The case describes a strategic dilemma faced by the management team of Galderma, a 50/50 dermatology joint venture (JV) between Nestlé and L’Oréal, which had been set up in 1981, following Nestlé’s strategic and sizable investment in L’Oréal. The lock-up agreement governing that investment was due to expire on April 24, 2014, triggering the very real possibility of a change not only in Nestlé’s shareholding in L’Oréal but also in Galderma’s ownership structure. Despite both parent companies’ demonstrated commitment to Galderma’s long-term success, after nearly 33 years of joint operations, the time had come when the JV and its shareholders could do better with more freedom. Dissolving the JV would enable its parent companies to pursue their respective growth strategies independently. It would also create wider business potential for Galderma, especially as its recent introduction of new medical aesthetic products, in response to the growing market demand for aesthetic procedures, threatened to overlap with L’Oréal’s core offering. At the same time, with the launch of Nestlé Health Science (NHS) in 2011, helping consumers lead healthier lives in every aspect, beyond nutrition, became central to Nestlé’s corporate strategy. Galderma could evolve along one of the four paths – maintaining the status quo, L’Oréal as corporate parent, Nestlé as corporate parent or finally, Initial public offering.
