Managerial Reasoning in Takeover Battles: The Case of Sanofi-SynthéLabo and Aventis

Abstract

Regarding the case of Sanofi-Synthélabo and Aventis, we scrutinize whether and how the reasonings put forward by the two companies differ. From an external governance perspective, managers must communicate convincingly in order to maintain or gain corporate control. If the shareholders do not trust managers to pursue a promising course of action they will engage in corporate governance and try to dismiss unsuccessful managers. In general the addressed shareholders must view the reasoning of the 'winner' of a takeover battle as superior because otherwise they would not have decided to tender their shares in the exchange offer. Yet more detailed reflections are necessary in order to find out how and to what extent the reasonings differ. We analyze the content and the cognitive quality of the arguments in Sanofi-Synthélabo's initial offer for Aventis's shares as well as in the information notice about the rejection of this offer by Aventis. Measuring the thoroughness of these arguments highlights their convincing power and gives hints to weak points which should have deserved additional attention in preparing the respective strategies and communications. Therefore these analyses are important for both managers and shareholders. Whereas the former can learn which additional aspects should be evaluated and communicated in order to present a thorough decision preparation, the latter can use the measurement instrument in order to assess whether the presented reasoning seems to be sufficiently sound or further arguments should be requested before the stockholders agree to tender their shares. Since in the present case Aventis's representatives eventually dismissed their rejection and recommended the merger, we finally scrutinize whether and to what extent the arguments against the merger stated in Aventis's rejection of the initial offer are indeed overruled by the revised offer.

Keywords: Argumentation rationality, Argumentation theory, Corporate communication, Corporate governance, Managerial reasoning, Mergers and acquisitions, Pharmaceutical industry

JEL Classification: G30, G34, M10, M19