Synertech-Dosagen
Confidential Information for Synertech
You are the CFO of Synertech, a global
pharmaceutical company with annual sales of
$700 million and significant cash reserves.
You need a new plant to manufacture a line of
genetically engineered compounds in the
advanced development stage. You cannot
modify one of your plants because of the
peculiarities of manufacturing genetically
engineered compounds.
The price must be in cash. No other terms
can be added to the negotiation.
The total cost of building a new plant is $25
million. If everything were to go perfectly,
you estimate it would be a year before the
plant was fully operational with FDA
approval. The product manager says that the
market is ready for the compounds.
Production will be prepared to begin in three
months. You have located a suitable
construction site in a new industrial park ten
miles from your corporate headquarters,
where the research and development groups
are located. You must commit to buying that
site very soon or risk losing it.
However, Dosagen, a pharmaceutical
company with sales of $150 million, has a
plant suitable for manufacturing genetically
engineered compounds for sale. The plant’s
location has one disadvantage. It is 70 miles
from Synertech headquarters and the R & D
facility. On the other hand, Dosagen’s plant is
up and running and already has FDA
approval. It also has a high-quality,
experienced workforce which, if they could
be retained, would reduce Synertech’s startup costs significantly.
You are about to meet with the CFO of
Dosagen. You have full authority to buy the
plant at whatever price you deem acceptable.
*
This exercise was adapted from one developed by
Professor Leonard Greenhalgh, Amos Tuck School of
Business Administration, Dartmouth College.
Role: Synertech
Synertech-Dosagen
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General Information
The Dosagen plant is in an area with many
start-up biotechnology companies. There is
an experienced biotech workforce in this area.
Given the project nature of much of the work,
this workforce is mobile between companies.
Dosagen purchased this plant from Biotech, a
diversified chemical company, three years
ago for $15 million. Biotech was at the time
in bankruptcy and needed cash badly, so this
Role: Synertech
purchase price may not be a good indicator of
market value at that time.
Two years ago, the Dosagen plant was
appraised at $19 million. The local real estate
market has declined 5% since then. However,
the Dosagen plant is unique, and general real
estate trends may not apply.
Although newer, a plant like the Dosagen
plant sold for $26 million nine months ago.
Synertech-Dosagen
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