Strategic Rationale for Bayer’s Acquisition of Monsanto

The Bayer’s acquisition of Monsanto was an offensive transaction that transformed to a worst corporate deal in Berlin. The acquisition of $63 billion was a significant shortcoming experienced in the gambit ranks. The struggle to take total control of Monsanto Co. has exposed the company into operation setback in future. The aim of Bayer was to transform Monsanto into a hub of invention in crop-science business an effort that did not materialize. After Monsanto acquisition in 2018, a case was filed in the court of law alleging that the crop-science business was associated with cancer and Bayer lost the lawsuit. After Bayer lost, the he was made to pay damage fees amounting to $190 million. In due time more plaintiffs totaling to 18,400 were filed against Bayer in acquisition of Montano.
Bayer responded by filing appeals against the petitioners but Monsanto shares kept losing their value at rate of 30% dated from the closure of the deal. The drastic drop in the value of Monsanto shares ranked the deal as the worst experienced in the history of the United States. In reference to merger of ballpark of AOL’s, Timer Warner, and Bank of America the Monsanto acquisition rank as the worst corporate in existence. There has been a reduction of market capitalization making the value of the company to lean on the edges of diminish. Most of the shareholders in Monsanto Co. expressed dissatisfaction with Bayer deal and on the last corporate meeting; they decided to withdraw their shareholding in the company.
The Bayer idea in the acquisition of Monsanto was to transform the Bayer smaller agrochemicals business into a leading corporate through the combination of pesticides with Monsanto seeds, and other crops produced under high technology methods (Monsanto, 2018). After the acquisition of Monsanto Bayer sales drastically reduced between the year 2015-2016. The sales of consumer health commodities decreased by 6%, pharmaceutical decreased by 7%, and crop science decreased by 13% (Cobb, 2018). Bayer in acquisition of Monsanto had an idea that a significant amount of $1.2 billion would be saved annually, this revenue would facilitate development of new products; hence, generation of more cash. The increase in population was foreseen as the source of readily available market, due to increase in demand of agrochemicals to increase the productivity per yield. Bayer was top producer of blood thinner Xarelto, and eye treatment Eylea pharmaceuticals, but now under the threat of collapsing due to acquisition of Monsanto. In the year 2015, there was increase in demand of Syngenta AG a Swiss rival product that almost marginalized Bayer agrochemical products due to acquisition of Monsanto.
Mr. Baumann initiated the idea of the Bayer’s acquisition of Monsanto when he took the leadership of the company as the CEO barely having served two weeks in office. The CEO proposed the idea of acquisition of Monsanto in St. Louis the headquarters of the United States Companies. The acquisition of Monsanto gave the CEO a hard time in convincing his shareholders the significance of the Monsanto agreement. The CEO gave an assurance that good result would germinate from the acquisition of Monsanto. There was an emerging concern from Bayer’s pharma unit disregarding the huge amount in debt used in funding of the Monsanto deal. There was a worry by pharma unit that the huge debt might cripple the investment process. From the perspective of the Bayer, the acquisition of Monsanto would not contribute to significant divisions.
The Bayer’s decision to bring an end of Monsanto acquisition in the late 2017 had to be postponed because of the emerging scrutiny initiated by the Europeans and United States regulators. The Bayer received a profit warning in 2017 due to increased inventories from crop science business owned by them in Brazil. The profit warning resulted from low level of sales of consumer health products due to high competition in the United States market.
The Total Cost being accorded the Roundup Litigation Risk
Before the acquisition of Monsanto, Bayer was demanded to sell some of their assets. A total of $ 289.2 million was to be paid as the damage fee. There was a reversal of the damaged fee to be paid, and reduced to a total amount of $78.5 million as reported by the people close to the top executives. There was an increase of the petitioners surrounding the acquisition of Monsanto, hence clouding the outlook.
Different Strategies in Acquisition of Monsanto
As the CEO of the Bayer’s I would take time to get conversant with the operations of the company, and the market structure before the acquisition of Monsanto. I would seek opinion from the shareholders and other stakeholders before embarking in the acquisition of Monsanto. Before the acquisition of Monsanto, I would make analysis in the previous and future operation of Bayer’s. Risk analysis would serve as the best tool in making assessment regarding the profitability or losses that may develop from the acquisition of Monsanto. 

Comments

Post a Comment

Popular posts from this blog

Microsoft Excel for Data Analysis

Image
For the purpose of this tutorial, we shall use Excel 2013 and 2010. However, most formulas and methods discussed can be applicable to Excel 2007. Many people outside the field of data analysis understand the power of MS Excel in data analysis. Perhaps this is because they are little aware of the many statistical programs we have for the purpose of data analysis. However, those in the field of statistics tend to forget or ignore the power of excel in data cleaning, manipulation and even analysis and visualization. One of the advantages of using Excel is that it is easy to use. Its functions are easy to apply and you don’t need to memorize all of them. Now, let’s walk together step by step and I will show you however we can enter raw data into excel, clean it, perform some basic statistical procedures and visualize our data using charts and graphs. NOTE: For some later part of this series of tutorials, you must have Analysis ToolPak. The Analysis ToolPak is an Excel add-in program t...
Read more

Data Cleaning Using MS Excel

Image
Last time we discussed briefly about data collection methods. Once we have collected the data, we need to edit it with the aim of making it clean for the next step of analysis. We shall assume that after collection, our data was entered into MS Excel. Editing is the process of examining or scrutinizing data in order to identify any errors, mistakes or omissions. Under this process, we focus on the completeness of data (no missing values), distribution of the data and extreme or outliers in the data. Some of the errors that that we may have to deal with under this process are sampling errors, Non-sampling errors, biased errors, non-biased errors, and positive or negative errors. Sampling errors occur due to the type of sampling method used during the collection of data. Sampling errors mean the difference between the estimate of a value as obtained from the sample and the actual value. Non-sampling errors take place if randomization was not used during sample selection. Biased errors...
Read more

Data Collection

As we had said in our earlier discussion, there are different methods that can be used to obtain data. These methods ensure reliability and adequacy of the data. The method used will depend on the degree of accuracy desired, nature of the study, objectives and scope of the study. Sources of Data We have two main sources of data; primary data and secondary data. Primary data is the data which is collected for the first time either directly or indirectly. It is usually authentic and raw. Secondary data is which is obtained from other individuals for a specific objective. It is not collected by the researcher. Secondary data, in most cases, might have gone through statistical operations in order to achieve the objectives for which it was first collected. There are four methods which we can use to obtain secondary data; Sampling, Observations, Questionnaires and Interviews. We shall discuss these methods in our subsequent discussions. Sources of secondary data are; 1. Journals an...
Read more