GlaxoSmithKline CEO Andrew Witty has further outlined his rationale for eschewing megamergers, the Wall Street Journal reports. In a chat with the WSJ Health Blog, Witty says he's not interested in big deals, despite the advantages big buyers often cite, such as doubling up pipelines or deepening expertise in particular treatment areas.
No, Witty's mind was not on the megamerger honeymoon, but on what happens afterward--namely, cost-cutting. Big deals are often praised for their opportunities to streamline costs. Especially now, when the industry isn't growing by leaps and bounds, big yields are about redundancies, Witty says.
"People are buying companies and taking costs down," he says. "You're paying a 30 percent or 35 percent premium to have the opportunity to fire people."
Now, Pfizer and Merck would debate that assertion, saying, yes, they're laying people off by the thousands, but they're also doing those things mentioned above: Beefing up their pipelines, broadening their reach, deepening the lineup in various treatment areas. And Glaxo hasn't been immune to cost-cutting, either. But Witty's remarks do add to the growing body of reasons why he's in favor of those "bolt-on" deals he talks about so much.
- read the Health Blog post