...GSK, a merger too far? 1- Analyse these two forces : * Threat of entry : Very important * Very high expenses on advertising Direct to Consumer (DTC) * In this industry some specific skills to manufacture drugs are required, because they need to pass severe clinical trials before being commercialized. * It can take a very long time to become profitable and to compensate the speeding in R&D. * The whole industry has a bad reputation because of former issues so it is difficult to have a positive image. * Also, you need numerous sales representatives to have a real impact on the market and to get a global commercial reach. * Threat of rivalry : important * Even niches areas in this industry are more and more crowded. * The top 10 pharmaceutical firms stand for 50% of the global sales. * There is he generic competition from which branded drugs producers are suffering. Indeed when the lifetime of a patent is over , generic companies rush to the market and offer drugs with the same active components but in a very low cost. There is also a real competition between generic companies. * Medium-sized pharmas have to consider M&A as a survival strategy. 2- Which factors explain the wave of mergers and acquisitions in the pharmaceutical industry? The pharmaceutical industry is a really special one, on the contrary of the most part of industries there is very few new products coming to market. Indeed, a lot of money and a really...
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...Strategic Management Case study C: GSK, a merger too far? Answer 1: 1. By using Five Force Framework, assess the threat of rivalry and threat of entry in the pharmaceutical industry: Threats of rivalry. When we talk about threats of rivalry we should mention not only the rivalry at the industry but also at the product market level. Industry level The pharmaceutical industry has become increasingly concentrated during last 20 years. Guided by absence of proper R&D facilities, gradual expiry of patents and other reasons, there has been a number of mergers and acquisitions in the industry within last 20 years. This trend is currently shaping the internal rivalry among companies. The major reasons for that are opportunistic financial operations and the creation of synergy. It is worth mentioning that some companies would prefer to merge than to experience hostile takeover. Product market level: The two-tier structure has to be taken into account: patented original brands vs. generics. Original compete mostly on non-price benefits, especially as long as they are patent protected, whereas generic drug are generally driven by price competition. The threats of entry. The threats of entry into the pharmaceutical industry are extremely high. Still, it is considered to be very attractive for the new comers. As an evidence for that, 21 pharmaceuticals are featured in the Fortune 500 companies in return on sales. The pharmaceutical industry has big barriers to prevent new comers from...
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...Abstract Mergers and acquisitions often referred to as M&A is also a tool for expanding ones business or get around different laws or regulations such as tax laws or monopoly regulations (Ross et al., 2002). Merger and acquisition (M &A) has been the most debatable issue in the field of management and finance. There are arguments for and against corporate restructuring and mergers. Lambrecht (2005) argued that although M&A activities occur in waves but M&A activities are as a result of the economic environment. This paper examines whether such corporate marriages long lasting and productive in term of value? We have analyzed the pre and post merger performance of Glaxo Smith Kline by applying the net present value approach of valuation. From the very beginning, Barron's (2000) called this merger as ‘‘a marriage of convenience-with lots of tough issues to be worked out … SmithKline is wedding itself to a slow-moving company with a lackluster pipeline of new drugs coming to market’’. We found that mega pharmaceutical merger hasn’t delivered value. The stock prices underperform both in absolute and relative terms against the index. The merger has resulted into a substantial R&D reduction and downsizing instead of a potential employment haven. Background ‘‘All Marriages are Happy. It’s the life afterwards that creates troubles’’ (Anonymous) A merger or acquisition happens when two or more companies join together, often to share costs, increase efficiency or gain...
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...STRATEGY CASE PREPARATION GLAXO WELLCOME SMITHKLINE BEECHAM easeyourlife herealso External analysis industry & market Drug wholesalers independant retailers retail chains government agencies hospitals patients GSK is diversified in areas such as vaccines, generics, biologics, consumer health and nutrition. Pharmaceutical industry €665 bn value, world largest industry R&D champion Major employer Influential lobby 10-15 years to develop a drug €1,17 bn cost of research & development, €105.00bn spent on R&D in 2012 in industry 1 to 2 of 10,000 substances pass all stages and become marketable macro analysis steeplec Society Technology Economy Environment Politics Legislation Ethic Competition fast growing aging & wealthier population rising urbanisation increase in unhealthy lifestyles & obesity opportunities opened up by scientific advances strong growth in emerging markets / Heavy political focus on healthcare as core state responsibility intellectual property protection / 3D printed drugs cyborgs rise new diseases category increased patient awareness & interest in natural medicines growing acceptance of generics shrinking working population falling R&D productivity increasing R&D expenses debt crisis in Europe reduction in individual disposable income volatility in emerging markets weak prospects in mature market increased...
