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MERGER
CASE STUDY
OF
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Status: May 2007
Contents
Overview of Sanofi and Aventis
The Deal
Why Merger???
The Sanofi Aventis Merger
Aventis perfomance
Sanofi Aventis combined perfomance
Present scenario
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Sanofi-Synthlabo a Paris-based pharmaceutical company
formed in 1999
Formed when Sanofi(former subsidiary of Total) mergedwith Synthlabo(former subsidiary of L'Oral)
Pharma giant with sales of $5.6 billion employing 29,200 people
Product portfolio includes healthcare, pharmaceuticals and cosmetics
Focus on pharmaceuticals business
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Status: May 2007
AVENTIS
Aventis a pharmaceutical and lab assay testing company formed in
1999
Formed when Rhne-Poulenc S.A. merged with Hoechst AG
The merged company was based in Strasbourg, France
Product portfolio of Aventis includes medicines in the area of cardiovasculardisease, thrombosis, diabetes, bone disease, epilepsy and cancer.
20 research centres in three continents
R&D budget of about 4 billion Euros.
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THE DEAL
Sanofi Synthelabo announced plans in early 2004.
Hostile Take over Bid
Relaunching of Friendly bid in place of rejected bid
Aventis approached Swiss drugs giant Novartis
Intervention of French government
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Why Merger????
Ethical sales in excess of $24 billion (19.1bn)
Record year-on-year growth
Compete with the likes of Pfizer and GlaxoSmithKline
Operate in seven therapy areas
Size and depth of combined portfolio
European Headquarters
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sanofi-aventisIntegration process and
business performance
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Agenda
1
2
Outline of the integration project
The key success factors
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Sanofi-aventis integration: 12 months fromthe announcement to combined operations
Jan
April
June
July
Aug
Sept
Oct.
Dec
Jan 26: Announcement of Sanofi-Synthelabo bid
April 25: Aventis supervisory board recommends improved offer to stakeholders
Aug 20: Birth of Sanofi-Aventis: SaSy takes control of Aventis
July 29: FTC clears Sanofi-Synthelabos offer for Aventis shares
April 24: Decision to increase price
Aug 23: Executive committee nominations
Sep.6: General manager nomination
Sep.23: Affiliate management committee nomination
Sep 30: First consolidation of Aventis sales into sanofi-aventis
June 21 Draft structure of future Management Committee announced
Oct 15: Choice of country headquarters announced in major countries
Dec 13: Merger approved by extraordinary Aventis shareholder meeting
Sep.16: Final results announced: SaSy holds 98,03% of Aventis capital
Dec 23: Merger approved by extraordinary SaSy shareholder meeting
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The Company worldwide
one of the worlds leading pharmaceutical companies
100,000 employees in the service of health
More than 17,000 researchers (including Sanofi Pasteur)
Present in over 80 countries
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More than 80 locations worldwide
* 86 IA locations28 R&D locations
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Sanofi-Aventis combined performance
million Q1 2009 Q2 2009 Q3 2009 Q4 2009 2009 % Change(vs. 2008)
Pharmaceuticals
6,480 6,726 6,354 6,263 25,823 +3.7%
Vaccines 627 712 1,046 1,098 3,483 +19.2%
Total sales 7,107 7,438 7,400 7,361 29,306 +5.3%
Europe 2,948 3,079 3,050 2,982 12,059 +3.2%
United States 2,295 2,438 2,441 2,252 9,426 +2.8%
Othercountries
1,864 1,921 1,909 2,127 7,821 +12.1%
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Status: May 2007
Detail of Vaccines 2009 net sales
Vaccines (in
million)
Q1 2009 Q2 2009 Q3 2009 Q4 2009 2009 % Change
(vs. 2008)
Polio/Pertussis/Hi
b
(incl. Pentacel
and Pentaxim)
236 259 229 244 968 +22.8%
Influenza
(incl. Vaxigrip
and Fluzone)
63 57 378 564 1,062 +46.7%
of which
seasonal vaccines
- - - 202 597 -1.7%
of which
pandemic
vaccines
- - - 362 465 -
Meningitis/Pneum
onia
(incl. Menactra)
116 143 205 74 538 +6.1%
Adult Boosters
(incl. Adacel)
96 106 109 95 406 -3.0%
Travel & Other
Endemics
77 88 72 76 313 0.0%
Other vaccines 39 59 53 45 196 +6.8%
Total Vaccines 627 712 1,046 1,098 3,483 +19.2%
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Status: May 2007
ConsumerHealth Care
378 311 356 405 1,430 +26.8%
Generics 93 284 302 333 1,012 +198.0%
TotalPharmaceuticals
6,480 6,726 6,354 6,263 25,823 +3.7%
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The strategic rational of this project
Creating a platform for strong, sustainable profitable growth
Accelerate expected sales growth by applying a product and
country specific strategy
Leverage marketing and sales forces to launch key productssuccessfully
Accelerate R&D by focusing combined resources on the most
promising projects
Improve profitability through a strategy based on rapid growth
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Group level integration committee withdecentralized teams in each function
Integration project chaired by very senior leaders of the two legacy companies
Decentralized Integration teams within each function (R&D, Industrial, Operations,
Finance, HR, etc.)
