Mergers & Acquisitions
MARRIAGE OF PHARMA GIANTS
The acquisition of Wyeth by Pfizer, Inc. in 2009 found arguably the largest pharmaceutical company in the world buying its chief rival to become the world industry leader in research and biopharmaceuticals. Considered one of the largest acquisitions in the US, Pfizer purchased Wyeth for $68 billion in cash and stocks and made Wyeth a subsidiary of the pharmaceutical giant.
Though the merger angered some critics, Pfizer is determined to prove the naysayers wrong. Positioned as an industry leader, Pfizer is able to reach a broader market, including emerging markets around the globe.
Through this merger, Pfizer is able to improve their overall global footprint in pharmaceutical research and consumer sales of prescription medications, animal health products, and enter the lucrative market of over-the-counter medications. Wyeth’s successful consumer healthcare product brands include Advil®, Dimetapp®, and Robitussin®. Wyeth is also a leader in the nutrition market with their milk products available in 60 countries. This gives Pfizer the opportunity to enter this highly successful market and reach more people around the globe.
With increased access to the latest innovations in pharmaceutical research, Pfizer is able to research and develop a wider-range of effective medicines, vaccines, and biotherapeutics that reach consumers at every stage of their lives all over the world.
BIG OIL & NATURAL GAS
Oil and gas giant Exxon Mobil acquired natural gas leader XTO Energy in 2009 for $41 billion in stock. Both are Texas-based companies, headquartered out of the Dallas-Fort Worth metroplex. This business transaction came at the heels of the purchase of Hunt Petroleum Corporation by XTO Energy in 2008.
XTO Energy is an established leader in natural gas production from unconventional resources such as shale gas and oil and coal bed methane. Experts predict that natural gas will be a key energy source well into the next few decades and is set to increase globally by 50 percent.
The acquisition of XTO Energy helps Exxon Mobil diversify their energy portfolio and gives them an opportunity to become a leader in the natural gas sector. Exxon Mobil is able to reach out to more consumers, particularly those in emerging markets, providing a necessary energy resource essential to the lives of many.
By breaking into in the natural gas market, Exxon Mobil can position itself to become a comprehensive energy leader. Though Exxon Mobil has shown interest in developing its own natural gas technology, the purchase of an existing successful natural gas purveyor allows for a more efficient transfer of technology. By increasing their efficiency, Exxon Mobile can add to their bottom line.
THE GREAT CHOCOLATE WAR
Considered one of the more controversial acquisitions in recent history, Kraft Foods successfully purchase the majority of shares in Cadbury after a lengthy, often hostile, bidding process for $19 billion. The agreement was finalized earlier this year with Kraft Foods, the second-largest food, beverage and confection corporation in the world, holding 71 percent of shares in Cadbury.
Cadbury, the UK-based company responsible for delicious confections, including Dairy Milk and everyone’s favorite Easter treat, Cadbury Crème Eggs®, rejected an initial offer by Kraft Foods, arguing that Kraft undervalued Cadbury. After intense negotiations and a bidding challenge by the Hershey Company, Cadbury finally reached an agreement with US-based Kraft.
The purchase is seen as a horizontal expansion of two leading food brands. Cadbury will benefit from the diverse brand and product portfolio of Kraft Foods. Kraft is able to expand into emerging markets such as India, where Cadbury has a strong presence. India has proven to be a tough market to break into as they are not as quick to embrace Western products, particularly food and confectionary products. However, many of Cadbury’s products — Dairy Milk and Bournvita malted drinks — are successful throughout India. In fact, the company has over 70% of the chocolate market. Through this acquisition, Kraft can continue to expand on the groundwork of Cadbury and become a powerhouse in India.
In many cases, mergers and acquisitions are beneficial for all companies involved, as each company gains from the associations with the other’s brand and product portfolio. As a result, the companies strengthen and increase their markets to become a profitable business venture.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.