Case Roche & Genentech
1. At the moment, Roche has a share of 65.9 %. The plan is to buy the rest of the 44.1 % of shares, so this case is clearly a complete acquisition.
The merger of Roche is clearly a horizontal takeover. Both firms focus on pharmaceutical research, where Roche is mainly focused on pharmaceuticals and mdedical diagnoses. Genentech is primarily focused on devevloping products based on gene splicing or recombinant DNA for diseases such as cancer and aids.
The reason for a complete takeover could be that Roche is looking for the benefits of economies of scale, which is mentioned in Berk & DeMarzo (Berk & DeMarzo, 2008, p. 895). This acquisition will improve efficiency for Roche, since Genentech can now completely focus her research on topics that is relevant for Roche. Now they can do research in large volumes, the average costs will be reduced.
The expertise of Genentech on the biotechnology field will probably be very valuable for Roche. Roche can now fully takeover the properly educated workforce of Genentech, which is a more easy way to get the right employees instead of recruiting them. This will create synergies, which is beneficial for the firm.
Thereby, the market conditions require Roche to undertake action. Despite the crisis, the concurrent Pfizer made a large acquisition. To prevent that they will become the largest player on the market and benefit from monopoly gains, Roche needs to grow to stay in the running. The acquisition will create diversification, which will reduce risk. A more diversified firm portfolio protects the firm from firm specified risk. However, in this case, because the firms are more or less in the same industry, the benefits of this diversification are limited. The correlation of the net incomes of Genetech and Roche correlate with 0.874.
Despite the advantages, there are disadvantages of the acquisation of Genentech. In the first place, larger firms are hard to manage. There are diminishing returns to managment.
The merger of Roche is clearly a horizontal takeover. Both firms focus on pharmaceutical research, where Roche is mainly focused on pharmaceuticals and mdedical diagnoses. Genentech is primarily focused on devevloping products based on gene splicing or recombinant DNA for diseases such as cancer and aids.
The reason for a complete takeover could be that Roche is looking for the benefits of economies of scale, which is mentioned in Berk & DeMarzo (Berk & DeMarzo, 2008, p. 895). This acquisition will improve efficiency for Roche, since Genentech can now completely focus her research on topics that is relevant for Roche. Now they can do research in large volumes, the average costs will be reduced.
The expertise of Genentech on the biotechnology field will probably be very valuable for Roche. Roche can now fully takeover the properly educated workforce of Genentech, which is a more easy way to get the right employees instead of recruiting them. This will create synergies, which is beneficial for the firm.
Thereby, the market conditions require Roche to undertake action. Despite the crisis, the concurrent Pfizer made a large acquisition. To prevent that they will become the largest player on the market and benefit from monopoly gains, Roche needs to grow to stay in the running. The acquisition will create diversification, which will reduce risk. A more diversified firm portfolio protects the firm from firm specified risk. However, in this case, because the firms are more or less in the same industry, the benefits of this diversification are limited. The correlation of the net incomes of Genetech and Roche correlate with 0.874.
Despite the advantages, there are disadvantages of the acquisation of Genentech. In the first place, larger firms are hard to manage. There are diminishing returns to managment.