Mergers, Acquisitions and Takeovers Case Study

Boston Scientifics’ Guidant acquisition

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Abstract:

Boston Scientific, with a market capitalisation of about $20 billion, was the largest life science company in Massachusetts (ranked by market capitalization). After the merger with Guidant, it could be the largest public company in the state by market capitalisation. Boston Scientific expected the deal would boost its growth and profit in coming years. Since June 2005, Guidant had recalled or issued safety advisories for about 88,000 defibrillators and more than 200,000 pacemakers. The company faced regulatory investigations as well as multiple lawsuits from the recalls. In December 2005, Guidant received a warning letter from the FDA about quality control at its plants, this meant the company could not introduce any new products until regulators are satisfied and issued at the plants had been addressed.

Like Guidant, Boston Scientific was also under a warning that restricted it from introducing products until the problems were fixed. Guidant owed Johnson & Johnson $705 million for breaking its prior agreement, which Boston Scientific was supposed to reimburse. Guidant needed to get the investigations and lawsuits behind it and rebuild its image. Boston Scientific needed to fix the problems of Guidant along with its own problems. Had Boston Scientific, lost by winning the deal?

Pedagogical Objectives:

• To discuss the suitability of the merger
• To highlight the issues and challenges faced by each of the two merged companies
• To discuss the synergies created by the acquisition.

Keywords : Mergers,Acquisitions,Alliances Case Study;Boston Scientific; Guidant Corp.; Johnson & Johnson; Medical Equipment Industry; Medical Device Maker; Acquisition; Strategy; Implantable Cardioverter Defibrillators (ICDs); Cardiac Rhythm Management (CRM); Pacemakers; Stents; Product recall

Contents : 
Guidant Corporation
Boston Scientific Corporation
The Acquisition
Risks for Boston Scientific
Financing by Abbott Laboratories
Issues at Guidant
Challenges for Boston Scientific
Implantable Cardioverter Defibrillators