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Biotech / Medical : Munch-a-Biotech Today
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To: Biomaven who wrote (424)6/11/1999 4:41:00 PM
From: aknahow  Read Replies (1) of 3158
 
Peter I even agree with your details, its in the conclusions we differ. Yes projects will be terminated. At times the right ones will go and at other times the group that knows how to play the better game will get the new management to back its' favorite. But in either case there are shut down cost. Cutting staff produces medium term cost benefits not short term ones.

I have never seen a CEO eliminated without the company incurring a large charge. Part of the agreement to merge will be a nice package to assure one of the CEOs is willing to leave. My point is that mergers of equals, or sideways mergers, in biotech means putting two weak companies together. The charges for consolidation, elimination of redundancies cost money the first year. So now we will have cash poor companies needing to come to the well even sooner than they would have if they had remained apart. The need to merge is present, but IMO they can't afford a wedding. If it was so easy and so logical we would have seen a lot more of it by now. Even to take the management time and effort to plan a merger is costly and since the desired partner may not be willing such planning expenses might be looked at as a non justifiable expense.

I agree they will have no chance but to merge, just that I think it will be the larger ones making them an offer they can't refuse rather than the much more difficult process of finding their own same sized partner.
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