Biotech – Pharmaceutical Mergers Face Pitfalls
Major pharmaceutical company Sanofi-Aventis SA has acquired Genzyme after a lengthy courtship, but now that the deal is done, making the merger work is fraught with pitfalls. Similar deals have shown a mixed track record, because buyers have tended to overvalue the acquired assets, and the executives that made the bio-tech firm successful often depart to new projects following an acquisition.
Roche Holdings tried to avoid these common pitfalls after its acquisition of Genentech in 2009 but has still faced other unforeseen challenges. Sanofi has definitely taken positive steps to reduce the risks in it's planned purchase, including benchmarking cash payments to Genzyme shareholders to future performance milestones. In addition, Genzyme is a mature bio-tech company that has been profitable for years, and this fact alone helps to mitigate risk.