The Merger of Two Giants: Royal DSM and Firmenich

Background

Earlier this year, it was announced that the companies Royal DSM and Firmenich were planning to merge, which would result in a conglomerate valued at around 40 billion euros (Vogue Business). Royal DSM is a public company that touches many industries including nutrition, food and beverage, health & beauty, and fragrance, investing in R&D to develop the ingredients for these products for other companies (DSM). Firmenich is a privately owned company focusing on fragrance and taste that, like DSM, develops ingredients to sell B2B. Both companies have a high dedication to sustainability. DSM integrates the UN’s Sustainable Development Goals into their company and is taking steps to tackle food waste whereas Firmenich is working to incorporate renewable ingredients and sustainable production techniques, has signed many pledges, and participates in climate summits (Firmenich) (DSM).

DSM-Firmenich

Because of these characteristics, people have argued that the two companies are complementary. DSM specifically excels in nutrition and biotechnology while Firmenich would bring knowledge of perfumes, flavors, and molecular technology. The new company, called DSM-Firmenich, would become one of the most powerful companies in the fragrance industry and is designed to have a committee with members from both DSM and Firmenich with DSM shareholders holding almost ⅔ of the new company (ChemistryViews).

Innovation in Biotechnology

However, the most exciting aspect of the merger is the anticipated resulting biotech innovation. Recently, with unusually warm temperatures in areas around the world, natural ingredients such as peppercorn have become rarer and their prices have increased, as reported by Givaudan, a major competitor of Firmenich. With 15 R&D centers, 40 creation centers, and 78 application labs, though, DSM-Firmenich will have the ability to create synthetic ingredients completely under the control of scientists. DSM in particular seems to have been preparing for this with the amount and type of acquisitions they have engaged in the past two years (Vogue Business).

Next Steps

While synthetic materials are highly effective, consumers tend to trust natural or botanical sources much more. Both DSM and Frimenich have experience with these two forms, natural and botanical sources are far less sustainable with larger carbon footprints. Therefore, the company will have to find unique and less harmful ways of extricating their needed ingredients, methods that do not ravage the environment (Vogue Business). Additionally, consumers nowadays prefer knowing exactly where their products come from. DSM-Firmenich will have to incorporate technology that allows for their ingredients to be labeled with data, such as the farm it was grown on as well as information on how it was grown, its transportation, and where it was stored (Vogue Business). The company also must continue to ensure that new ingredients they derive are unusual but loved (Vogue Business). That, of course, has always been an essential part of any company in this industry’s success.

Conclusion

Although there are many anticipated positives of this merger for both companies, it has been noted that it is uncommon to have two such large and powerful companies merge, and the fact remains that they must efficiently work together to dedicate capital to research and development to pioneer new extraction methods and determine new formulas. The merger is set to be completed in the first quarter of 2023, and time will tell if these two giants can effectively supplement and build upon each other as they hope to.