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How Cognitive Bias Undermines Value Creation In Life Sciences M&A

 
• By Oded Ben-Joseph

Life sciences mergers and acquisitions are typically based on perceived future value rather than objective financial parameters, but the cognitive biases inherent in subjective assessments can derail deals. Executives need to take emotion out of the equation and rely on relevant data to craft successful transactions.

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Merger and acquisition transactions play a central role in the life sciences sector and are the catalyst for growth and transformation, driving innovation from the laboratory all the way to the patient. As I discussed in my August 2016 article, "Where the Bodies Lie" (Nature Biotechnology, 34, 909–911), life sciences companies often fall victim to recurring misconceptions that lead to unnecessary failure.

These failures often hinge upon management’s misunderstanding of the fundamentals of market and transactional dynamics. In particular, cognitive biases play...

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