The Monsanto - Bayer acquisition case, factors that influence M&A premiums, a teaching case study

Bort, Guillermo Hernan

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https://hdl.handle.net/2142/121373 Copy

Description

Title

The Monsanto - Bayer acquisition case, factors that influence M&A premiums, a teaching case study

Author(s)

Bort, Guillermo Hernan

Issue Date

2023-07-19

Director of Research (if dissertation) or Advisor (if thesis)

Goldsmith, Peter M

Committee Member(s)

• Paulson, Nicholas D
• Schnitkey, Gary D
• Blumthal, Meredith

Department of Study

Agr & Consumer Economics

Discipline

Agricultural Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

• M&A premium
• Hubris Theory
• Agricultural inputs industry
• Factors influencing M&A premium

Abstract

During the past decade, the merger of Dow with Dupont/Pioneer, the acquisition of Syngenta by Chem-China, and the acquisition of Monsanto by Bayer have reshaped the global agricultural input sector, signaling the final stages of a long process of market concentration. Increasing complementarities among companies involved with seeds, biotechnology, crop protection chemicals, and biological products drove this process as agricultural production was increasingly viewed as a complex and integrated system. These large and complex M&As received intense media coverage, price premium being a major highlight of widespread attention. I examined the literature about what determines price premiums, the multiple strategic and financial factors in play when a large acquisition is decided and explored different approaches to understand what drives an acquisition decision and whether they create or destroy value for shareholders. I focused my study on the Monsanto acquisition by Bayer and created a case study with accompanying teaching notes to discuss the main factors contributing to an acquisition decision and determining acquisition premium. I identified three main sets of factors: a) macro factors: related to culture, industry trends, acquisition waves, R&D-focused investments and expectations of future technology developments; b) enterprise factors: connected with competitive strategy, firm size, firm ownership structure, mode of payment and financial performance; and c) managerial factors: where management ownership, principal-agent theory and hubris theory come into play. The Monsanto/Bayer case study created here presents a unique learning opportunity to discover the complex decision-making process of a large acquisition and exposes students to a holistic approach combining qualitative and quantitative elements to form a solid opinion about the drivers of a major M&A in agribusiness.

Graduation Semester

2023-08

Type of Resource

Thesis

Handle URL

https://hdl.handle.net/2142/121373

Copyright and License Information

Copyright 2023 Guillermo Bort

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