In one of the biggest deals of 2020, medical equipment giant Thermo Fisher Scientific Inc. (NYSE:TMO) agreed to acquire Qiagen (NYSE:QGEN) in March for $11.5 billion. Qiagen is a diagnostics company focused on analyzing biological samples used for a wide range of applications.

Thermo's deal to acquire Qiagen was straightforward when it was announced, but the two companies have had to come back to the negotiating table as some bumps in the road have emerged.

Qiagen's booming results lead to an increased buyout price

While the COVID-19 pandemic continues to wreak havoc on the world, Qiagen's business has actually seen its business boom. The company's technology has been found useful for COVID-19 testing, which has led to a significant increase in sales for its equipment and services.

In a Q2 earnings update, Qiagen noted that its sales grew 16% and its earnings grew by 70% compared with Q2 2019. The company also increased its guidance for the full year 2020, and expects continued strong growth in 2021.

As a result, Qiagen's shareholders demanded a higher offering price from Thermo Fisher. Given Qiagen's strong financial performance this year, some investors threatened to vote against the buyout offer if Thermo Fisher didn't increase its buyout offer.

Thermo Fisher ultimately caved to investor pressure. On July 16, the company agreed to raise the buyout offer by almost 10%, from 39 euros to 44 euros per share. However, this slight increase wasn't enough to satisfy all shareholders.

a lab with scientists working on computers and lab equipment

Image Source: Getty Images.

A sweeter offer, but not sweet enough

Thermo Fisher clearly wants to get this deal done. Qiagen is now more valuable than ever given its importance in fighting the COVID-19 pandemic. In order to get the deal across the finish line, at least two-thirds of shareholders must vote in favor -- this is a higher standard than the typical simple majority that most deals require. The voting requirement was at 75% until Qiagen reduced it as part of the sweetened offer price.

Some shareholders are not happy that the vote requirement was reduced, however, and have called foul play. The leaders at hedge fund Davidson Kempner have been outspoken critics of the deal. The hedge fund owns 5% of Qiagen's shares, and they think the price needs to be upped even more. Davidson Kempner has even gone as far as to encourage other shareholders to vote down the deal if the offer isn't improved to at least 48 euros.

Thermo Fisher has received its share of backlash from the investing community, so why not just give Qiagen's shareholders what they want?

A good deal for Thermo Fisher?

You can't always get what you want, and shareholders may not successfully be able to demand a higher offering price when the future of COVID-19 testing is still uncertain. Thermo Fisher had good timing with its acquisition agreement for Qiagen; increasing the bid too much now would put Thermo's shareholders on the hook for the uncertainty surrounding Qiagen's recent bump in earnings.

Thermo Fisher risks overpaying for Qiagen if it just caves to investor demands, but at the same time, it needs to get shareholders on its side to get the deal closed. Qiagen is the right company at the right time to own during a pandemic, and the management team at Thermo Fisher clearly sees a lot of benefits to owning it for the long term. The fate of the deal rests on Qiagen's shareholders -- if Davidson Kempner can convince enough shareholders to vote down the deal, Thermo Fisher will either need to offer more money or walk away.

Thermo Fisher is a powerhouse healthcare company, and adding Qiagen would advance its capabilities in a fast-growing area of diagnostics -- if it can get the deal done.

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