Monsanto has rejected Bayer’s all-cash $62 billion bid, but says it is open to negotiations. A combination of Bayer and Monsanto would create the largest seed and pesticide business globally with $67 billion in sales. While you may not be creating an agricultural behemoth with your acquisition, there are a few lessons we can learn from this transaction, regardless of size.
M&A Will Affect You…How You Respond Is Your Choice
One of the reasons Bayer wants to acquire Monsanto is because of consolidation in the agriculture industry. Last year chemical giants Dow Chemical and DuPont agreed to a deal that will combine their agriculture businesses. Earlier this year Syngenta, a Swiss pesticide maker, agreed to be sold for $43 billion to China National Chemical Corporation.
When acquisitions occur in your industry, they affect you whether or not you decide to pursue M&A. A major acquisition by a key player may change the market environment and industry dynamics and you’ll need to find ways to adapt to these changes. This may mean changing your approach to customers, developing a new product, or pursuing strategic acquisitions yourself. Whatever you decide to do, remaining static and maintaining “business as usual” is not the best path to success.
Price Isn’t Everything
The Bayer – Monsanto deal is a publicly traded transaction and so it must be reported in the news and to investors. With all the media surrounding the deal, all the information is available to not just the public, but Bayer’s competitors. It’s interesting that Monsanto has rejected Bayer’s offer as “incomplete and financially inadequate,” but is open to further discussions. In other words, Monsanto believes the offer is too low and would like a higher price.
In contrast to large publicly traded companies, privately held firms execute acquisitions a bit differently. First, there is no need to announce each acquisition to the public. This allows you to fly under the radar and keep your strategic plans hidden from competitors. It also may help you to avoid price wars and auctions where you are competing against other bidders.
Of course, price is an important aspect of any deal, but it is not the only important factor. Especially in the world of privately held, not-for-sale acquisitions, there are many non-financial factors that can (and will) convince an owner to sell. Finding out what motivates an owner and communicating the strategic alignment of the deal are critical.