Monday, January 31, 2011
Reuters and Bloomberg are reporting that Sanofi has executed a nondisclosure agreement (text here) with Genzyme. That likely means that the two are far enough along in their discussions to begin due diligence. It also suggests that Sanofi and Genzyme expect this transaction to end up in friendly territory. It was always my expectation that if the two were to do a deal, that it would be a friendly one. Genzyme's management has plenty of protections from the Mass corporate law so there was never any way that Sanofi would be able to successfully complete a hostile tender.
Now how to talk them out of the earnout? How about this - from a data set on fair values of earnouts for a paper I'm writing - less than 20% of earnouts are actually successful. Most earnouts fail to meet their targets and an astonishing 31% of earnouts are written off completely within the first year following closing of the transaction.