Allergan-Valeant Case
Q: Evaluate the merger – state 3 pros (P1, P2, P3) and 3 cons (C1, C2, C3). Conclude with an overall assessment of this merger (O).
P1: Potentially higher revenues through cross-selling of eye-care and skin-care products across Allergan and Valeant’s customers. P2: Potential cost savings of 2.5B$ through economies of scope by sharing overlapping functions such as sales and R&D. P3: A diverse and global customer base that will support current and expected revenue streams, such as government and private health insurers that are willing to pay for eye treatment and end-consumers who are willing to pay for skin treatments. C1: Some cannibalization of sales may occur due to overlapping products in skin-care and eye-care between the two firms that may hurt revenues. C2: Valeant invests less than 5% of sales in R&D whereas Allergan invests more than 16% of sales in R&D. The expected cut in R&D spending post-merger, could potentially reduce product innovation leading to a weaker competitive position and lower revenues. C3: The hostile nature of the takeover by Valeant and an activist investor, might cause integration issues post-merger since Allergan management is not interested in the merger. O: A merger of equals as in this case is usually bad. This merger may not be good for Allergan since its research-driven focus will be hurt by Valeant which is more sales-driven, currently non-profitable and views R&D as a risk.
P1: Potentially higher revenues through cross-selling of eye-care and skin-care products across Allergan and Valeant’s customers. P2: Potential cost savings of 2.5B$ through economies of scope by sharing overlapping functions such as sales and R&D. P3: A diverse and global customer base that will support current and expected revenue streams, such as government and private health insurers that are willing to pay for eye treatment and end-consumers who are willing to pay for skin treatments. C1: Some cannibalization of sales may occur due to
P1: Potentially higher revenues through cross-selling of eye-care and skin-care products across Allergan and Valeant’s customers. P2: Potential cost savings of 2.5B$ through economies of scope by sharing overlapping functions such as sales and R&D. P3: A diverse and global customer base that will support current and expected revenue streams, such as government and private health insurers that are willing to pay for eye treatment and end-consumers who are willing to pay for skin treatments. C1: Some cannibalization of sales may occur due to overlapping products in skin-care and eye-care between the two firms that may hurt revenues. C2: Valeant invests less than 5% of sales in R&D whereas Allergan invests more than 16% of sales in R&D. The expected cut in R&D spending post-merger, could potentially reduce product innovation leading to a weaker competitive position and lower revenues. C3: The hostile nature of the takeover by Valeant and an activist investor, might cause integration issues post-merger since Allergan management is not interested in the merger. O: A merger of equals as in this case is usually bad. This merger may not be good for Allergan since its research-driven focus will be hurt by Valeant which is more sales-driven, currently non-profitable and views R&D as a risk.
P1: Potentially higher revenues through cross-selling of eye-care and skin-care products across Allergan and Valeant’s customers. P2: Potential cost savings of 2.5B$ through economies of scope by sharing overlapping functions such as sales and R&D. P3: A diverse and global customer base that will support current and expected revenue streams, such as government and private health insurers that are willing to pay for eye treatment and end-consumers who are willing to pay for skin treatments. C1: Some cannibalization of sales may occur due to