Acquisition Boston Scientific – Guidant 1/12/2019 Fin 648 – Merger & Acquisitions

Porter: 5 Forces Analysis FDA regulations are tough Products litigation More and more competitors have entered the market Promising businesses are bourgeoning Current competitors acquire them with money Hospitals group together to increase their power Payers such as insurance companies ask for further tests Different targets = Contract manufacturers not yet consolidated = Medical devices involve high-technology 1/12/2019 Fin 648 – Merger & Acquisitions

Fin 648 – Merger & Acquisitions SWOT Analysis Strengths An aggressive acquisition strategy R&D investments Supply capacity, sales force and global presence Strong financial Performance Merger with Guidant Weaknesses Problems of quality controls and safety identified by the FDA. Delayed or limited authorization to sell new products Rise in debt After Deal problems 1/12/2019 Fin 648 – Merger & Acquisitions

Fin 648 – Merger & Acquisitions SWOT Analysis Opportunities Growth in healthcare spending Threats Intense Competition Generic products Bargaining power of buyers Merger with Guidant – Conclusion Opportunity in term of increase in revenue, diversification and expansion of the business. Boston has to deal with many challenges. 1/12/2019 Fin 648 – Merger & Acquisitions

BCG Growth – Share Matrix Analysis Scientific Cardiovascular Scientific Express2TM Coronary Stent System Scientific Filter Wire EXTM Guidant Interventional Cardiology Guidant Coronary Stent Scientific Neuromodulation Guidant Pacemakers Guidant Implanted Defibrillators Guidant Cardiac Surgery Scientific Texus Stents Scientific Coronary Stents jdjsjdj Guidant Bare-metal stent Scientific Cardiac & Other Vascular Surgery System 95% 80% 60% 40% 20% 10% 5% 0% 1/12/2019 Fin 648 – Merger & Acquisitions

Fin 648 – Merger & Acquisitions Products/Operations 1/12/2019 Fin 648 – Merger & Acquisitions

Strategic Acquisitions 2 types of strategic acquisitions: Result of the combination is far greater than the sum of the parts: A&B (merged) > A+B (stand-alone) Improvement of the profit margins of Newco The core principal that runs through every example of successful M&A is integration. A strategic acquisition cannot be successful if not adequately integrated in the Newco. 1/12/2019 Fin 648 – Merger & Acquisitions

Elements for a Strategic M&A Strategy Acquire customers No – GUIDANT is a competitor Horinzontal Merger Capitalize on a company strength Yes. GUIDANT is a powerful business accelerator for BOSTON SCIENTIFIC. Cover a weakness BOSTON SCIENTIFIC becomes more diversified Improving or completing a product line A new line of business for BOSTON SCIENTIFIC with strong revenues. Technology – build or buy? BOSTON SCIENTIFIC acquires the GUIDANT technology Acquisition to provide scale and access to capital markets BOSTON SCIENTIFIC’s market cap : ~$18bn – GUIDANT’s Market Cap : ~$25bn BOSTON SCIENTIFIC will become #1 in medical supplies industry. Protect and expand mature product lines Unknown. Protect customer base from competition BOSTON SCIENTIFIC will provide customers a more diversified offer. Opportunistic acquisition for when the market turns BOSTON SCIENTIFIC needs another business line to thwart this risk of Taxus being less profitable 1/12/2019 Fin 648 – Merger & Acquisitions

Fin 648 – Merger & Acquisitions Conclusion Benefits: opportunity to increase revenues diversification and expansion of the business Challenges: Legal issues Benchmark the market Lowers its cost to achieve its economies of scale 1/12/2019 Fin 648 – Merger & Acquisitions