Execution is the challenge in India: Merck KGaA’s Udit Batra
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In November 2015, German pharmaceuticals and healthcare company Merck KGaA completed the acquisition of Sigma-Aldrich for €13 billion, making it the largest ever buyout by the family-controlled business, founded more than 350 years ago.
At its core remains the life-science business, with Delhi-born Udit Batra as the chief executive of the vertical. He is also a member of the executive board of Merck KGaA.
In an interview, Batra spoke about the challenges in integrating Sigma-Aldrich, rapidly changing organizational needs and his relationship with the family that has controlled the business for over three centuries.
Is the integration of Sigma-Aldrich complete?
I would not say it is over. We announced the integration in September of 2014 and but the deal closed only in November 2015. It has gone extremely well so far. In the year of integration, you expect a lot of disruption.
I must say that even during the integration, our back orders, customer service have gone up.
From an organizational perspective, which is critical, we have one organization. Where there is still more work to be done is processes. There is a way of doing things in Merck and there is a way of doing things in Sigma, and now we are trying to bring it all together.
We have also said that we will not touch the sales organization as we did not want to disturb the customer interaction. We did not touch the production sites earlier and we again had the same logic —that let us not disrupt anything that has to do with the customer.
In the last 10 years, Merck has changed from a pharmaceutical company to more of a technology and science company—largely through acquisitions. Is that going to be the direction going forward?
Indeed. That’s a very good description. We have gone from mostly a pharmaceutical company to three different pillars (healthcare, life sciences and performance material) and all the three pillars are strong in their own right.
In the healthcare business, we have a pipeline, which is in early stage. We hope to get good news very soon. If it goes through, we will build that business very well.
The life sciences business that I run is a leader in the area. We play in 11 business fields and we are number 1, 2, or 3 in 10 out of those 11.
In India, we are number one in the life science tools and equipment space. In the performance material business, we are number one in liquid crystals and display materials.
What are your plans for India?
India is in the top 5 countries of the world in terms of sales for the life sciences business. We are the number one player in the life science tools and equipment segment.
In India, there is a need for pharmaceutical products, research products. Even though the funding is not at the highest level if you compare to China or other countries, the Indian government says, if you have an idea we will fund it. They said, we just don’t have people who are focused on the right thing.
The need is clear. People want to do research. People want to have biosimilars and biologic products. There is a need for food testing, environmental testing.
There is an intent to solve this. We want to solve it, we want to participate. We have been trying. The government wants to participate and the local companies want to participate.
The challenge comes when you look at sustainability of execution. It is okay to say you know that these are the regulatory standards, but they have to be executed in a certain way. They have to be complied with.
How does the promoter of your company, which is more than 350 years old, ensure that there is a very thin line between management and promoters that should not be crossed?
Merck is 70% family-owned. We have a long-term perspective. We are 30% listed on the DAX, so there is a performance focus. But that does not mean you are not long-term focused.
I will give you an example. The decision to acquire Sigma-Aldrich and the price we needed to pay... I have never seen a decision of that magnitude being taken so fast.
The company had been deliberating for a while. We had been invited to the board to make a presentation where we said, if we stand alone, we will go here and if we make acquisitions, here is the list and Sigma-Aldrich was on top of the list.
When we were having the negotiations with the Sigma board, we were at a borderline, where we said, “Should we go above this value or not?”
That decision, usually in a public company, goes through the board and back. In a public company, we would have been out of the process.
We had the chairman of the family board sitting in the next building. We called him up and said, “Can you come over?”
He came over and asked what is the threshold and we increased the price and it was an instantaneous decision. Because we were convinced of the long-term value of the merger and the family was convinced. They said this is the right thing to do.