Thesis Abstract and Dissertation Abstracts
Big Pharma M&A- Growth Drivers or Resistors?
Abstract Category: Other Categories
Course / Degree: PhD
Institution / University: Narsee Monjee Institute of Management Studies-NMIMS, India
Published in: 2005
Big Pharma (major pharma players) has unleashed a flurry of M&A activity, second only to the banking-finance sector, leading to a significant consolidation. This race for a place by Big Pharma would fuel future pharma M&A activity, which is increasing in deal size but reducing in frequency, with 1 mega merger every alternate year, since 2000.
Convergence aims at strategic acquisitions and alliances, and has been successful in key areas like drug discovery, design, delivery, biotech and co-marketing. Convergence would be the most actively pursued strategy in future M&A deals.
M&A offers potential for cost reduction, synergy and economies, offsetting the impact of dwindling growth rates and reduced margins. Although, corporate growth and cost savings are the major reasons for M&A, the key drivers are: R&D productivity, barren pipelines, patent expiries and generics, geographical reach, therapeutic potential, and shareholder pressure. Pfizer and GSK together, have spent $ 240 Billion in M&A deals to reach the top, and sustain their rankings.
Pharma M&A deals result in short term cost savings of 7% and reduction in expenses of 11% but the Glaxo-Wellcome and the GSK deals have each yielded cost savings of 11% and reduction in expenses of 18%. But, successful deals also involve huge work force lay-offs.
Companies following an organic growth model like Merck and J&J have consistently increased market share while pharma focused companies have performed better. Inspite of multiple mega-mergers, GSK’s current market share is less than the sum of its pre merger constituents.
Studies confirm that 90% of pharma M&A deals are intra-country or intra-continent and 75% of all pharma M&A deals do not deliver shareholder value, but increase market share only in the short term. Major M&A pitfalls are, the high deal premium and an inability to effectively integrate.
Ironically, the biggest initial casualty is the R&D department where uncertainty reigns. Integration, though not monetarily significant, can lead to organizational upheavals, affecting the culture and future performance of the company.
Even if an M&A deal makes sound strategic sense and all parties are amenable, the payoff from a mega-merger is by no means a certainty.
Thesis Keywords/Search Tags:
M&A, Pharma, Strategy
This Thesis Abstract may be cited as follows:
Rangnekar Amit, Big Pharma M&A- Growth Drivers or Resistors, NMIMS-PhD-2004-05
Submission Details: Thesis Abstract submitted by Amit Rangnekar from India on 14-Feb-2005 18:57.
Abstract has been viewed 3172 times (since 7 Mar 2010).
Amit Rangnekar Contact Details: Email: amitrangnekar@gmail.com
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