Mergers expert Schweizer: Hostile takeovers are always particularly risky / Cultural differences should not be underestimated
Lars Schweizer, Professor for Strategic Management at Goethe University Frankfurt, calls the planned takeover of Monsanto by German pharmaceuticals giant Bayer a major challenge. Apart from cultural differences and the strategic repositioning of Bayer which will become necessary as a result of the takeover, Schweizer especially points out that the move originally began as a hostile takeover. “That means that so far Bayer has only been able to look at Monsanto from the outside. They know neither the exact figures nor anything about internal affairs, but instead simply made an offer on the basis of the market price.” According to Schweizer, Bayer will discover little by little whether this price is indeed justified. On average, half of all takeovers fail (see interview with Schweizer from December 2015).
With regard to cultural distance, Lars Schweizer reminds of the example of Daimler-Chrysler. “The cultural differences between Germany and the USA are not to be underestimated.” The alliance between German car manufacturer Daimler and the US-American Chrysler group in 1997, which was extolled at first as a “marriage made in heaven”, was annulled in 2007 when the targeted goals proved impossible to achieve and the value of both parts of the company dropped umpteen billion euro.
Schweizer also points out that the takeover of Monsanto will mean a shift in weights within the Bayer group and hence make strategic repositioning necessary. “Such realignment always raises the question of whether workforce and clientele will go along with it.” Monsanto’s rather poor reputation and above all its controversial glyphosate weedkiller are certainly not particularly conducive here.
Then there is the substantial purchase price which Bayer must first of all finance. Schweizer emphasizes in this context that the sum is not based on any meticulous audit, but instead ultimately on the market value of the US-American firm alone. “A takeover which originated as a hostile offer thus always involves a greater risk than mergers already are.” In Schweizer’s view, the planned takeover of Monsanto is hence a major challenge overall for the Leverkusen-based firm and only after many years will it be possible to judge accurately its success or failure.