Mergers and acquisitions in research: who wins?

If you follow the business section on the news, you may have noticed the frequency of mergers and acquisitions (M&A), particularly in the biotechnology industry. As an example, we have seen Thermo Fisher Scientifc (Thermo) grow tremendously in the last decade. Thermo was initially formed through a merger of Thermo Electron and Fisher Scientifc in 2006. Steadily acquiring a broad and diverse profile of products, Thermo is now a household name in the scientific world, being the parent company of the vast majority of reagents used in laboratories. The rapid need for COVID-19testing and research has driven their growth and revenue in the past year, fueling their strategic M&As. Most recently, Thermo has completed the biggest buyout of 2021, closing the deal at $17.4 billion to acquire PPD, a global pharmaceutical contract research organization.

From the perspective of both employees and companies, there are pros and cons to buyouts and mergers. Often, moree stablished corporations acquire smaller companies or startups. For the acquiring firm, a strategic merger offers entry into a new market or acquisition of intellectual property. It provides an opportunity to fill gaps in a product line or services, saving time in company growth and development. Theoretically, this is a win-win for both parties, providing financial backing for the smaller firm to drive the evolution of their innovation. In particular, production scale up, manufacturing, and investment in inventory are all steps in growth that require a large amount of capital. Startups often fail without strategic acquisitions. Many ideas never come to fruition due to lack of experience in company management, understanding the customer base, marketing, and investment capital. Driven by the initial idea, entrepreneurs often fail to properly research the field and pivot the product accordingly to capture the market. This is where a strategic M&A could drive the growth of a startup or even free up the key innovator to be able to gain returns, exit the startup, and work on new ideas. Furthermore, M&As can drive competition between large corporations, preventing the monopoly of a market.

However, good ideas and products can be lost after buyouts of startups. There are many reasons that lead to a failure in growing an idea, product, or service after M&A – some of which are driven by the power differentials in acquisitions. In some instances, companies are acquired merely for financial benefits rather than the idea. In other instances, a startup may offer a portfolio of products, but are acquired for only one key technology. However, the major reason for failed M&As is due to poor transitions, post-merger integrations, and retention of employees. The amount of work required in integrations alone can be distracting for senior staff, taking away from the focus on the company’s vision. This distress is further exacerbated by shifts in corporate culture that may be challenging adjustments. This includes changes in daily work culture, expectations, and transparency which can be detrimental for team morale. Even without vast change, M&As are disruptive for employees, stirring up anxiety in the lack of certainty in their roles and job stability. Despite this, there are many successful M&As. M&As have great potential to be beneficial to both parties – as long as there is transparency to employees during the transition and resources dedicated to guiding a smooth integration.

References

“Biopharma, COVID-19 Response Drove Thermo Fisher’s 2021 Revenue Bump.” n.d. BioSpace. Accessed February 18, 2022. https://www.biospace.com/article/biopharma-covid-19-response-drove-thermo-fisher-s-2021-revenue-bump/.

Eisenmann, Tom. 2021. “Why Start-Ups Fail.” Harvard Business Review, May 1, 2021. https://hbr.org/2021/05/why-start-ups-fail.

Harvard Business Review. 2017. “Surviving M&A,” March 1, 2017. https://hbr.org/2017/03/surviving-ma.

IRIS-xyz, PUBLISHER. n.d. “The Pros and Cons of Mergers and Acquisitions as Part of Your Growth Strategy.” Accessed February 18, 2022. https://www.nasdaq.com/articles/pros-and-cons-mergers-and-acquisitions-part-your-growth-strategy-2016-11-16.

Park, Andrea. 2022. “Thermo Fisher Revenue Climbs 22% for 2021, Buoyed by Product Launches and the Year’s Biggest Buyout.” Fierce Biotech. February 2, 2022. https://www.fiercebiotech.com/medtech/thermo-fisher-logs-22-revenue-growth-for-2021-buoyed-by-product-launches-and-year-s-biggest.

“Thermo Fisher Scientific : News Release.” 2012. Archive.Ph. July 22, 2012. http://archive.ph/jdtm.