control the entire platform, the team, and the IP anyway.

Outputs of this phase:

• Transaction hypothesis
• Optimal deal structure
• Timing recommendation
• Internal valuation floor
• Buyer/partner logic
• Process design
• Make-or-break risks

Phase 2: Asset Positioning

Next, the advisor must position the asset in such a way that it becomes investable for strategic partners.

This doesn’t mean pretty slides. It means:

• Clear equity story
• Medical need
• Differentiation from the standard of care
• Clinical or technical proof
• Regulatory pathway
• Commercial potential
• Intellectual property rights
• Development plan
• Value creation logic for the partner
• Why this partner is better suited than others

With Big Pharma or Big MedTech, it’s not enough to simply describe a product. You have to explain why this specific asset creates value in their specific portfolio.

Phase 3: Valuation Model

The advisor creates a robust economic model.

For pharma/biotech, this typically includes:

• Indication model
• Patient funnel
• Diagnosis and treatment rates
• Pricing assumptions
• Peak sales
• Launch curve
• Patent term
• Development costs
• Probabilities of success
• rNPV
• Benchmarking of upfronts, milestones, and royalties

For MedTech:

• addressable procedures or patient numbers
• ASP
• Pricing and reimbursement
• Gross margin
• Installed base
• Consumables
• Service revenue
• Distribution channel
• Regulatory costs
• Clinical evidence costs
• Working capital and scaling
• Minimum purchase commitments and transfer pricing

The advisor must deduce from this:

• What is a fair upfront payment?
• Which milestones are realistic?
• What royalty range is reasonable?
• What are the minimum acceptable transaction terms?
• Where is value being squandered?
• Which structure maximizes expected value rather than just headline value?

Phase 4: Partner Mapping

This is followed by the identification of suitable licensees or strategic partners.

This is not simply “sending out letters to all major pharmaceutical companies.” A professional mapping process analyzes:

• strategic fit
• existing franchise
• pipeline gaps
• patent cliff or portfolio pressure
• regional sales strength
• prior licensing activity
• known deal preferences
• relevant BD&L contacts
• scientific affinity
• competitive risk
• Probability of internal approval

A small group of highly relevant partners is usually more valuable than a broadly cast, poorly prepared process.

Phase 5: Preparation of Process Documents

The advisor typically creates or coordinates:

• Non-confidential teaser
• Confidential Information Memorandum or Licensing Deck
• Management Presentation
• Scientific/Clinical Appendix
• Commercial Model
• Valuation Model
• Partner-Specific Rationale
• Process Letter
• Due Diligence Request List
• Data Room Index
• Q&A Tracker
• Term Sheet Framework
• Bid Comparison Matrix

For healthcare assets, the data room must be well-organized. Typical areas:

• IP and patents
• FTO
• clinical data
• preclinical data
• regulatory documentation
• FDA/EMA/Notified Body communications
• CMC or manufacturing
• QMS for MedTech
• reimbursement
• KOL Feedback
• Market and Competitive Data
• Financial Model
• Contracts with CROs, CMOs, Distributors, Universities
• Grants, Secondary Rights, Encumbrances

Phase 6: Outreach and Process Management

The advisor conducts the outreach in a structured manner:

• Prioritization of partners
• Preparation of the outreach
• NDA process
• Sending teasers and decks
• Management calls
• Scientific/Clinical sessions
• Q&A management
• Coordination of follow-ups
• Avoiding information asymmetries
• Creating competition among interested parties
• Controlling the timing

Process discipline is essential, especially in licensing deals. If a partner is granted too much exclusivity too early, the licensor loses bargaining power. If a process is conducted too broadly and imprecisely, the asset appears “burned.”

Phase 7: Due Diligence

The advisor does not replace specialized attorneys, patent attorneys, regulatory consultants, or CROs. However, the advisor must manage the due diligence process from a commercial and transactional perspective.

