Updated: 07/25/2013 6:19 PM
Created: 07/25/2013 5:47 PM WHEC.com
Even before the deal to buy Bausch & Lomb, Valeant Pharmaceutical had been on a shopping spree, buying up more than 20 companies over the past three years. And in every case, Valeant executives talked about "synergies." It means duplication, places where they can quickly cut operating costs and maximize value.
"This acquisition will really change the employment landscape here in town," says Patrick Burke managing principal of Burke Group.
Burke has been predicting since January that the sale of B&L could have a devastating effect on the Rochester community. A financial planner, Burke has studied Valeant's track record and says B&L workers should brace for more than 1000 job cuts, primarily here in Rochester.
"I think if you look back at the history of Valeant, based on what they tell people in their initial guidance versus what they actually cut, what they actually cut is significantly greater than what their initial guidance has been," said Burke.
So we decided to look back at other recent Valeant acquisitions.
In December, Valeant closed on a deal to buy Medicis Pharmaceutical Corporation in Scottsdale, Arizona, a maker of dermatology drugs, for $2.6 billion.
Within 24 hours, the company started laying off workers.
"What they did there is they reduced their operating cost by close to 70% in the first year, which led to almost 2/3 of their employees going away," said Burke.
According to The Phoenix Business Journal, employees were summoned one by one and given a folder. Manila folders were handed to those who had a job, black folders for those being laid off.
According to the Arizona Republic, 440 Medicis workers were to be let go.
"They go about their business very clinically. they have a formula and they implement their formula and if you're on the losing side of that formula, that's where you end up," added Burke.
Here's how deep operating expenses were cut after other major acquisitions by Valeant.
At Medicis, they found $300 million in "synergies" and cut expenses by 64%.
At Biovail, the reduction was 69% and at Ortho/Dermik, it was even higher at 73%.
Valeant executives say they are expecting a 49% reduction in B&L's operating expenses, a savings of $800 million.
"I think this company is on a mission to become a world leader in this business, and I think by the CEO's own admission that's what his intention are," says Burke." "That's what his ambitions are. And when you have those kind of ambitions, there's a lot of other things that just become trivial in nature."
Burke says one of the things that worries him most is how quickly Valeant has grown. It has taken on a lot of debt, and he fears that will translate to operating pressures to find cost savings.
If he sees a bright side it's that some jobs may be saved because this is Valeant's first jump into the ophthalmology business and it may need to retain a larger share of workers with that knowledge.