Eurofins helps Pasteur de Lille out of the doldrums

Prospects of IPL's analytical services business

Pr. Pierre Amoyel (C) Institut Pasteur de Lille 2011November 2011. The foundation has to share command, but it retains control of its majority shareholder. An unmasked account by Caroline Rothschild and Wolf G Kroner of IPL's past failures, assessment of the transaction including comments by Gilles Martin, CEO of Eurofins, with regard to the financial value of the deal, and prospects to relaunch Pasteur de Lille's analytic services business.

 

 

 

 

Comment

At the crossroads: Carry on tradition or reconsider past values

With its stake in IPL Santé Environnement Durables (IPL SED) Eurofins takes a bold step: It needs operational involvement in the entire IPL group, but has direct control over only two albeit major firms. Today the IPL SED network is an artful conglomerate of firms, associations, public agencies in France. Central command is with a research foundation of benefit to the public, i.e. Institut Pasteur de Lille (IPLF), which has the same name as the reputed research institution (IPL), but operates different. The foundation performs not itself research, but manages three major revenue streams: public subsidies, donations and legacies, taxable commercial income (service contracts, licences etc.).

 

IPLF’s ways of doing business clash with Eurofin’s approach as the former is oriented to paradoxical operations. In december 2002 the foundation was spun-off Pasteur Lille which already operated several IPL SED firms. IPLF was not a response to market needs, but to new regulations offering tax breaks and other privileges for research foundations. The intention of government was not supporting selfish missions, but to support fundraising for research of benefit to the public.

 

Institut Pasteur de Lille in the Nineties

It is true that the foundation has been acting like its honourable peers. Pursuing multiple objectives through a centrally administered network of non-profit and for-profit organisations, permanent and ad hoc-groups, voluntary and professional units. As is known this offers considerable operational advantages: You may tap donations as well as royalties, subsidies as well as fees for service. Morever, it offers considerably more freedom to operate. One can (legitimately) hide some activities, while highlighting others in the public domain. You may adapt regulations to your activities and have the same regulations make the task more difficult for competitors. Paradox operability reduces accountability pressures, in particular in case of financial loss. Operating in paradox is a smart business approach, but it is not a solution for all purposes and forever. It works well in political environments, in rather static markets with a local customer base and predominantly personal transactions. Paradox operations become dysfunctional, if applied to large-scale services for industry in globalised markets. The commercial disaster of IPLF venturing into the latter environment is a vivid example.

 

At the moment IPLF is rescued. Nevertheles it needs further capital to ensure the sustainability of IPL SED. New revenues have to be generated from sales of analytic services, because it appears that public financial support is exhausted. A lingering issue is to re-assure current customers of IPL SED that they continue to receive the quality of products and services they need. Re-structuring analytical services is not sufficient. Eurofins offers IPLF a breather, but it has to take provisions against being driven to pump additional cash and inflate an investment which was modest at the outset. For the foundation’s commercial services business to become profitable and create shareholder value it has to break with its tradition of paradoxical operations: Profits for particular interests, losses in the public interest. Will it withdraw from steering an industrial business, and concentrate instead on its core mission which is to mobilise donations and subsidies to fund research of benefit to the public? At issue is neither replacement of individual managers, nor paying lip service to lofty goals, nor proclaiming ambitious plans. It is simply renouncing on paradox operations and a principled decision by Institut Pasteur de Lille’s shareholders to reconsider past values.

Wolf G Kroner

 

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