Integration officers from both legacy companies at each level of the organization toensure highly efficient coordination
Project structure and timelines adapted to the needs of each function
Regular reporting of project advancement in each function to the Group IOs and
exchange of experience between functions
Corporate communications
Internal initiatives: Fil Bleu, Chat with President, Communications kit, townhall
meetings
External : Corporate web site, Company name & logo, Doctors brochure
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Status: May 2007
The key success factors
StrategyA strong strategic vision and full commitment of the organization to achieve itA proactive approach (unsolicited takeover) to ensure clear decisions and speed inthe entire processBusiness drive throughout the integration process
LeadershipConstructive interactions with unions & social partnersOne line of command nominated very early in the processStrong visibility of charismatic leadersRapid decisions regarding sites and infrastructure in view of cost optimizationClearly defined rules of the game
Project managementSolid project preparation with a small core team
A decentralized project structure with integration officers at all levelTight planning and an ambitious targetSimple milestones shared throughout Pharmaceutical OperationsFocus of operational management on the business
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Status: May 2007
Business drive throughout the integrationprocess
Business oriented integration principlesTop line growthMinimize business disruptionPrioritization of tasks according to business needsRapid decisions on all strategic integration mattersIdentification of quick wins
No small products (Base Business), No small markets
Very early understanding of stand alone business context of allaffiliates on both sides through Country Exchange Meetings in June
Integrated view of the business based on early combined budgetreviews (Nov 04):
Definition of business objectives from combined operations perspectiveMonitoring of aggressive Top Line growth expectationsReview and challenge of Synergies targetsEnsure preparation for going live from January 1st
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Constructive interactions with unions &social partners
Sanofi-aventis believes in the need to have strong partners
and in a constructive dialogue with them
Very early in the process JF Dehecq and country
management met the union representatives of both legacycompanies before any commitments were made public
JF Dehecq made clear commitments with regards to
maintaining sanofi-aventis activities in the countries
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One line of command nominated very earlyin the process
Parity rule for managementnomination and theprinciple of a single line ofcommand were announcedupfront
This has beenimplemented very rapidlywith a top down approach:
June: Draft structure offuture ManagementCommittee announcedAug: Executive committeenominations
Early Sep: Generalmanager nominationEnd Sep: Affiliatemanagement committeenomination
sanofi-aventis
Communiqu de presse Paris, le 6 Sept. 2005
NOMINATIONS DE 100 DIRIGEANTS
Sanofi-Aventis annonce aujourdhui la nomination
dune centaine de dirigeants dans plus de 70 pays
Les Responsables des 2ones Gographiques
Les Directeurs Rgionaux
Les Directeurs Gnraux
Les Responsables des Oprations Commerciales
Les Responsables Franchises du Marketing
Global
Les nouveaux Directeurs Gnraux auront un rle
majeur dans la construction du Groupe Sanofi-Aventis. Ils nommeront dici la fin du mois de
Septembre lquipe de direction dans leurs pays
respectifs, et feront en sorte que les oprations
soient totalement intgres dici la fin de lanne
2005.
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Rapid decisions regarding sites andinfrastructure in view of cost optimization
Rapid decisions
regarding information
systems based on
economic rationale
From 5 Corporate
Headquarters to only
1 in Paris
Closure of 70 localheadquarters
COUNTRY SASY HQ site TOWN
ADRIATICS AVE/OTHERS As per cases
ALGERIA Alger OTHERS Alger
ARGENTINA Buenos Aires AVE #REF!
AUSTRALIA Sydney, New Zeland OTHERS
BANGLADESH None AVE Dhaka
BRASIL Rio AVE #REF!
BULGARIA Sofia OTHERS Sofia
CENTRAL AMERICA Guatemala City AVE #REF!
CHILE Santiago SASY Santiago
CHINA Shanga SASY Shanga
COLOMBIA Cali/ Bogota AVE Bogota
DOM/TOM OTHERS/AVE As per cases
DOMINICAN REPUBLIC Santo Domingo AVE #REF!
ECUADOR Guayaquil AVE #REF!
EGYPT Le Caire AVE Le Caire
GUATEMALA AVE Guatemala City
GULF AVE
HONG KONG Hong Kong TBD Hong Kong
INDIA Bombay AVE Bombay
INDONESIA Jakarta AVE Jakarta
IRAK
IRAN
ISRAEL Raanana AVE #REF!
