April 13, 2012 5:32 PM
Dealmaker of the Week: Marko Zatylny of Ropes Gray
Posted by Tom Huddleston Jr.
Marko Zatylny, 38, a corporate partner in the Boston office of Ropes Gray.
URL Pharma, a Philadelphia-based specialty drug company; and, Becton, Dickinson and Company, a Franklin Lakes, New Jersey-based medical device manufacturer.
Becton Dickinson agreed on Tuesday to sell units from its biosciences division Discovery Labware, based in Billerica, Massachusetts, to Corning for $730 million in cash. The following day, Japan’s Takeda Pharmaceutical Company said that it will pay $800 million for URL.
Becton Dickinson will sell a majority of the units in Discovery Labwareâ€”which makes laboratory research products like tubes, pipettes, and flasksâ€”to Corning for $730 million in cash. The deal is expected to close by the end of 2012.
In the second deal, Takeda will make a cash payment worth $800 million up front to acquire URL, with the agreement also calling for Osaka-based Takeda to pay unspecified earn-out payments based on future performance. URL’s top product is Colcrys, a treatment for gout that saw roughly $430 million in net sales last year. The deal is expected to close in early June.
THE BIG PICTURE
The deals were among multiple transactions in the pharmaceutical and biosciences sectors last week. And, the Takeda deal represents the latest attempt by a Japanese company to expand through international growth. As we reported in January, Sumitomo Mitsui Banking Corp.’s $7.3 billion purchase of a Royal Bank of Scotland aviation unit made a big splash and was expected to further influence Japanese investments overseas. In March, Sumitomo also paid $310 million to take control of auto repair chain Midas. And, Japanese chemical company Asahi Kasei also got in on the action last month with its $2.2 billion acquisition of U.S. medical equipment maker Zoll Medical.
The Takeda deal is the first time that Zatylny and Ropes have worked with URL. But, both lawyer and firm already had plenty of familiarity with Becton Dickinson prior to this transaction. Zatylny, who was promoted to partner just last November, represented Becton Dickinson on a number of transactions while he was still an associate.
“I definitely had a history with them when I was an associate, and have worked on both divestitures like this [sale to Corning], and other acquisitions that they’ve done [since 2010],” Zatylny says.
In 2010, Zatylny worked on Becton Dickinson’s sale of three separate product unitsâ€”for eye surgery products, scalpels, and critical care products like cathetersâ€”to portfolio companies of private equity firm RoundTable Healthcare Partners. That deal was similar in nature to the Corning transaction, but Zatylny has also worked on multiple acquisitions for the client in recent years, including purchases of HandyLab and Accuri Cytometers.
The firm has also been representing Becton Dickinson in ongoing litigation involving Abbott Laboratories and patents for diabetes monitoring technology.
Less than a year into his partnership, these deals offered Zatylny his first opportunity to lead teams shepherding two deals to nearly simultaneous signingsâ€”a feat further complicated by his work on the initial public offering of restaurant chain client Bloomin’ Brands, filed last week. Zatylny laughs when asked whether such an experience might serve as a rite of passage for a young dealmaker. “Yeah, I guess I got it out of the way early,” he says.
But while juggling the needs of multiple clients is standard fare for lawyers, Zatylny does admit that these deals presented a unique challenge for him. “I can’t think of a more challenging set of circumstances where they all converged like this,” he says.
Initially, at least, it did not seem like the URL and Becton Dickinson deals would sign so close together. “That was not clear at all until about a week and a half, or two weeks ago,” Zatylny says. “And, it just ended up being very unlucky timing for me. I would have much preferred them to not fall on top of each other as much as they did.”
Zatylny can’t disclose much specifics on either deal’. But, speaking generally, he did say that they started out with very different timelines. “One of them was a much more accelerated process and we had a sense that it might be a quick transaction when we first started talking with the client about how it might play out,” he says. “And, then the other was more deliberate and was a longer process.”
Thankfully, Zatylny says, he had plenty of support from Ropes’s partners and associates to ensure that each of the matters was handled effectively even after it became clear that their signings were going to converge.
And, though the deals’ timelines would eventually sync up, each transaction came with its own distinct obstacles. For the Becton Dickinson deal, the challenge was carving out the units being sold and properly severing them from the seller. Of that process, Zatylny says that it “takes a lot of internal time and effort to figure out what the assets are and what’s staying behind.”
And for URL, the main obstacle was negotiating an earn-out contingency that could see Takeda cough up more money for the company in the future, depending on product performances. Such aspects often take a lot of effort on both sides, Zatylny says, and the complication often stems from the unknown elements. “With earn-outs, the structure can be such that it would continue for any number of years into the future,” he says. “And, the further out you get, the more difficult it is to try and predict and think of all of the things that might change or happen in the meantime.”
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