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Global mergers and acquisitions advisers, especially, the investment bankers are doing extremely well consummating trillions of dollars in deals as a result of cheap debts, ambitious company executives and desire for expansion (Financial Times [FT], 12/21/2006). Deals announc

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ed in 2006 have outpaced those consummated in 2000 by over 16% totaling $3,900 billion. According to statistics from Dealogic and reported by the FT, the top ten investment bankers including Goldman Sachs, Citigroup, JPMorgan, etc. have been working on deals worth $7,341 bill

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

on in 2006. The news media provide extensive coverage of these deals. It is common knowledge that once these M&As have been consummated, the bankers and corporate executives realize substantial financial rewards, as well as the investors of acquired companies. However, the me

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ia does not provide the same level of coverage on what is needed to make these corporate marriages succeed. It is critical to report on the challenges of Post Merger Integration (PMI). For these M&As to succeed, the corporate executives must avoid eight classic mistakes (i.e

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

deadly sins).

During the dot com boom and when M&As were growing in 2000, Monnery and Malchione reported the 7 classic mistakes (a.k.a. “7 Deadly Sins of Mergers”) that executives make in M&As based on their analysis of 200 mergers (Financial Times Management Viewpoint, Feb

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

uary 29,2000). They concluded that the most common reason for failure is underestimating the difficulty of successful post merger integration (PMI). In an FT article titled “Viewpoint: Why mergers are not for amateurs…” (FT, February 12, 2002) Knowles-Cutler and Bradbury arr

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ived at the same conclusion after reviewing a Deloitte and Touche study of mergers and acquisitions. In my book, “Blueprint for a Crooked House” (www.iloripress.com), I used the 7 classic mistakes to analyze and report the failure of the global joint venture between AT&T and

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

ritish Telecom; and added the 8th deadly sin—inadequate attention to customer needs.

In response to a question from Bernhard Klingler, Linz, Austria, on how to handle post merger challenges, Jack and Susan Welch recently reported on the Six Sins of M&A (BusinessWeek Online,

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ctober 23, 2006). The Welch’s six sins constitute a subset of the eight classic mistakes. It is important to remind corporate executives of these classic mistakes so that they can avoid them and reduce the financial losses by the stakeholders and the economy. The eight deadl

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

sins excerpted from my book, Blueprint for a Crooked House, are revisited below:

1. Assuming that All Partners are Equal. “Mergers of Equals” is a myth. Someone needs to be in charge to resolve deadlocks which can be impossible to do in a 50-50 partnership where it is not c

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ear who is in charge.

2. Using a One-Size-Fits-All Approach for Each Business Unit. Each new business unit has their unique cultures. Marrying the culture of the new organization into the acquirer’s culture should be thoughtfully done.

3. Managing Organizational Change With

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

out Leading. This is what Jack and Susan Welch refer to as “taking bold steps with the integration”. The acquiring company is advised to strike the iron while it is hot—complete the integration process within 3 months of the acquisition while the participants are still excite

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

and motivated about the new opportunity.

4. Paying Too Much Attention to Cost Savings as the Primary Strategic Opportunity. Don’t be too desperate for the acquisition to fall into what Jack Welch calls a “reverse hostage” situation.

5. Expecting to Realize Most Benefits by

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

the End of the First Year. This goal will be harder to achieve if the acquirer pays too much for the merger (i.e., 20% or 30% above the market price—Jack Welch).

6. Believing that the Organization Cannot be Stabilized until all the Facts are Known. This belief may lead to wh

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

t Jack Welch calls the conqueror syndrome”, a situation in where the acquirer installs their own people in all critical positions. This defeats the primary objective of the merger, which is to fill a strategic void. Management needs to realize that if their people have the ex

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ertise to grow the company to fill the strategic void, may be they don’t need the acquisition.

7. Declaring Victory Prematurely and Failing to Track Promised Organizational Changes.

8. Not Considering the Impact of Customer Reactions to the Merger. In a study sponsored by B

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

usiness Week and conducted by the University of Michigan and Thomson Financial Corporation on American Customer Satisfaction Index, found that 50% of consumers report that they are less satisfied two years after a merger. “It can take years for companies to change customers’

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

eelings and stop any losses” (Emily Thornton, Business Week, December 6, 2004, pp. 58-63).

Conclusion: Whether hostile or friendly, company executives and shareowners should seriously consider the impact of PMI on M&As. The Sarbanes-Oxley Act that demands more disclosures on

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

the performance of the board of directors and company executives of public companies may help address some corporate governance issues, but until the stakeholders address the eight classic mistakes described above, we will continue to experience significant failures in M&A ac

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ivities. As stated earlier, those promoting M&As are doing very well financially, but for the sake of the customers, employees, and other stakeholders, the executives need to invest more resources to avoid the eight deadly sins to ensure the success of post merger integration

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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