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Why the U-turn is a high-risk tactic
July 23, 2008
My FT column this week is about Roche’s offer to buy the stake in Genentech it does not already own. I believe it is taking risks with its reputation and the value that it has gained from Genentec. It starts as follows:
One of the entertaining things about business is that executives must sometimes, in the interests of their shareholders, say one thing for years and then reverse themselves and declare the opposite.
This can involve double-crossing, or at least angering, those who believed the original story. So it goes.
It often happens when a big company takes over a small one. At first, the acquirer insists that its new subsidiary will be left alone and its managers will be free to carry on as before without interference from head office. Then, one day, the long leash becomes a short one.
The question is not whether this is bad behaviour – in fact, it is life – but whether it is wise. Will those who work at the subsidiary be so annoyed that they walk out, leaving little behind? Or will the U-turn work?
You can read the rest here and comment below.
Several points to note
1) The two parties concerned have been, sts, living together now for many years. Probably Roche’s offer has a LOT to do with the weak dollar, and if the dollar goes up - well, the offer might be allowed to expire or taken off the table (Yahoo story). Maybe - after the directors’ panel reports back on the Roche offer - there will be a few more $$$ on offer. But as Roche holds 56% it’s unrealistic to expect a counter-offer from anywhere else.
2) In the last decade or so there has been a BIG change in Swiss-German corporate mentality -
a new generation is running the show here, and Roche has a new CEO (Severin Schwan - Austrian).
Google has a big presence in Zürich, employs ca. 300 people working in a very informal atmosphere, got a positive writeup with pictures in the “Tages Anzeiger” this year. Mother breast-feeding baby, deep comfy armchairs in the “library”, round-the-clock snacks, frayed jeans, many different nationalities on the payroll… In the end it’s results that count but imo for Roche that probably means today Nobel prizes, and the top & bottom lines will look after themselves?
3) Roche is also going for small deals (in the
Posted by: J.J. | July 24th, 2008 at 9:33 am | Report this comment$$$ hundreds of millions). Already in July so so far it bought Mirus (?) in Wisconsin and announced the purchase of a Canadian bio-tech a couple of days ago.