CFO Studio Magazine with Bernd-Peter Bier, CFO, Bayer

COVER STORY Preparing to Move Up 10 WWW.CFOSTUDIO.COM 4th QUARTER 2015 A sked what advice he would give to a middle-market finance executive preparing for his or her next career move, Berry Bier, CFO of Bayer Corporation, says, “It’s always important that you have a good foundation in one technical skill. You want to be really good in having been a treasurer once or having been a tax guy.” Bier, who joined Bayer in 1999, was a tax guy. “You have to have proven that you are able to work in the details,” he continues, “and you should have started to look beyond your old function, started to look into how the company is really working — how the lines connect that you don’t necessarily see on an organizational chart.” Next, Bier suggests envisioning how the company might look in a few years, and what steps might be needed to guide it appropriately. “Be visionary in that way. I think it’s really hard to try as a company to get better without having a certain vision of where you want it to be,” he says. Developing the vision for the overall company will be done jointly with others on the leadership team, but Bier says a formidable financial executive will set a plan for his or her department, “and that vision has to be linked back to the overall company. Next, you build a strategy for how to achieve it.” According to Bier, such strategy and implementation rest on three things: “It’s all about building a strong team and being efficient at what you do, and really remembering what you promise.” areas, MaterialScience. This would leave HealthCare (pharmaceuticals for humans and animals) and CropScience (including crop protection products, growth stimulants, and seeds that need less water or that are pesticide resistant). MaterialScience, which makes high- tech polymers, would then no longer compete for resources with the two other business areas. Though it would remain a subsidiary of Bayer AG, MaterialScience, with the new name of Covestro, would be removed from the U.S. corporation entirely and would have its own access to capital markets. (Subsequently, 31 percent of Covestro has been floated on the German stock market.) Bier took up his role as project leader, and was given two months to clear the first hurdle: executing the legal separation by a Jan. 1 deadline. The target date for the spin-off to begin operating separately was Sept. 1, 2015. Bier calls this assignment one of the biggest challenges of his career. “You are separating about a third of your sales,” he says. “If we are a $50 billion company and you spin off $15 billion of that, that’s a big undertaking. Such a company needs a fully fledged organization.” He had to divide functions across the whole company, including finance, HR, communications, IT, supply chain, procurement, and sales. He says, “That’s a huge task, but also really exciting.” In addition, he had to start the registration process and transfer contracts with suppliers and customers. He began by assembling a team, building project plans and a timeline, and then moving on to execution. At that point, the team had to “deliver on all these different action items, and there [were] always things coming up. So you have to be very flexible and pragmatic to solve these things.” Among these difficulties: reluctance on the part of some suppliers to shift their agreements with Bayer to Covestro. “We had to find ways to convince them, and we had to find ways both companies can operate separately as of Sept. 1,” he says. He praises the spirit of cooperation on his team from day one. But as project leader, when tough choices have to be made, “you have to make a decision.” The team can only do so much. As he was heading up the project to carve out MaterialSciences, Bier was simultaneously part of the steering committee for the integration of a $14.2 billion acquisition. That process had begun in April 2014, when Bayer beat another bidder to acquire Merck’s Consumer Care business, which includes Claritin®, Coppertone®, Dr. Scholl’s®, and MiraLAX®. Added to Bayer’s aspirin juggernaut, the brands would significantly strengthen the company in its HealthCare area. The integration continued until the end of June 2015 and, depending on how it is measured, established Bayer as either the No. 1 or No. 2 company in the U.S. non-prescription medicines market. The company’s new profile makes Bayer highly reliant on its pharmaceutical products for earnings. It has best-selling drugs for hypertension, cancer, and hemophilia, among other categories. But the pharmaceuticals industry, Bier says, is a “risky business.” This is especially true of companies that are in a stage of their business life cycle where they have numerous successful products and high growth but are nearing a critical moment in their history, when an important patent will expire and “you lose a significant part of your sales,” he says. Now that Bayer is solely a life-sciences company, having “cut off [its] chemical legs,” the CFO says more M&As will almost surely occur. To explain why, Bier points to the hard realities of developing a pharmaceutical product: It can easily