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The news is abuzz with the recent announcement of Bayer acquiring Monsanto. The PR spin may be that together they can better serve the world’s need for more food for a growing population, but the hard facts are that both firms need to deal with stagnating prices that they can charge farmers. They thus need to achieve economies of scale to lower their costs (and now at least won’t have to worry about one other big rival trying to out-bundle them in sales).

In trying to capture these savings, the larger Bayer (no news yet on a new name) will face two big challenges.

The first is a common one but usually the crux of all problems: integration. Not only are these two big firms with many markets, products, processes, etc., but they are also culturally rooted in different contexts, management styles, communication norms, and more. My advice for the firms: don’t assume that everything needs to be integrated, and don’t think of it as post acquisition integration… you should have already started the informal integration planning!

The second challenge for Bayer will be spinning off its agriculture business from its sister healthcare division. We know even less about best practices of splitting things apart than we do about combining things. Yet we need to learn to do this well, as we see more and more firms seeking this as a strategic alternative (see my former post) to remain competitive. My second piece of advice: don’t try to grow either piece until you’ve cleaned up what you have! I’ll close with some “food for thought,” if the world is producing more staple foods (such as corn and wheat) than it is consuming, then perhaps the food isn’t getting to the right places. Let’s all chew on that.

Samina Karim

Professor, Entrepreneurship and Innovation