International Corporate Finance

Cross-border Merger or Acquisition

Bayer AG Merck & Co, Inc.

Eric Mermod
University of New South Wales
October 28th 2015

The Recent CrossCross-border M&A Boom

Lack of deal activity in the years following the crisis has contributed to a
new demand for transactions in 2014.

Cross-border M&A is at a post crisis high, up 78% from 2013 to USD 1.3
trillion in 2014. Represents 37% of USD 3.5 trillion total 2014 M&A.

New growth, cheap debt and economies of scale drove companies

towards looking for M&A opportunities again.

Survey: interviews of 350 executives involved in cross-border deals.

Expand, build scale, reach more customers

Access to intellectual property and industrial assets

Access to skilled human capital and natural resources

Bayers Motivations For The Deal

Bayer wanted to tighten its grip on the OTC medicines market.

Infiltration of Eastern Europe, China and Brazil accelerated-growth

markets, while deepening position in North America, Western Europe and
Latin America.

Leveraging considerable global infrastructure expand Mercks strong US

brands to other areas.

Bayer, with its global footprint in OTC medicines, is able to take

these products and position them stronger outside of the US.
Marijn Dekkers, Bayer AG, CEO.

USD 400 million revenue synergies by 2017 and USD 200 million of
marketing and COGS synergies per year by 2017 were expected. Quick
positive contribution of 2% to core earnings per share.

The Deal

On October 1st, 2014, Bayer HealthCare completed the acquisition

of Mercks Consumer Care business for USD 14.2 billion. Goodwill of
USD 5.137 billion recorded.

Bayer now OTC leader in North and Latin America and global
number two position in non-prescription medication.

Start of a strategic pharmaceutical collaboration between both

firms in the field of heart disease drugs.

Bayer aims to strengthen its global position in the cardiovascular

therapeutic area with this agreement.

Merck will make a one-time payment of USD 1 billion To Bayer and

sales milestone payments of up to USD 1.1 billion related to future
performance.

PostPost-Acquisition Performance

Bayer sets new records for sales, EUR 42.2 billion, and EBITDA in
2014. Sales up 11,6% in 2014 Q4, growth sustained in 2015.

Mercks acquired business contributes million EUR 289, 495 and

528 in 2014 Q4 and 2015 Q1 & Q2.

Three new products from the acquisition ranked 1st, 6th and 9th in
Bayers best-selling consumer health products so far in 2015.

Consumer Care division experiences around 8% adjusted growth in

sales every quarter, synergies taking effect.

Bayer raises future 2015 performance expectation multiple times,

expects sales of EUR 48-49 billion. EUR 24 billion registered on June
30th.