Behind the successful Shire integration: Takeda’s chief financial officer, Costa Saroukos. Mr. Saroukos joined Takeda in 2015 as CFO of Takeda’s European and Canadian operations before he was elevated to global CFO in 2018. Before that, he was head of finance and business development at Allergan for the Asia-Pacific region, and had spent 13 years at Merck & Co. as the executive finance director for Eastern Europe, the Middle East and Africa among other responsibilities. Well before Takeda’s acquisition of Shire, Mr. Saroukos had been a part of Merck’s acquisition of Schering-Plough in 2009, and Actavis PLC’s acquisition of Allergan Inc. in 2015. 

With the Shire integration now behind him, CFO Journal spoke with Mr. Saroukos on how he and the team at Takeda combined the two drug giants, how they paid down debt ahead of schedule and what he sees near-term on the company’s debt and drug pipeline. His answers have been edited for length and clarity.

WSJ: What did you learn from your deal-integration experiences that helped with the Takeda and Shire integration? 

Mr. Saroukos: Many of the executive team, including myself, have been on both sides of an acquisition. One of the first things we discussed early on was how to avoid past mistakes from our combined experiences. The answer was speed and agility. 

One of the worst ways to carry out an integration is to continue to operate separately, such as having different names on buildings for a long time. Therefore, once we closed the deal, we had the whole organization under one name—Takeda. There was no “Which company are you from? Legacy red or legacy blue?” It is important to knock that down fast and become one company and one brand in order to bring transformation and innovation. This was our number one priority. 

There was no ‘Which company are you from? Legacy red or legacy blue?’ It is important to knock that down fast and become one company and one brand in order to bring transformation and innovation.

— Costa Saroukos, CFO of Takeda

Another reason speed is important is to avoid losing talent. You want to move fast, figure out what businesses to focus on, pick the leaders for those businesses as well as their deputies as quickly as possible and lock it in. Two days after the deal closed, we then had 200 business leaders gather in San Diego to go over our integration strategy, vision and which therapeutic areas the combined Takeda will focus on so that implementation in each local unit could happen just as quickly. 

WSJ: Were there any country-specific cultural differences that you had to take into account given Japanese and European cultures are quite different? 

Mr. Saroukos: Not so much with employees, but where you did see a cultural difference was with our investor community. It was the largest acquisition in Japanese history and top 10 in the biopharmaceutical world. Japanese investors are traditionally very conservative on acquisitions, based on multiple failed cases in the past. Understandably, they were skeptical on how we were going to integrate on this scale with the amount of debt we had shouldered. 

We had committed to bringing down net debt to adjusted Ebitda from 5.0 to low 2.0 by fiscal year 2023 which starts on April 1. This is compared to a global industry average of 2.0 and a Japanese industry average of below 1.0. We had also committed to sell $10 billion worth of noncore assets and deliver $1.4 billion of synergies that would also hit the bottom line and improve margins. Many investors—not just Japanese—were skeptical if we could do this while maintaining the dividend, but Japanese investors were more concerned. 

WSJ: How did you manage to pay down $60 billion of debt while maintaining dividends?  

Mr. Saroukos: We started by making sure we had an accurate financial reporting tool as quickly as possible that tracked one integrated number and one version of the truth, in order to figure out synergies, cost savings and how to implement a plan to achieve our goals.

We did this by leveraging an existing financial reporting tool I built in-house when I was CFO of Canada and Europe. It is called “ CFOinUrpocket ” and is trademarked. Back then, I wanted to have a digital reporting tool where I could see the profit and loss statement in an app. Having this existing tool was great, because we already had 30 countries using it. We broadened CFOinUrpocket to be used globally across 80 countries for the combined Takeda and Shire offices. This allowed us to accurately track the integrated financials in one integrated system one month after the deal closed. Again, the speed was crucial. 

With this, we identified 10 “synergy cost packages,” which included things like compensation and benefits, contractors, consulting, travel, etc. In order to achieve synergies that would improve margins as we had promised, by using CFOinUrpocket, employees could see how their cost savings were tracking versus the target once a month. Individual cost savings was then linked to individual KPIs [key performance indicators]. The effort was all linked in a closed loop for everybody. 

As a result, we delivered not $1.4 billion, but $2.3 billion in savings one year ahead of schedule. 

WSJ: Right now the yen is weak and in your favor. What would you do if the yen strengthened?  

Mr. Saroukos: Our guidance is based on a constant exchange rate, and we aren’t incentivized by foreign-exchange fluctuations. What has helped is

maintaining a debt profile that matches the cash flow we generate—50% of our debt profile is in U.S. dollars, 20% in Japanese yen and the balance is in euros. So it is naturally hedged. 

What I am very proud of, is that three to four years ago, we had the foresight to lock in a 2% interest rate. I thought interest rates won’t be this low forever, so we tried our best to lock in as much as possible. I am happy to say that, as of now, 100% of our debt is fixed with a weighted average rate of 2%. 

WSJ: What keeps you up at night? 

Mr. Saroukos: I don’t know, I’m a good sleeper, I work so hard. Though, if you had asked me the same question three years ago, I would have answered differently. It wasn’t easy. It was tough and challenging with lots of pressure. But with the integration behind, it is now about making sure the pipeline continues to deliver. In the next 12 months, we’ll start to see more positive news coming out of the pipeline.