Q270 · How do the financial costs of entering the…

Q270 · Category F: Fees, Budget and Financial Planning (Q251-Q300)

Acquiring an existing licensed company is a common ‘capital in exchange for time’ strategy, and its financial costs differ considerably from applying from scratch. The main acquisition cost is the ‘share transfer price’, which is usually much higher than the start-up capital required for a new business because it includes the value of the licence-holding company, goodwill in the existing business, its customer network and staff team, and potentially its inventory. By contrast, applying from scratch mainly involves capital expenditure. The advantage of an acquisition is that operations can begin immediately, avoiding the long application and waiting periods. The drawbacks are a large upfront lump-sum investment and the need to conduct thorough due diligence on the target company.

📘 Regulatory basis

After a company’s shareholding changes, although the licence holder remains unchanged, the company will generally need to notify the Department of Health or the Chinese Medicines Board of changes to directors, shareholders and key personnel. A reassessment may also be required to ensure that the new management is likewise qualified to operate.

📗 Drew Tang's recommendations

Before deciding to acquire the company, you must engage a professional team such as us, together with lawyers and accountants, to conduct comprehensive due diligence on the target company. This must cover its financial position, tax compliance, any pending legal proceedings and, most importantly, its compliance record. An apparently cheap ‘shell’ may conceal substantial debts or a troubled compliance history.

📕 Risk notice

The greatest risk is acquiring a company with “hidden problems”. If the target company has a history of serious non-compliance or undiscovered debts, these “legacy liabilities” will pass to you once the acquisition is completed. Gaps in due diligence may mean that what you buy is not assets, but liabilities and endless problems.

Plan Your Hong Kong Pharmaceutical Licensing Project with Drew Tang

Business Manager Tang Shangyong (Drew Tang) will review your products, operating model, licence type and preparation requirements with you one-to-one. The precise service scope is confirmed in writing; pharmaceutical duties are carried out by legally qualified personnel, and approvals are determined by the competent authorities.

How do the financial costs of entering the market by acquiring an existing licensed company compare with applying from scratch?

Plan Your Hong Kong Pharmaceutical Licensing Project with Drew Tang