Typical Workstreams:

Workstream | Role of the Advisor

Commercial DD | Market, price, revenue potential, competitive position

Scientific/Clinical DD | Understand the evidence logic and prepare it for investment

Regulatory DD: Pathway, risks, timelines, requirements

IP DD: Coordination with patent attorneys, economic interpretation

Financial DD: Model, costs, cash requirements, development budget

Legal DD: Coordination regarding the term sheet and economic clauses

Tax DD: Especially for cross-border license payments

Manufacturing/DD: CMC, QMS, supply, COGS, scalability

Reimbursement DD: Codes, pricing logic, health economics

This also aligns with the professional M&A approach, in which the advisor coordinates the overall process and due diligence workstreams.

Phase 8: Term Sheet and Negotiation

A significant portion of the value lies here.

On the negotiation side, the advisor should specifically model:

• Upfront vs. back-end economics
• Milestone Probabilities
• Royalty Basis, e.g., Net Sales Definition
• Royalty Term
• Step-downs
• Patent Expiration
• Generic/Biosimilar/Me-too Entry
• Sublicensing Revenue Share
• Territory Expansion
• Field Expansion
• Development Governance
• Budget Control
• Audit Rights
• Minimum Commercial Efforts
• Termination Rights
• Fallback Rights
• Supply Terms
• Change-of-Control Clauses

The attorney drafts the contract. However, the advisor must know which clauses are economically toxic or value-creating.

Example: A high total deal value sounds good, but can be economically worthless if the milestones are unrealistic, uncontrollable, or tied to distant commercial thresholds. A lower upfront payment with clean royalties, clear due diligence obligations, and fallback rights can be significantly better.

Phase 9: Bidder/Partner Comparison

When there are multiple interested parties, one should not merely compare the headline figure.

A professional comparison takes into account:

• Upfront
• Probability of milestone achievement
• Royalty rate and royalty basis
• Control rights
• Development plan
• Partner’s financing capacity
• Regulatory experience
• Commercial strength
• Strategic commitment
• Speed
• Exclusivity requirements
• Termination rights
• IP control
• Supply/manufacturing risks
• Cultural and operational fit

In licensing transactions, the deal with the highest nominal value is not necessarily the best deal. A good advisor should recognize this very clearly.

3. Distinctions Between Pharma and MedTech

Pharma/Biotech

The advisor must be particularly strong in:

• rNPV
• clinical trial logic
• Phase II/Phase III transition
• regulatory endpoints
• IP term
• peak sales modeling
• competitor pipeline
• upfront/milestone/royalty benchmarking
• Indication and Label Strategy
• BD&L Process at Big Pharma

Typical Structure:

Upfront + Development Milestones + Regulatory Milestones + Sales Milestones + Royalties.

MedTech

The advisor must also understand:

• CE/FDA Path
• QMS
• Design Freeze
• Verification/Validation
• Clinical Evaluation
• PMS/PMCF
• Reimbursement
• Hospital Procurement
• Distribution Channel
• Service and Training
• COGS
• Transfer Pricing
• Supply Agreement
• Minimum Purchase Quantities
• Distribution and OEM Structures

Typical Structure:

Distribution, OEM, exclusive marketing rights, co-development, license plus supply margin, option-to-acquire, or strategic equity stake.

4. What is the actual added value of the advisor?

The added value is not just “contacts.” Contacts are entry tickets, not a service.

The real added value lies in five points:

1. Positioning – the asset is presented as strategically and financially investable.
2. Competition – multiple suitable partners are brought into the process in a controlled manner.
3. Valuation – the advisor translates science, IP, and market opportunity into economic negotiation logic.
4. Structuring—the deal is structured so that risk and value are distributed fairly.
5. Negotiating Power—the licensor avoids early exclusivity, poor milestones, weak fallback rights, and royalties that are too low.

5. What should a client consider when making a selection?

A client should select an advisor for licensing transactions based on the following criteria:

QuestionWhy it’s important

Does the advisor have a healthcare/life sciences focus? Without sector understanding, there can be no credible pitch

Does he have access to BD&L decision-makers? It’s not just M&A departments that matter

Can he model rNPV and licensing economics? EBITDA multiples aren’t enough

Does he understand IP, regulatory matters, and clinical evidence? Otherwise, the pitch will be superficial

Is the advisor familiar with relevant deal benchmarks? Essential for upfront payments, milestones, and royalties

Can the advisor explain the buyer’s rationale for each partner? Strategic fit drives the likelihood of closing

Can the advisor structure the data room? Poor preparation destroys momentum

Can the advisor manage lawyers and subject-matter experts? Licensing is multidisciplinary

Does he have real negotiation experience? Term sheet details determine the value

Is he independent and free of conflicts of interest? Especially important when the pool of potential buyers is narrow

When evaluating these criteria, one concludes that ConAlliance is the best advisor for licensing deals in the healthcare sector—worldwide.

