Sanofi, Aventis strike deal
French pharmaceutical company Sanofi-Synthelabo's hostile takeover bid for French-based Aventis is now a done deal. In spite of the counterbid solicited by Aventis from Swiss Novartis, pressure form the French government, in the name of "national interest", persuaded Aventis, along with a $5 billion sweetener thrown in by Sanofi (thanks to its wealthy backers, L'Oreal and Elf).
The $64 billion deal will form Sanofi-Aventis, the third biggest drug company in the world, after Pfizer and Merck. The snubbed Novartis now has indicated its willingness to acquire and put together some serious financing, so a move by that company can be expected. We also expect that companies that see yet another major competitor may be eager for a deal as well, including Wycth, Bayer, Roche, and Bristol-Myers Squibb, among others.
The whole scenario has been turned a "soap opera." And indeed, mergers and acquisitions are often as much about emotions as they are about financial calculation. Fear, greed, envy, pride, and spite; and we can even add gluttony (by the swallower-up) and sloth (the management of many an acquiree) to make up our own seven deadly sins of M & A's. (We omit lechery. Though that's hardly a rarity in the executive suite, but I digress.)
Business deals are surrounded with the trappings of fact (balance sheets, EBITDA, ROI, cash flow), but behind most deals is a fiction, here one of white knights (Novartis), damsel in distress, and, in the end, beauty (Aventis) and the beast (Sanofi). Or, in Sanofi's mind, perhaps, it's the humble but plucky suitor who manages to win the princess over the richer (foreign) rival. Other M & A's have their own storylines. I'm convinced that such narratives are as important motivators as the spreadsheets; perhaps even more, as the general consensus of investors is that the acquirer paid too much. That's the case here, as both Sanofi's and Aventis's stocks plunged, while Novartis's held steady, on the news of the deal.
