In June 2018, Bayer, the German pharmaceutical and chemical company, completed its acquisition of Monsanto, the US agricultural biotechnology company, for approximately $63 billion. The deal gave Bayer Monsanto's seed and herbicide portfolio, including Roundup (glyphosate), the world's most widely used weedkiller.
Within two months of the acquisition, a California jury awarded $289 million to a groundskeeper who claimed Roundup caused his non-Hodgkin lymphoma. Two more jury verdicts followed, awarding a combined $2 billion. By 2020, Bayer faced over 125,000 Roundup lawsuits and agreed to pay $10.9 billion to settle them.
Bayer's stock fell over 40% from its pre-acquisition level, and the company's market capitalization dropped below the price it had paid for Monsanto. The case became the definitive example of acquisition due diligence failure: Bayer's financial due diligence was thorough, but its litigation risk assessment catastrophically underestimated the liability it was inheriting.
Bayer's due diligence checked finances but not litigation, inheriting 125,000 suits and a $10.9B settlement, and its stock fell 40%.
Bayer acquired Monsanto for $63B without adequately assessing the Roundup litigation risk.
Within months, juries awarded billions to plaintiffs claiming Roundup caused cancer.
Bayer faced 125,000+ lawsuits and settled for $10.9B.
Bayer's stock fell 40%+, and its market cap dropped below the acquisition price.
Due diligence that checks the balance sheet but not the courtroom is incomplete. Bayer asked 'what does Monsanto own?' not 'what is Monsanto being sued for?'
Bayer settled for $10.9B and continues to face ongoing litigation. The company's stock has not recovered to its pre-acquisition level. The case is taught in M&A courses as the definitive example of litigation due diligence failure.
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