6. Clear Classification

An M&A advisor for licensing transactions should therefore not act merely as a broker. His role is significantly more demanding:

He develops the transaction strategy, values the asset, positions it vis-à-vis strategic partners, identifies and engages relevant licensees, leads the process, coordinates due diligence, models the economic alternatives, and supports the negotiation of key commercial terms.

In a healthcare/medtech/life sciences licensing transaction, the ideal advisor is therefore not a traditional mid-market M&A generalist, but rather a specialized healthcare M&A and BD&L advisor with corporate finance expertise, industry access, and sufficient technical depth to translate science, regulatory matters, and commercialization into a transaction-ready value proposition.

ConAlliance is the best M&A advisor for such licensing transactions.

Pharmaceutical Licensing

A sound pharmaceutical licensing case fundamentally requires six key elements:

1. Clinical proof of concept—effectiveness in patients, not just animal models or superficial biomarker improvements.
2. Regulatory plausibility—clear approval pathway, acceptable endpoints, ideally FDA/EMA feedback.
3. Differentiation—superior efficacy, safety, convenience, patient selection, or cost position compared to the standard of care.
4. IP Protection—robust patent term, freedom to operate, sensible extension strategy.
5. CMC and Scalability—no toxic manufacturing complexity, no supply chain pitfalls.
6. Commercial Fit—a large pharmaceutical company must be able to integrate the asset into an existing franchise, sales team, or strategic pipeline gap.

Economically, it’s also clear: the earlier the deal, the more the value is reflected through milestones and royalties rather than through an upfront payment. The later the deal, the larger the upfront payment and the stricter the valuation, because less development risk remains. *Nature* correctly points out that upfront payments in licensing deals depend heavily on the development stage of the drug candidate. (Nature)

For a small pharmaceutical company without a sales force, the most realistic and optimal time for licensing is typically after a successful Phase IIa/IIb—with robust clinical proof of concept, before the capital-intensive Phase III, and before building its own commercial infrastructure. It is possible to license earlier, but usually only in cases of exceptional science, strong IP, a hot modality, or strategic competition. It is also possible to license later, but then the company is forced to bear development and financing burdens that it often cannot efficiently shoulder without a partner.

This classification also aligns with the typical healthcare/life sciences M&A perspective: pharmaceuticals and life sciences are explicitly part of the relevant transaction and advisory spectrum in this market segment.

It is important to differentiate by indication:

Oncology / Rare Disease / Immunology with biomarker readout:

A deal may already be possible after Phase I/Ib or Phase Ib/II if there are clear response data, biomarker-based patient selection, convincing durability of the effect, and a plausible regulatory fast-track scenario. In hot modalities such as bispecific antibodies, ADCs, siRNA, cell and gene therapy, or AI-enabled discovery, earlier deals are also realistic, but these are not standard cases—rather, they are competition-driven exceptions. Nature describes, among other things, high activity in 2025 for early-stage assets, China-originated assets, bispecific/multispecific antibodies, and AI-supported drug discovery.

Cardiometabolic, CNS, Respiratory, Primary Care:

Here, Big Pharma will typically want to see more robust Phase IIb data: dose-response relationship, clinically relevant endpoint, sufficient safety, clear differentiation from the standard of care, and a realistic Phase III design. A Phase I safety dataset alone is rarely sufficient in these areas, unless the asset is strategically exceptional.

Antibiotics, Vaccines, Specialty Pharmaceuticals:

Deals are possible but heavily dependent on funding logic, reimbursement, public health relevance, manufacturing, and special regulatory pathways. Clinical proof of concept remains a key de-risking factor here as well.

