James Beery (or Jim as he likes to be known) was in for a busy festive season.
Just over a week before Christmas the merger between SmithKline Beecham and Glaxo Wellcome was finally given competition approval after a marathon one-year wait. Trading of shares on the London and New York Stock Exchanges began on 27 December. The £114bn merger created GlaxoSmithKline (GSK), the UK’s third-largest company, after Vodafone and BP Amoco, and the world’s largest pharmaceutical company.
Beery returned in the New Year as vice-president and global general counsel of the merged group. The go-ahead from the Federal Trade Commission (FTC) was probably the best Christmas present he could have hoped for. It had been a long time coming.
The merger was given the greenlight by the European competition authorities in May, but did not receive clearance from the US competition watchdog for another seven months, almost exactly a year after the merger had been agreed.
The delay was unprecedented. “It took longer than we thought was possible,” Beery says. “Things went smoothly in Europe, but the process was quite different in the US. When we started out, we suggested that a realistic completion date would be the summer, then it became September, then the end of the year.”
Beery says there were a number of reasons, but attributes at least some blame to the way it was handled by the US competition authority. “I believe the rules at the FTC changed a bit during the year,” he says. “It was by far the most complex pharmaceuticals merger it had dealt with and as time went on there was an increasing emphasis on fix it first – the detailed terms of the divestures.”
One of the major sticking points was concern about the merged GSK’s potential dominance of the smoking cessation market. Eventually, the FTC reached a compromise that gave clearance to the merger while reserving the right to continue its investigation into the smoking cessation products.
This was a good result, according to Beery. “We took that deal and ran,” he says. “It was an unusual, but not an unwelcome, accommodation on the FTC’s part.” And it was a huge relief for those involved in the merger.
It was a complex process – the legal costs of the merger alone stand at £30m. The process of integrating the two global giants, with a market value of £114bn and a combined workforce of 110,000 has been no small task.
During the last year, Beery, with other senior executives at the group, has been charged with running the businesses separately while planning for a future together.
As the merger was set in motion months before the competition authorities gave it the okay, an integration committee was set up early in the year and key appointments, including Beery’s, were soon put in place.
Beery’s task was to set about integrating the two legal functions while remaining mindful of the possible anti-trust implications if the merger was not to go ahead.
“We had to be aware of the possibility that the merger would not happen. We did not want to exchange the crown jewels of our respective R&D departments, for instance, in the event that it did not go ahead,” he says. All the while, the integration process had to continue. “It was a highwire exercise – on the one hand we had to co-operate on the merger, on the other we had to ensure that we did not come too close prior to completion.”
For the legal function this involved integrating two very different in-house operations. “We had two very different systems that the two groups operated in very different ways and it is a question of bringing these two systems together,” Beery says.
In retrospect, Beery says, the organisation would probably have approached integration very differently if it had known how long it would take to clear with the US competition authorities.
“There was a lot of stopping and starting. It cost more in money terms and in human terms. If the clearance had come through in July then we would have wanted decisions made about the business before that, but if it had come in December we would not have wanted decisions, about people for example, made in June.”
Globalisation and centralisation are Beery’s watchwords. At SKB, where Beery was general counsel, the legal team operated along very centralised lines. The function was divided into six corporate groups, legal operations, environmental and safety, intellectual property, legal and secretariat, legal compliance and security.
The legal team at Glaxo Wellcome was dispersed more widely on a country-by-country basis. “It would have 24 lawyers in a country, while we would have six lawyers,” Beery says. The new legal function will follow the model Beery created at SmithKlineBeecham. There are approximately 620 staff in the new combined legal function, 200 or so of whom are lawyers.
There will be job losses. “After the dust settles, there will be fewer total people but this is not a bloodbath,” Beery says.
First and second-line reports are already in place and final decisions on the remaining professional placements should be made later this month. Key losses in the UK include head of legal Stephen Cowden and head of IP Alan Hesketh from Glaxo Wellcome; and Ramon Jacobs SKB’s director vp legal operations in the UK.
Beery estimates there will be 500 staff remaining in the combined legal team once the integration process has been finalised. “I have an enormous number of talented and self-motivated people in the team and I look forward to working with them.”
Although he must be relieved to see the past year behind him, Beery’s work is far from complete. “There is still an enormous amount to do in the integration of the two teams,” he says. “There is no magic moment to a merger – the bells do not ring.”
One to one with Jim Beery
Role: Senior vice-president and general counsel at newly-merged pharmaceutical giant GlaxoSmithKline.
