Should Sanofi stick to smaller deals?

Now that Sanofi-Aventis (NYSE: SNY) and Genzyme (NASDAQ: GENZ) are officially negotiating, deal fever is giving way to deal worry. As we reported yesterday, investors on the Sanofi side worry that the French drugmaker will pay too much for U.S.-based Genzyme, while Genzyme's shareholders worry Sanofi won't pay enough.

Now, Reuters is offering some quantitative research suggesting that a Genzyme-sized deal might not be the thing for Sanofi. Perhaps Sanofi chief Chris Viehbacher (photo) should stick with the strategy that's played out over the last 18 months or so: Small deals, one after another after another. After all, he's accumulated some $12 billion worth so far.

According to the Bain & Co. research Reuters quotes, big deals, particularly big deals in the healthcare sector, don't boost value for the acquiring company. They erode value instead. Plus, premiums paid in the healthcare sector tend to be higher than average--especially now that Big Pharma is so desperate to plug the holes they'll see when key patents expire.

Meanwhile, the Bain study found that multiple, small acquisitions deliver higher returns. Companies that follow that strategy post excess returns of 3.5 percent or so, compared with less than 1 percent for companies that go after big deals alone.

Of course, any deal can be the exception that proves the rule. And just because healthcare buyers tend to overpay doesn't mean Sanofi would.

- read the Reuters story

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