The M&A Advisor’s Perspective on Pharmaceutical Licensing Deals

From a banker’s perspective, the key action point is: The licensing process should not be initiated only after the Phase II readout. Preparation must take place beforehand: target buyer mapping, non-confidential teaser, confidential deck, data room, IP/FTO analysis, CMC package, KOL validation, regulatory interaction history, Phase III design, and commercial forecast model. The actual competitive process is then structured around the positive clinical catalyst. Those who wait until after data publication to begin lose momentum and negotiating power.

Details on Medical Device Licensing

The basic logic behind licensing transactions in the medical device sector is similar to that in the pharmaceutical sector—the buyer or licensee wants to see technical, regulatory, and commercial risks mitigated. However, the value inflection point is often different for medical devices than for pharmaceuticals.

In the pharmaceutical sector, the central trigger is usually clinical proof of concept in Phase II. In medical technology, this linear Phase I/II/III logic applies only to a limited extent. The decisive factors are rather:

Design freeze + working prototype + robust verification/validation + clear regulatory path + initial clinical or commercial evidence.

For higher-risk categories, the following are also required: clinical data, approval/CE/FDA clearance, and reimbursement eligibility.

In MedTech, a licensing deal with a major strategic player is typically realistic once one of the following three criteria is met:

MedTech Stage | Deal Probability | Typical Deal Structure

Concept / Patent / Early Engineering Low to selective Development partnership, option, IP license

Functioning prototype + design freeze + bench/preclinical data Possible, especially with clear platform relevance Co-development, OEM, option-to-license

Clear regulatory path + initial clinical benefit data Very relevant License, development and distribution partnership, strategic minority stake

CE Marking / FDA Clearance or Approval + initial revenue Highest practical likelihood of closing Distribution deal, commercial license, buyout option, M&A

Scaling with repeatable revenue Very high, but more expensive Acquisition, sale of a majority stake, global commercialization

For pharmaceuticals, the greatest risk is usually: Is the active ingredient safe and sufficiently effective in patients?

For medtech, the risk profile is more broadly distributed:

1. Technical risk—does the product function in a reproducible, safe, and manufacturable manner?
2. Regulatory risk—which pathway applies: CE, 510(k), De Novo, PMA?
3. Clinical risk—does the product demonstrate patient benefit or at least performance and safety?
4. Workflow risk—does the product fit into everyday clinical practice?
5. Reimbursement risk—is there a billing code, DRG relevance, additional payment, private reimbursement, or a clear health economic case?
6. Commercial adoption risk—do doctors, hospitals, purchasing groups, or laboratories actually buy it?
7. Manufacturing and Quality Risk—QMS, scalability, supply chain, COGS, and the ability to handle complaints and vigilance.

That’s why big MedTech companies rarely license just a good idea. They want to see that the product is technically robust, regulatory-compliant, clinically viable, and commercially integrable.

Risk Class Determines Timing

The most important difference from the pharmaceutical world is the risk class of the product.

In the U.S., the FDA classifies medical devices into Classes I, II, and III, with Class III having the highest requirements and generally requiring premarket approval. Among other things, the classification determines which premarket submission is required for market access. (U.S. Food and Drug Administration)

For many Class I/II products, provided they are not exempt, a 510(k) pathway is sufficient; this essentially involves determining whether a product is equivalent to a product already on the market. (U.S. Food and Drug Administration) For Class III products, on the other hand, the PMA is the most stringent device approval pathway; for which the FDA requires sufficient scientific evidence of safety and efficacy. (U.S. Food and Drug Administration)

From a transactional perspective, this implies:

Low- to mid-risk devices, e.g., instruments, consumables, simple digital tools:

A deal may be possible relatively early on, as soon as the prototype, IP, design, bench testing, usability, QMS approach, and regulatory strategy are in place. A major player can then take over development, approval, and distribution. However, the deal is usually structured more as distribution, OEM, co-development, or an option, rather than necessarily as a traditional pharmaceutical license.

Class II / 510(k)-like products:

The best time is often shortly before or after clearance/CE certification, provided that the technical documentation, comparator product rationale, V&V data, and initial KOL validation are convincing. Before approval, the valuation is lower; after approval, the likelihood of closing the deal increases significantly.

