McKinsey Classics: “The six types of successful acquisitions”/ Novartis

Reducing excess in an industry can also extend to less tangible forms of capacity. 

Consolidation in the pharmaceutical industry, for example, has significantly reduced the capacity of the sales force as the product portfolios of merged companies change and they rethink how to interact with doctors. 

Pharmaceutical companies have also significantly reduced their R&D capacity as they found more productive ways to conduct research and pruned their portfolios of development projects.

Enter into a transformational merger 

A commonly mentioned reason for an acquisition or merger is the desire to transform one or both companies. 

Transformational mergers are rare, however, because the circumstances have to be just right, and the management team needs to execute the strategy well. 

Transformational mergers can best be described by example. 
One of the world’s leading pharmaceutical companies, Switzerland’s Novartis, was formed in 1996 by the $30 billion merger of Ciba-Geigy and Sandoz. 
But this merger was much more than a simple combination of businesses: under the leadership of the new CEO, Daniel Vasella, Ciba-Geigy and Sandoz were transformed into an entirely new company. 

Using the merger as a catalyst for change, Vasella and his management team not only captured $1.4 billion in cost synergies but also redefined the company’s mission, strategy, portfolio, and organization, as well as all key processes, from research to sales. In every area, there was no automatic choice for either the Ciba or the Sandoz way of doing things; instead, the organization made a systematic effort to find the best way. 

Novartis shifted its strategic focus to innovation in its life sciences business (pharmaceuticals, nutrition, and products for agriculture) and spun off the $7 billion Ciba Specialty Chemicals business in 1997. Organizational changes included structuring R&D worldwide by therapeutic rather than geographic area, enabling Novartis to build a world-leading oncology franchise. 

Across all departments and management layers, Novartis created a strong performance-oriented culture supported by shifting from a seniority- to a performance-based compensation system for managers. (Más)

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