Business Essay Example: Allergan's Merger/Acquisition of Biogen Inc.

Mergers and acquisitions are strategic approaches through which an organization acquire or merge with other organizations to acquire technology efficiency, greater market share, distribution channels and product innovation advantages (Damodaran, 2005). The target company for the merger and acquisition seeks to increase the organization production capacity. The most appropriate target company for a merger with Allergan is Biogen Inc. because the organization can increase Allergan's operational synergy. This paper will assess the most appropriate target organization for Allergan based on the organization's objective of acquiring operation synergy through mergers and acquisition. Biogen Inc. meets the required mergers and acquisition objectives established by Allergan which seeks to increase its economies of scale. Biogen Inc. is the best choice for Allergan because of the organization investment in technology and innovation as it aims to create new and more effective market products for neurologic problems. Biogen Inc. is a multinational organization which indicates that the organization can be able to generate greater economies of scale value to Allergan by helping the organization to acquire greater market representation which could stimulate the sales of other organization products using Biogen Inc. market channels. Biogen Inc. sources its raw materials from various suppliers which means that the organization has greater power than the suppliers and can be able to access its raw materials at low prices (Biogen Inc.). The organization investment in technology and research is also another critical factor that contributes the operational synergy with Allergan which seeks to increase its economies of scale. Therefore, compared to other companies, Biogen Inc. has a greater synergy to increase Allergan economies of scale compared to other target companies.

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Why Biogen Inc. is the Most Appropriate Target Company

Strategic Fit

Allergan seeks to increase its production capacity through economies of scale. The organization target company should be able to provide Allergan with the necessary requirements to align with the organization objective of operations synergy. Business operations play a significant role in acquiring an organization competitive advantage. Through economies of scale, Allergan will be able to increase its production and reduce overall production cost (Damodaran, 2005). The target company should be in a position to meet Allergan merger objective of increasing the organization operations synergy.

Production Technology

Superior production technology has the ability to increase an organization operations synergy. Today, technology is a significant consideration for any organization and Allergan operations synergy will require an organization that has significant investments in technology. The pharmaceutical industry requires superior quality products regulated by international standards to protect the wellbeing of the consumers (Damodaran, 2005). Therefore, production technology status of the target organization will significantly determine the choice for Allergan merger and acquisition.

New Markets

A good target organization for a merger with Allergan will help Allergan to increase its market coverage which will help the organization to benefit from the economies of scale. In this case, Allergan mergers and acquisition target organization should have significant market access in areas that Allergan does not cover in its current operations (Damodaran, 2005). The target organization should be able to increase Allergan market share which will increase the organization profits.

Cost Savings

Cost saving is a significant operation synergy that Allergan mergers and acquisition organization should possess. Cost savings is an important approach through which Allergan can grow its bottom line. The manufacture of pharmaceutical products is very expensive especially in small quantity production for a local market (Damodaran, 2005). As such, Allergan mergers and acquisition target organization should provide Allergan with an opportunity to increase its production which will reduce the production cost and increase overall organization gains.

Access to Suppliers and Raw Materials

Suppliers and raw materials access play a significant role in an organization operations advantage (Damodaran, 2005). The most appropriate target organization should have access to suppliers and cheap raw materials which will help to create operating synergy with Allergan. Access to suppliers will significantly increase the value of Allergan by enabling the organization to produce more goods at a cost efficiently which will help the organization to acquire a cost advantage in the market.

Biogen Inc. Background

Biogen Inc. is an American multinational organization that has invested in biotechnology with its headquarters in Cambridge, Massachusetts. The organization is known for its investment in innovation in the treatment of autoimmune, hematologic and neurodegenerative diseases across the globe. The organization products include a variety of neurological conditions medicines such as Tecfidera, Avonex, Spinraza, Eloctate, Rituxan, and Fampyra (Biogen. n.d.). Tecfidera is Biogen Inc. highest selling drug with a 35% sales of the organization total sales followed by Avonex which accounts for 25% of the organization total sales (Biogen. n.d.). The organization mission is leadership in neuroscience products and solutions which seeks to improve the lives of people living with neurodegenerative diseases (Biogen Inc's. 2018). The organization has been able to develop many neurologic diseases products due to its dedication towards innovation and application of technology. The organization revenues and operating income show that the organization has a significant market share globally and also its products are marketable and have a greater demand and preference by consumers (Biogen. n.d.). Biogen Inc. has a total equity base of $12.613 as of 2017 and 7,300 employees. Recently, the organization shares soared due to the introduction of an Alzheimer trial drug with a market value of $63 billion as of 2018 (Kim, 2018). Biogen Inc. has a market leadership by investing in technology and research which has contributed in creating a competitive advantage for the organization and has also enabled Biogen Inc. to maintain a market leadership, especially in creating neurologic diseases solutions through therapies. Biogen Inc. has its market presence in the United States of America, Canada, Japan, European Union countries and Australia where it uses wholesale distributors AmerisourceBergen and McKesson with each distributor accounting for the organization 10% sales. The organization directly operates in 30 countries and through distributors in 60 countries with the US being the highest grossing market for Biogen Inc. followed by Europe. Biogen Inc. competitors include Abott, AbbVie Inc., and Amgen Inc. The organization can overcome competition easily due to its investment in research and technology which helps the organization to offer greater value and new products (Biogen Inc's. 2018).

Biogen Inc. Management Structure

Biogen Inc. has a vertical leadership structure where leadership roles are strictly defined and has a top-down approach to organizational decision making. The organization has an executive leadership which is headed by Michel Vounatsos as the chief executive officer and executive vice presidents leading the legal and secretary department, the finance department, the research, and development department, human resources, marketing, corporate development, medical and pharmaceutical and technology department. The executive leadership answers to the board of directors which is headed by Stelio Papadopoulos as the chairman of the board and eleven other members who oversee particular departments. The organization top-down leadership structure shows a clear chain of information and decisions. A top-down approach is an effective approach to leadership for a big country like Biogen Inc. because decision making is made faster and more effective. The leaders in Biogen Inc. has defined roles in different departments which eliminates any confusion with the chief executive officer bearing most of the organization decisions and reports to the board members (Biogen Inc.).

Biogen Inc. Industry Performance

Compared to its competitors, Biogen Inc. has a market leadership due to its investment in technology, research, and development which sets the organization apart from all its competitors. Recently, Biogen Inc. has successfully introduced an Alzheimer's drug which has gained the organization a better market position as the organization share prices increases (Kim, 2018). Biogen Inc. has a high market share and strategy compared to its competitor based on the organization investment in technology and research which has helped the organization to differentiate its products as the organization can discover, develop and deliver effective neuroscience solutions which have helped the organization to attain market leadership in its niche. The organization financial report as at 2018 shows that the organization revenues have increased by 9% (Biogen. n.d.).

References

Biogen Inc.|Company Profile. (n.d.). Retrieved from http://www.vault.com/company-profiles/pharmaceuticals-and-biotechnology/biogen-idec-inc/company-overview

Biogen Inc's. (2018.). Retrieved from https://csimarket.com/stocks/compet_glance.php?code=BIIB

Biogen. (n.d.). Biogen Q2 2018 Revenues Increase 9% To $3.4 Billion. Retrieved August 20, 2018, from http://investors.biogen.com/static-files/44a04b54-7322-4009-8dfb-08cf7a79b80a

Damodaran, A. (2005). The value of synergy.

Kim, T. (2018, July 06). Biogen shares soar on successful Alzheimer's drug trial again. Retrieved from https://www.cnbc.com/2018/07/06/biogen-shares-soar-on-successful-alzheimers-drug-trial.html