Sanofi-Synthelabo Merger Essay

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esentation analyses the events leading up to the 2004 merger between the pharmaceutical companies Sanofi-Synthelabo and Aventis. It reveals the social, commercial and political complexities and challenges of a merger process in which the defence of French national interests and regional capabilities competed with traditional ‘commercial’ narratives before the deal was closed.

presentation critically evaluates the competing criteria adopted by government and industry to justify different merger scenarios and considers the implications for pharmaceutical innovation, industry consolidation and M&A theory The American economy greatest market for the pharmaceutical industry in 2004 the tax cuts and the lower interest rates stimulated expansion in that country. - The worldwide sales in pharmaceutical products reached the $550 billion in 2004 and $466 billion in 2003, which implied a growth of 7% and 9% over the previous year. - sales were concentrated in USA - the market share ranking of the pharmaceutical sector by revenues, the leader in 2003 was Pfizer, Glaxo smithKline, Merck, Johnson & Johnson and Aventis. - During this time, there were 64 blockbusters (products generating over $ 1 billion in sales annually) - In 1985, the ten largest companies were responsible for around 18% of the global sales. By 2002 their market share was around 50%. - the industry has also seen an increasing acquisitions trend of biotechnological businesses by pharmaceutical companies - The main feature of the sector is the R&D dependence. (heal some specific illness and create a competitive advantage new innovative product--- enjoy patent protection for 20 years Finally, pharmaceutical companies need to be always concerned about the regulatory, legal and safety issues and their repercussions. To sum up, these facts lead the businesses in the industry to acquire others in order to achieve economies of scale, reduce cost, gain market consolidation, restore a declining pipeline of products or expand to new products or geographical markets. The leading company in the merger of Sanofi-Aventis was Sanofi, which had a considerable experience in mergers and acquisitions processes Sanofi started a process of growth by acquiring other European and American pharmaceutical groups. This group became the second largest player in France, 17th in Europe and one of the top 20 worldwide, with 33.000 employees and presence in more than a hundred countries. However, its business had a huge European base with around 60% of sales in 2003. The US was the second largest area of business with around 25% of sales in 2003 In 2003, Sanofi’s assets totalled €9.7 billion, providing a €6.3 billion equity support over the comfortable debt level of €3.4 billion. €8 billion were generated in revenues for a net profit of €2 billion that yielded ROA and ROE of 20.62% and 31.75%, The main shareholders of the company were L’Oréal, former main shareholder of Synthélabo, and Total, which had acquired ELF Aquitaine, the main shareholder of Sanofi. Nevertheless, around 50% of the shares were public. The core business of Aventis is discovery, development and marketing of branded prescription drugs, vaccines and animal health products Aventis came to existence in 1998 as a result of a series of mergers and acquisitions and enjoys a solid position as one of the world’s largest pharmaceutical companies its roots to 1858 with the foundation of Poulenc its operations as a drugstore in France. Subsequently, Poulenc expanded into chemicals, and even photography supplies and contributed greatly to the production of various drugs and medical supplies that were utilized by the French military during WWI. Another French company, Rhone, began
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- Aventis took the opportunity to criticize Sanofi’s timing of the proposed acquisition, which was just before the release of very promising forecasts of growth and battle about plavix patent - the goal of the takeover was create a strong company, reorganizing it in such a way to reduce costs and to remove overlaps as sanofi CEO said - Unions from both companies were concerned about the detrimental impact on employment that this merger could have. From the unions’ point of view, the employees were the major losers in deals such the Sanofi takeover, and they called for protest

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