While I think that Forbes typically does a better job covering the biopharm industry, Fortune also comes through with flying colors once in a while. The October 5th issue is a good example of that with an article called "The (Second) Worst Deal Ever."
Reminding me of many exciting encounters with books of the "who done it?" genre, the article by Shawn Tully recounts the fight for Guidant between J&J and Boston Scientific and the important role played by Abbott.
Since I don't want to give away any of this juicy story, I will only quote one part of it. If anything, it will only entice you to read the whole thing.
"What emerges is a roller-coaster tale of bet-the-franchise corporate brinkmanship, miscalculation and overreaching. It is a stark lesson on how the single-minded pursuit of victory can blind even brilliant execs to the true costs of a deal. It's also a study in wildly contrasting personalities locked in gladiatorial combat: the colorful, swashbuckling crowd from Boston vs. the cautious, by-the-book executives at Johnson & Johnson, who, despite their stiff bearing, proved as tough as they are proud."
Now, not giving away the story does not mean that I don't have some opinions about this deal. If I could choose only one of those opinions, it would be my dismay about greed trumping ethical behavior.
It must be remembered that deals are made by human beings and the element of trust can't be underestimated. In this M&A story gone awry, Guidant management comes across as simply greedy and even gleeful with the deal they finally got with Boston Scientific for their "investors." Never mind that they reneged on a deal with J&J on more than one occasion.
Abbott comes off no better. Perhaps worse. After being approached by J&J with a deal to take over part of Guidants' product franchise, they stab the bearer of good news in the back and manipulate the situation to favor themselves and Guidant management. After such behavior, I would not be surprised that it will be a long time coming before J&J does anything new with Abbott.
Boston Scientific, of course, is the company left holding the bag. As the article makes clear, it's hard to see how the Guidant acquisition will ever pay off. For now, the real news is that Guidant is not generating ANY profits for Boston Scientific while leaving it exposed to years of legal liability and financial damages from product failures and recalls.
And should I mention the damage done to the employees of Boston Scientific who have seen the value of their investment (time, loyalty, pride and money) in their employer take a severe beating?
Just how long will it take to recover from this fiasco and will others in our industry learn anything from these events?
For now, I'm going to remain a pessimist. Greed seems to permeate the human condition more than anything else at the moment.
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