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Case
| HBS Case Collection
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January 2017
Bayer AG: Bidding to Win Merck's OTC Business
by
Benjamin C. Esty, Marc Baaij and Arjen Mulder
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Abstract
Shortly after submitting their best and final offer to acquire Merck's Consumer Care Division (a collection of "over-the-counter" (OTC) products with sales totaling $2 billion), the Bayer M&A team was given a chance to revise their bid because another potential acquirer—likely Reckitt-Benckiser, a UK-based company that had outbid them in a few prior acquisition auctions—had submitted a last-minute offer to Merck. Frank Rittgen (head of M&A) and Werner Baumann (CFO) have to decide whether to increase the cash portion of their $14.2 billion offer and/or amend the terms of a proposed joint venture (JV) with Merck involving cardiovascular drugs that had been included in their offer as a way to "sweeten" the deal. Under the current terms of the proposed JV, Merck would pay Bayer $1 billion upfront for access to their pipeline of drugs and could pay up to another $1.2 billion in contingent payments based on actual sales. Alternatively, the Bayer team could hold fast on both fronts and let their final bid stand. With only an hour to make a decision regarding one of the industry's "transformational assets," the Bayer team had to move quickly and carefully as they were determined not to overpay for the asset.
Keywords: acquisition;
bidding strategy;
valuing synergies;
negotiations;
corporate strategy;
business unit strategy;
bidding process;
valuation;
auctions;
discounted cash flow;
cross-border M＆A;
tax shields;
Valuation;
Competitive Strategy;
Auctions;
Bids and Bidding;
Germany;
United States;
United Kingdom;
