Explain in detail the nature of the debate between Allergan and Valeant as to
whether Valeant’s business strategy is capable of sustaining business growth.
The debate between Allergan and Valeant is that Allergan is putting objection to its
acquisition or merger by Valeant Pharmaceuticals because of Valeant’s inappropriate
business strategy and Allergan highly doubts whether its strategy is capable of sustaining
Valeant is trying to acquire Allergan because
Allergan is a multinational speciality
into the sales and manufacturing of eye care; facial and
cosmetic products and they were best known for the Botox.
Valeant first approached Allergan in April 2014. It has twice raised its bid, which it is
making with hedge fund manager Bill Ackman, but was unsuccessful in all its attempts to
woo Allergan, Valeant’s most recent offer was made on May 30.
But Allergan rejected it as well sighting the reason it isn't rejecting Valeant's bid because
of price but it's rejecting Valeant's business model.
Valeant's Business Model
Valeant is a pharmaceuticals company headquarter in Canada. Under current CEO
Michael Pearson, the company has executed more than 100 deals as part of a strategy to
grow through acquisitions.
On Valeant's first quarter conference call, Pearson said that in the first quarter alone, the
company completed 10 transactions. Pearson elaborated on what Valeant looks for in an
acquisition, saying it looks at cash flow and what he called a, "...Certain return to our
"When Pearson refers to a "certain return" for shareholders, he becomes criticism of
Valeant's business model, that Valeant strips costs, including research and development
from the companies it acquires and just sells their finished products.
In a letter to Valeant CEO Pearson, Allergan CEO David Pyott said Valeant's latest offer
does not include enough "sufficient or certain value to warrant discussions between
Allergan and Valeant. According to him, Valeant's strategy runs counter to Allergan's
customer focused approach. In particular, the question is how Valeant would achieve the
level of cost cuts it is proposing without harming the long-term viability and growth