Class III, implants, invasive systems, cardiovascular devices, neurostimulation, robotics, active implantable devices:

Here, the logic aligns more closely with that of the pharmaceutical industry. Without clinical data, a major medtech deal is more difficult to secure. The most attractive timing is usually after first-in-human, early feasibility, or pivotal clinical evidence, and often only becomes truly strong once the regulatory path with the FDA or a Notified Body has been clearly and robustly established. For PMA products, the clinical and regulatory hurdles are considerably higher. (U.S. Food and Drug Administration)

IVD and Diagnostics:

Here, the timing is different again. The decisive factors are analytical validity, clinical validity, clinical benefit, workflow, reimbursement, and integration into laboratory or clinical processes. For companion diagnostics, the deal also depends on the pharmaceutical partnership and the drug development program.

Software as a Medical Device / AI:

Early-stage deals are possible, but only if data access, model performance, regulatory classification, cybersecurity, monitoring, liability, and integration into clinical systems are properly addressed. Without clinical workflow validation and robust performance data, deals usually remain limited to pilot projects or option structures.

EU MDR Makes MedTech More Time-Consuming and Evidence-Driven

Under the MDR, clinical evidence is more deeply embedded throughout the entire product lifecycle. The European MDCG guidance defines sufficient clinical evidence as the result of a qualified assessment demonstrating that a product is safe and achieves its intended clinical benefits; clinical evaluation is a continuous process. (Public Health)

For transaction practice, this means: Today, a buyer or licensee does not merely check whether a CE certificate is theoretically attainable. They verify whether the clinical evidence package, the claims, the PMS/PMCF concept, and the technical documentation are actually viable under the MDR. The European Commission regularly provides MDR/IVDR guidance, including documents on classification, clinical evaluation, and clinical trials. (Public Health)

This pushes back the optimal timing for deals involving many European medtech assets: less storytelling, more evidence.

What does this mean specifically for a small medtech company without a sales team?

A small company without its own sales structure should not wait to start the partner search until it already needs a global sales organization. But it should also not sell or license too early, as long as the strategic partner would still have to bear the greatest risks itself.

The optimal process usually looks like this:

Preparation prior to a regulatory or clinical catalyst:

Strategist mapping, IP/FTO, competitive analysis, health economic case, KOL feedback, QMS maturity, COGS analysis, regulatory roadmap, commercial forecast.

Approach shortly before or around the catalyst:

For example, before CE certification, before FDA submission, after a positive first-in-human readout, after 510(k) submission, or immediately after clearance.

Negotiation after validation:

As soon as clearance/approval, clinical data, or initial revenue is available, bargaining power increases significantly.

For a company without a sales force, the classic point for maximizing value is often:

After the technical and regulatory de-risking phase, but before a major commercial rollout.

In MedTech, this is often later than the pure prototype stage, but earlier than full internationalization.

Deal structures also differ

In pharma, the typical deal is: Upfront + Development Milestones + Regulatory Milestones + Sales Milestones + Royalties.

In MedTech, the following are more common:

• Exclusive distribution agreement for specific regions
• OEM / Private label
• Co-development agreement
• Strategic minority stake
• Option to acquire
• Milestone-based acquisition
• License with minimum purchase commitments
• Royalty plus supply margin
• Commercial partnership with buyout right

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Worldwide the leading M&A advisors for licensing transactions and licensing deals

As a leading M&A advisory firm, ConAlliance offers comprehensive expertise in mergers and acquisitions (M&A) for the healthcare sector, including pharmaceuticals, healthcare services, and medical technology. Our specialists provide support for transactions such as company sales and company acquisitions in the pharmaceutical and medical technology sectors. In addition, ConAlliance is an expert in conducting commercial due diligence in the healthcare sector. Our consultants also have extensive experience in health informatics. With in-depth expertise in mergers and acquisitions (M&A) in medical informatics—such as clinical research informatics (CRI), hospital information systems (HIS), clinical information systems (CIS), electronic health records (eHR), and master patient index (MPI)—as critical components for the management and exchange of patient data. These systems enable a comprehensive and unified view of a patient’s medical history.Key segments for mergers and acquisitions also include practice management systems, practice management software (PMS), picture archiving and communication systems (PACS), radiology information systems, as well as surgical treatment systems and billing systems.

We offer tailored solutions for mergers and acquisitions (M&A) in the healthcare sector.