Don't just kick the tires, look under the hood. That's advice that might have been useful to Daiichi Sankyo during its due diligence work prior to the 2008 acquisition of Ranbaxy.
In an analysis, the Wall Street Journal finds that Daiichi intelligence couldn't detect the imminent FDA shoe drop on the Indian generics maker. The Japanese giant paid $4.6 billion--"top dollar," say analysts--to buy its way into the generics business.
However, the FDA within weeks of the deal moved on its earlier findings of manufacturing noncompliance and misbranded drugs. Two Ranbaxy facilities were closed, and 30 export products were no longer allowed to pass through U.S. customs.
It's difficult to imagine that Daiichi had no inkling of the coming ops disaster. A 2006 warning letter issued to Ranbaxy for its Paonta Sahib plant--one of those involved in the later FDA action--should have been a clue.
Daiichi dutifully undertook actions to fix Ranbaxy's operations problems. Speculation late last year had the drugmaker prepared to strike a deal with the FDA to get business back on track.
Even so, WSJ labels the acquisition a "fail" overall, despite the successful integration of Ranbaxy R&D into Daiichi.
- see the analysis