Nine years ago while I was working at a bulge bracket investment bank, I did an analysis (a pitch mind you) for a big biotech company to acquire Cephalon. I can’t tell you how many all-nighters I pulled working on this pitch. It included an overview of Cephalon and the financial analysis (accretion/dilution) for the acquirer to determine if the deal made financial sense. Clearly the deal was never done and the fit was horrible. Why would a big novel biologics focused biotech acquire a specialty pharma with a limited pipeline (at the time) and small molecule drugs, many of which were relatively small products? Valeant, however, is a different story. One specialty pharma company acquiring another is logical and potentially a good fit. I’ll leave that to the Wall Street analysts to analyze. That is all nice but the kicker for me was the 100% debt financed, all cash offer. Basically Valeant doesn’t have to spend a dime of their own money nor dilute their shareholders to get access to the Cephalon cash flows and growing pipeline of novel products. Where do I sign up?

I doubt the deal will get done at $73 a share given this reality. Making an offer around the 52-week high does not represent much of an upside to current shareholders, especially in light of the several recent acquisitions announced. They seem to be pursuing a new, more acquisitive strategy to bolster their pipeline ahead of the Provigil and Co patent expirations.

Let’s the games begin but oh to run a publicly traded company with a creative M&A department…