<div><em>Two months after the official merger of the two companies in April 2015, Ranbaxy’s Indian office lost 18 top officials, including the CFO. The industry believes that many more job cuts in the top, middle management and at the shop floor are on cards, says<strong> C H Unnikrishnan</strong></em><br><br>Industry consolidation by way of acquisitions or mergers is a 'well considered' strategic move in modern business as it helps big and financially strong organisations to grow bigger and the acquired or merged one to get a valuation that it deserves for the exit. On both the sides, the only one who benefit are the promoter. One gets a bigger business and the other gets money.</div><div> </div><div>But, none really bothers about the other two key stakeholders--the employees and the customer as they always lose in the game. </div><div> </div><div>The customer stands to lose in the industry consolidation process due to lesser competition in the market and the employees will lose their job as there is only lesser opportunity.</div><div> </div><div>The latest case is in India in this context is the country's biggest consolidation deal (till date)-in the pharma space -- the $4 billion worth merger transaction between Dilip Shangvi- led Sun Pharmaceutical Industries Ltd and Daiichi Sankyo Company owned Ranbaxy Laboratories Ltd. This strategic deal enabled the buyer Shangvi double his global generic drug foot print, while the seller Daiichi a profitable exit. </div><div> </div><div>Immediately after the deal, Sun Pharma said it will have a $250 million synergy from the deal in the next three years of the merger.</div><div> </div><div><img alt="" src="http://bw-image.s3.amazonaws.com/unni-small.jpg" style="width: 200px; height: 200px; float: right;">Sun Pharma and Ranbaxy were rivals in equal strength in the world generic drug market, including India, in terms of products, manufacturing and distribution. Unfortunately, Ranbaxy lost market share in the high margin US business due to regulatory compliance issues at its Indian plants since 2008, shortly after Japanese drug maker Daiichi bought the promoters’stake in the company--yet another consolidation. It lost half the revenue prompting significant fall in its market valuation. </div><div> </div><div>Sun Pharma’s synergy projection was mainly targeted at the resource optimisation, which is nothing but cutting duplications in management, manufacturing, sales and research. While at least 40 per cent of this savings was expected from a cut in top management and sales force at various locations, another 20-25 per cent is expected through rationalizing the distribution channel, mainly in India and the US. The rest will be from cutting overlaps in products and manufacturing sites.</div><div> </div><div>As expected, it happened. </div><div> </div><div>A few months after the deal in April 2014, Ranbaxy is faced with an exodus. At least five top management executives including country head Venkatachalam Krishnan and heads of various key departments such as finance, legal, and sales and distribution at Ranbaxy’s US office had to leave. Two months after the official merger of the two companies in April 2015, Ranbaxy’s Indian office lost 18 top officials, including the chief financial officer Indrajit Banerjee, were shown the door. The industry believes that many more job cuts in the top, middle management and at the shop floor are on cards.</div><div> </div><div>It makes better economical sense to Sun Pharma. It doesn’t want to have duplication in management, manufacturing and sales. Instead of spending huge money on making Ranbaxy plants complied to the US drug norms and maintaining hundreds of employees there, it can very well make those products in its own plants by merely transferring those product registrations.</div><div> </div><div>With this consolidation, Daiichi, the majority owner of Ranbaxy, made more money after selling the stake. Sun Pharma promoter will make more money by eliminating the competition and saving cost. Much before all these, Ranbaxy promoters --the Singh brothers Malvinder Mohan Singh and Shivinder Mohan Singh and family made money after selling their stake to Daiichi. </div><div> </div><div>But, in the market place, the consumer (patients) lost one cheaper or better choice. The employees, who built Ranbaxy over these years, lost their jobs. And, there weren’t anyone to negotiate for them as Malvinder Singh negotiated with Daiichi in 2008 to guarantee him his highly paid job as chief executive officer for the next five years even after selling his stake. There also, the promoter only won. </div>
