Was Buying Amersham a Good Idea? Why or Why Not?
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Was buying Amersham a good idea? Why or why not?
Cost: $10 billion
We believe the decision by GE to acquire Amersham was a good idea. The acquisition brought synergies between the companies, created a catalyst for accelerated growth in both companies core business and also laid the foundation for shareholder value to be created for an extended period into the future. This is not to say that potential problems can be simply overlooked, as they could surface with the acquisition of such a large firm based in a foreign country.
GEs decision to buy Amersham was one that was a strategic management decision. The decision was one that CEO Jeff Immelt made for several reasons, one being to
Amersham was acquired at a cost of $10 billion. This is a huge cost, but worth every penny. Prior to the acquisition, Amersham had good existing relationships with pharmaceutical companies, and they were highly advanced in testing agents in bioscience that would ultimately help catalyze GE Healthcare to being a life sciences-based solutions company as opposed to a diagnostic one. GE took advantage of these strengths.
They gained a company with highly knowledgeable employees. Their experience and relationships were a huge benefit in attaining Amersham as a company. In 2.5 years not one senior manager of Amersham has been lost. They also had 150 appointments cross between GEMS and Amersham, and the total staff turnover was at 5%. They couldnt have asked for a better company that had highly trained employees and a company that had great relationships existing already. GE attained a huge benefit, in that, they could ascertain economies of scale from taking a lead in these relationships and building off of them as their own. Additionally, 90% of drugs on the market, had protein separation systems used by their company, and between the two companies the development for customizing drugs to treat individuals earlier was also underway.
Synergy was brought between Amersham and GE Healthcare. Their missions complemented each other so well, that it allowed them to be able to fill gaps in services where the other lacked. For example, the development of GEs diagnostic equipment can be done in collaboration with Amershams biochemical imagine agents, which is useful in considering product lifecycles that they tested. Multiple generations of imaging agents could be developed at the same time, which was important due to the 5-10 year development time required. In 2005, GE Healthcare held a revenue of $250 million, while also realizing a cost savings of $15.1 billion in revenue. What can be seen from this is that they were compliments for each other; combining these companies allowed for them to prosper.
Possible issues with an acquisition of this magnitude must be considered. Apart from all of the benefits that have been identified, GE Healthcare does run the risk of possibly becoming too large. GE Healthcare with its acquisition of Amersham may now be involved in too many projects that are leading it away from its core business. The company will now be tasked with managing a much larger market, a greater number of clients and customers and numerous governments and agencies. People must also be considered in the acquisition and merger. The current management team may not work well with the new incoming GE management, or perhaps