Bayer Animal Health Divestment - Blessing in Disguise?
Blessings come in many different forms and come at times least expected. Recent confirmation by Bayer AG Board of its worst kept secret to divest AH business may actually turn out be a blessing for this 6th largest company in AH space.
For the moment this divestment announcement may cockle the hearts of “I told you this will happen’ camp waiting ever since Bayer acquired Monsanto, but if history is to rhyme and rhyme it will – this divestment may well be much delayed and much needed blessing for key stakeholders of Bayer Animal Health.
Since we are counting blessings, a potential upside for Animal Health Business of Bayer despite threats of divestment - after acquisition of Monsanto in Sep 2016 – still could have been the access to new research molecules from Monsanto stable apart from Bayer Crop Science. Bayer Animal Health’s biggest brand: “Advantage / Advocate Family” (Imidacloprid & combis) is actually a Bayer CropScience molecule.
However, the now confirmed divestment news, may bring in more varied blessings than a mere bump to its para portfolio, based on divestment route chosen, as explored below:
It may sound incredulous but Bayer Animal Health is the only company among Top 6 on the list – which hasn’t made / benefitted from any acquisition (mid or large size) in the last 5 or 6 years.
While its competitors have ‘greatly” benefitted from acquisitions and mergers triggered by business swaps – Bayer Animal health has grown largely organically. Thanks to its excellent product life cycle management and some in-licensing, Bayer AH has continued to grow above or around industry growth rates, despite intense competition from new molecules in its large ‘parasiticides’ portfolio .
Lack of inorganic growth was primarily on account of attention and resources directed at larger Human Pharma and CropScience acquisitions. This divestment (if divested via IPO) may finally clear the path for Bayer AH business to regain its destiny and chart its own growth plan as an independent business and be in line with the rapidly evolving new animal health industry driven by data, new technologies and expansions across animal species, esp. Aqua.
Lean & Mean Machine
A move away from the conglomerate structure would deleverage and break down the barriers – organizational and cultural – and allow “New Co” to focus on most important aspect of the business: market share expansion, currently hampered by internal competition for resources within a conglomerate structure such as Bayer Group.
In an increasingly connected world – speed may well be the new competitive advantage and this divestment would only help do away with a few layers in decision making at Bayer AH business.
More Business As Usual
Should Bayer AH get a chance to walk down the path of IPO to maximize stakeholders’ value- this will ensure the same great team with largely intact portfolio serving more vigorously the same set of customers with a promise for more.
Successful listings of Zoetis and Elanco and stellar growth post listing, as independent AH companies may have positive lessons and worth emulating – but for Bayer it may boil down to urgency of largest acquisition in its history and the potential build up of pressure on account of mounting Roundup suits vis-à-vis the large outgoes on taxation front.
Whatever be the chosen path - it still will be win-win-win for customers, employees and other stakeholders of Bayer AH.