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Bayer's Acquisition of Monsanto Bayer’s acquisition of Monsanto “A critical evaluation of Bayer's Financial Communication during the crisis in the post-acquisition phase” by Nicolai Braun Master’s Thesis Finance & Strategic Management Supervision: Jens Gregersen Date of submission: 16th of September 2019 Number of pages: 75 Character count: 187.455 Student number: 107079 Abstract Within a company, the department of investor relations covers the task of financial communication. Effective financial communication bridges the gap between the company’s top management and investment decisions makers. Financial communication is concerned with more than financial figures and data, especially because the usage of language plays a key role in building an organization’s image, reputation, credibility and confidence. In the course of Bayer’s acquisition of Monsanto in June 2018, deficiencies in the usage of financial communication became evident. In fact, from August 2018 onwards the company’s stock price has suffered a steady decline. This is mainly due to thousands of law suit claims arising in connection with Monsanto’s best-selling product Roundup and its controversial component glyphosate. Bayer’s statements related to these legal cases showed little effects to turn the negative trend of stock price erosion around. Bayer executives and board members who were responsible for the acquisition might be accused to have underestimated the legal and reputational risks the acquisition would bear on image, reputation and investor’s trust. Not to mention whether the single-minded focus on business synergy effects and potential cost savings was a huge mistake that left out a more holistic view of all related risks in the context of the acquisition. However, during the annual general shareholder meeting in April 2019, no self-doubt could be identified at top-management level. That shows the striking dilemma of inappropriate financial communication. Critical Discourse Analysis of the CEO’s speech brings further light into the issue, why Bayer has not managed to improve investors’ trust and escape the crisis through its financial communication. Bayer’s top management should better analyse how to set a new business strategy and communicate more credibly that it is serious about Roundup’s hazards and liability compensation payments, as well as developing glyphosate alternatives in order to restore the trust of a broad public and of all stakeholders. Keywords: financial communication, investor relations, company crisis, image, reputation, investor’s trust, CSR, organisational legitimacy, Critical Discourse Analysis ACKNOWLEDGEMENT The completion of this Master Thesis depicts the end of my academic journey. Countless hours of late night studies, reading academic articles, writing scientific papers and delivering presentations lie behind me now. While, I will certainly miss the inspirational and exciting time I had during my studies and especially at CBS I am just as thrilled to start a new chapter in my life. I would like to take this opportunity to thank several people. Firstly, I would like to thank my supervisor Jens Gregersen, who was excited about my topic and eager to support me from the beginning. Thank you for always lending a sympathetic ear to me and helping me through the completion of my master’s thesis. I would also like to thank my family, friends and housemates for bearing with me during the ups and downs of this thesis. From the bottom of my heart – Thank you! Copenhagen, 16.09.2019 Table of Contents 1 Introduction .................................................................................................................... 3 1.1 Motivation and Problem Statement ...................................................................................... 3 1.2 The rationale behind Bayer’s acquisition of Monsanto ............................................................ 6 1.3 Bayer’s company appearance and perception ........................................................................ 7 1.4 Monsanto’s company presentation and perception ............................................................... 8 1.5 Research Objective and Question .......................................................................................... 9 2 Limitations ...................................................................................................................... 9 3 Research Philosophy ...................................................................................................... 10 3.1 Research Paradigm .............................................................................................................. 11 3.2 Ontology ............................................................................................................................. 12 3.3 Epistemology ....................................................................................................................... 13 4 Methodology ................................................................................................................. 13 4.1 Research Approach .............................................................................................................. 14 4.2 Research Strategy ................................................................................................................ 14 4.3 Research Method ................................................................................................................ 15 4.4 Research Design .................................................................................................................. 16 4.5 Advantages and constraints of the case study methodology ................................................ 17 4.6 Validity, reliability and generalization of case study findings ............................................... 18 4.7 Data Collecting .................................................................................................................... 19 4.8 Quality evaluation of the collected data .............................................................................. 19 4.9 Processing the Data ............................................................................................................. 20 4.9.1 Stakeholder Analysis ............................................................................................................ 20 4.9.2 Critical Discourse Analysis & Fairclough’s framework ......................................................... 20 4.9.2.1 Methodological considerations regarding CDA .......................................................................... 22 5 Literature Review .......................................................................................................... 23 5.1 Definitions and concepts of Financial Communication ......................................................... 24 5.1.1 What is the meaning of Financial Communication? ............................................................ 24 5.1.2 What is the meaning of Investor Relations? ........................................................................ 24 5.1.3 Image and Reputation ......................................................................................................... 26 5.1.4 Trust and Credibility ............................................................................................................ 28 5.2 Tools in Financial Communication ........................................................................................ 28 5.3 Issues of Financial Communication in times of M&A ............................................................ 29 5.3.1 The importance of transparency and uncertainty avoidance .............................................. 29 5.3.2 Target audiences for financial communication during M&A ............................................... 31 5.3.3 Overview of different stakeholders’ interests & information requests ............................... 31 5.3.3.1 Factors driving investors’ decision-making ................................................................................. 32 5.3.3.2 Required non-financial information for the financial analyst ..................................................... 32 5.3.3.3 The role of notation agencies ..................................................................................................... 33 5.3.3.4 The role of commercial banks ..................................................................................................... 33 5.3.3.5 Required information for business partners ............................................................................... 33 5.3.3.6 Required information for employees .......................................................................................... 33 5.3.3.7 The role of media and journalists regarding investment decisions ............................................ 34 5.4 Integrating the stakeholders’ diverse interests and the necessity of a coherent story .......... 34 5.4.1 Asymmetric Information & Agency Theory ......................................................................... 35 5.4.2 Framing ................................................................................................................................ 35 5.5 Issues of Financial Communication in Crisis ......................................................................... 36 5.5.1 IR and the role of top executives in crisis ............................................................................ 37 5.5.2 Shareholder activism ..........................................................................................................
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