JAPAN Tokyo AVE Tokyo
LIBAN Beyrouth AVE Beyrouth
MALAYSIA Kuala Lumpur OTHERS
MEXICO Cuautitlan AVE Mexico
MORROCO Casablanca AVE
OTHER EASTERN EUROPE (CIS) OTHERS As per cases
PAKISTAN None AVE Karachi
PANAMA AVE Guatemala City
PARAGUAY Paraguay Paraguay
PERU Lima AVE Lima
PHILIPPINES Makati SASY MakatiROMANIA Bucarest OTHERS Bucarest
RUSSIA Moscou OTHERS Moscou
SAUDI ARABIA Jeddah SASY Jeddah
SINGAPORE Singapour AVE/SASY Singapour
SOUTH AFRICA Johannesbourg AVE Johannesbourg
SOUTH KOREA Seoul AVE Seoul
SUB SAH AFRICA AVE Dakar
TAIWAN Taipei TBD Taipei
THAILAND Bangkok AVE Bangkok
TUNISIA/LYBIA Tunis AVE Tunis
UKRAINE Kiev OTHERS Kiev
URUGUAY Montevideo Montevideo
VENEZUELA Caracas AVE Caracas
VIETNAM Saigon Hanoi
IllustrativestatusreportforITCsiteselection
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Clearly defined rules of the game
Conversational styleInformal interaction in parallel of formal reporting / submissions to explaincontext elementsTransversal coordination throughout the integration networkOpen dialogue also beyond hierarchy in view of rapid problem solvingRespect of colleagues and of their opinion (the right to challenge is linked to theobligation to listen)
Structured and disciplined integrationCompliance with integration process and timelinesRole and responsibilities of all actors in the integration network well definedEfficient reporting, control, validation and decision processes
Objective driven approachBusiness objectives guide the integration processCombined operations perspective (instead of relating back to the legacy context)
Clear prioritization and pragmatic solutions
People focusEncourage active participation of all key actors of the organizationRecognize past merits
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Solid project preparation with a small coreteam
Anticipative project preparation (full project preparation finalized
by end of July 04)
Internal solutions and expertise (minimal external support)
Massive mobilization of internal resources in all parts of theorganization while ensuring continuity at operational
management level
A very small core team at Operations level:
non-invasive reporting (only what 3 people could review)Pragmatic approach
Very direct coordination / support
Best use of in-house expertise / and knowledge
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Status: May 2007
A decentralized project structure withintegration offices at all level
Decentralized integration officesIntegration offices at Operations,Region and Country levelAn Integration officer from eachlegacy companyPermanent coordination betweenIntegration officers and operational
management at all level of theorganizationRegular integration officermeetings to exchange experiencesand adapt overall project structure
Workstreams1
Strong cross-functional interactionExpert groups on critical subjects
1) See list of workstreams in the appendix
OpIO(OperationsIntegration
Office)
OpIO(OperationsIntegration
Office)
RIO(US, FR, G, J,Europe, ITC,and G-MKT)
RIO(US, FR, G, J,Europe, ITC,and G-MKT)
AIO(Affiliates)
AIO(Affiliates)
Closeinte
ractions
withG
Prog
ressreport
andsubmis
sion
Gu
idelines
andsupport
Progress
report
andsubm
ission
Guidelines
andsup
por t
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Status: May 2007
Tight planning and an ambitious target
Tight planning
June 04: Finalized design of the integration infrastructure(integration teams, milestones) and of the integration guidelines
August 04: launch of integration teams at all level and in all entitiesof the company
End of December 04: Dissolution of the integration network andtransfer of all tasks to the relevant functional / operational entities
A shared and ambitious target:
January 1st 2005: sales forces fully operational in the field allaround the world
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Status: May 2007
Merger sanofi-aventis in Germany
Main issues of business structure:
Clarifying of direction of business transfer
Merge of sales force lines(appr. 1,500 eees) effective January 1st, 2005
Transfer of support functions from Bad Soden to Berlin (appr. 300 eees) till March 1st, 2005
Transfer of support functions from Berlin to Frankfurt (appr. 80 eees) till March 1st, 2005
Transfer of Corporate activities to Paris
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ISSUES
Main issues labour law:
Balance of interest and socialplan
Collective agreement about new structure of works council
HR transfer agreement
before January 1st, 2005
Company related collective agreement between union and employers association about membershipin employers association Nordostchemie: August 2005
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Status: May 2007
Merger sanofi-aventis
Further issues:
Integration of payroll
Transfer of appr. 1,100 eees ex SaSy from former System in SAP-System till January 1st, 2005
Harmonization of pension benefit schemes
Becoming effective September 1st, 2005
...
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Status: May 2007
Main issues Compensation
:
Harmonization of compensation systems
Harmonization of sales force premium systems
Before January 1st, 2005
Implementation of a corporate wide IVR-Systems
(Individual Variable Remuneration)1. Quarter 2005
Harmonization of employee benefits (Cafeteriasystem, Leasingcars etc.)
2. Quarter 2005
O l ti l k t
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Status: May 2007
Our values: an essential key to ourcollective and individual success
Courage
our collective approach, our commitment to success
Creativity
our ability to do things differently
Respect
our behavior, our social dimension
Solidarity
our readiness to fight alongside our fellow human beings
wherever and whoever they may be
Audacity
our aptitude for exploration, discovery, innovation
Performancethe key to our future
P & C f S fi A thi
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Status: May 2007
Pros & Cons of Sanofi - Aventhis
Sales will increase & would support Cardiovascular franchise
Decrease Sanofis forecast percentage growth
Will increase Sanofis size
Operate in Seven therapy area
Forth largest player
Help to integration due to similar working culture
New pharmaceutical Giant
10000 12000 jobs could go
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Status: May 2007
THANK YOU.