Why Abbott Laboratories Seeks to Terminate the Alere Acquisition

Overview

In an effort to expand its diagnostics capabilities, Abbott Laboratories (ABT) announced the acquisition of Alere (ALR) on February 1, 2016. Although Alere has struggled for growth in the past few years, Abbott found the company to be a complementary fit. Abbott believed that the company’s portfolio and team would help Abbott accelerate its growth in the high-growth diagnostics market.

The chart below shows the revenue profile of Alere for 2014. However, the company experienced a series of adverse events that began to diminish Abbott’s willingness to go ahead with the deal. The friction between the two companies led to a series of lawsuits, which we discussed in the previous article.

Why Abbott Laboratories Seeks to Terminate the Alere Acquisition

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Management’s rationale behind deal termination

On December 7, 2016, Scott Stoffel, divisional vice president of external communications at Abbott Laboratories, noted, “Alere is no longer the company Abbott agreed to buy 10 months ago. These numerous negative developments are unprecedented and are not isolated incidents brought on by chance.

“We have attempted to secure details and information to assess these issues for months, and Alere has blocked every attempt. This damage to Alere’s business can only be the result of a systemic failure of internal controls, which combined with the lack of transparency, led us to filing this complaint.”

Next, let’s take a close look at the developments at Alere that triggered the tremors in the deal.