7 explain in detail the nature of the debate between

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7. 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. Ans: 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 business growth. Valeant is trying to acquire Allergan because Allergan is a multinational speciality pharmaceutical company . They are 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 shareholders. "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
trajectory of Allergan’s business. For these reasons, Allergan do not believe that the Valeant business model is sustainable. Low Investment in Research & Development Also, one of Allergan's main problems with Valeant's business model is that the company does not invest in research and development. Valeant's aggressiveness has gotten significant attention in the market. Jeremy Levin, former CEO of Teva Pharmaceuticals said, "Valeant will eventually run out of things to buy... A company without R&D in short-term and mid-term can be viable, but in long- term is not. Also following Valeant's first offer for Allergan, the FT's John Gapper argued that if the entire pharmaceutical industry adopted Valeant's approach, drug discovery would grind to a halt.

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