In September 2021, Sanofi announced that it would acquire Kadmon, an American pharmaceutical company, for $1.9 billion. The acquisition aims to bolster Sanofi’s transplant medicine business based in France. Given the scope and market share of the two companies, the purchase is a plus for Sanofi. First, Kadmon deals with market niches that focus on unmet medical needs, such as transformative therapy (Sanofi, 2021). On the other hand, Kadmon develops drugs for immune and fibrotic diseases and several other drugs essential to the field of oncology. Secondly, by acquiring Kadmon, the recently FDA-approved Kadmon drug Rezurock will be patented to Sanofi. Redrock is expected to help Sanofi succeed in treating chronic graft-versus-host disease in adults and children above 12 years since the last systematic therapies used by Sanofi have Failed (Sanofi, 2021). The acquisition is therefore expected to be a successful venture for Sanofi.
One of the problems that could face an acquiring company is the problem of overpayment. One thing that should be noted is that when a company overpays for an acquisition, in no way will the selling company complain, but when the company is underpaying, that is where the problems start. In Sanofi’s addition of Kadmon, the board members of Kadmon holdings unanimously agreed to the acquisition, most probably because there was an overpayment. It is reported that every shareholder will be paid $9.50 per share in cash (Sanofi, 2021). To avoid the dilution problem associated with an overpayment, Sanofi should carry out its due diligence and conduct a study to check whether the forecasted revenues and income will be worth it after the acquisition (Sacek & Šavriņa, 2016). The due diligence can be carried out by knowing the business capabilities of Kadmon Holdings and learning about their human resource structure as a part of the pre-acquisition investigation phase.
Sacek, A., & Šavriņa, B. (2016). Business capabilities and human resource knowledge as the critical factor of due diligence in pre-acquisition phase. CBU International Conference Proceedings, 4, 164-171.
Sanofi. (2021). Sanofi to acquire Kadmon to further strengthen growth of transplant business. Web.