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...Mergers and Acquisitions Tasha Powers Dr. Michael Laverty Business 508 – Contemporary Business November 17, 2014 A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less essential company loses its identity and becomes part of the more imperative corporation, which retains its identity. A merger extinguishes the merged corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the merged corporation (Gomes, 2011). A merger is not the same as a consolidation, in which two corporations lose their separate identities and unite to form a completely new corporation. Federal and state laws regulate mergers and acquisitions. Regulation is based on the concern that mergers inevitably eliminate competition between the merging firms (Helms, 1996). This concern is most delicate where the participants are direct rivals, because courts often presume that such arrangements are more prone to restrict output and to increase prices. The fear that mergers and acquisitions reduce competition has meant that the government carefully scrutinizes proposed mergers. On the other hand, since the 1980s, the federal government has become less aggressive in seeking the prevention of mergers (Gomes, 2011). Mergers appear in three forms, based on the competitive relationships between the merging parties. In a horizontal...
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...Case Study – GSK’s Acquisition of Sirtris: Independence or Integration? Questions to be answered: 1. Slaoui and Andrew Witty, GSK’s CEO must sell the acquisition of Sirtris to two key constituencies: the GSK board of directors, as well as to Westphal and the senior team at Sirtris. How would you make these pitches? 2. If you are Westphal, how do you feel when you get the call from Slaoui? What terms are you most inclined to negotiate? 3. The vast majority of startups “exits” during the past decade have been through acquisitions by larger companies. What is likely to change at Sirtris after the acquisition? More generally, how do entrepreneurial companies change after they are acquired? Is there a role for an entrepreneur like Westphal in a very large company like GSK? 4. Put yourself in Slaoui’s position. How should you manage the integration of Sirtris? Then think about the same questions from the perspective of Westphal? 1. GSK and Sirtris have been negotiating a potential acquisition for several years, so when the actual decision was made, Slaoui and Witty had to pitch the news to their own people at GSK as well as to Sirtris’ senior team and CEO Mr. Westphal. The process of bringing the news to the respective constituencies should include a couple of universally applicable standards and/or rules that managers should bring to the table when announcing an acquisition that is believed to have a major impact on the operations and culture of both companies...
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...GSK Gary Benillouche Sylvain Descazeaud Stéphane Nooroya Yousra Zaghdoud Bernichi Case C : GSK 1 - Derive three opportunities and three threats for GSK by first making the PESTEL analysis of the macro-environment surrounding the pharmaceutical industry. |Political |Economic |Social | |Governments are looking for reduce healthcare|The current economic crisis. |Population is getting older. | |costs. | | | | |Cost structure at ethical pharmaceutical |Increasing awareness of people thanks to the | |There is no convergence of healthcare system |companies: manufacturing of goods (25%), R&D |Internet : new demand and changing | |: people don't get always reimbursed their |(12 to 21%), administration (10%), sales and |expectation. | |health costs around the world. |marketing (25%). | | | | |Rise in the number of obese people. | | |New kind of competition with generics drugs. | ...
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...CASE STUDY: GSK (GlaxoSmithKline) Warm-up: • Do you think that we should prevent pharmaceutical firms applying for patents? • Selling drugs online has become a common practice. Do you believe we should go further in this direction? • Is the wave of M&A beneficial for clients in the pharmaceutical industry? Question 1: Derive three opportunities and three threats for GSK by first making the PESTEL analysis of the macro-environment surrounding the pharmaceutical industry. PESTEL analysis of the macro-environment surrounding the pharmaceutical industry: As a reminder: Macro-environment: PESTEL Industry (or sector): 5 forces of Porter + Life cycle THE PESTEL MODEL: 1. Political 2. Social 3. Environmental 4. Economic 5. Techonological 6. Legal SOCIAL FACTORS Ageing population: need more drugs Better informed customers: Firms should give more information, because when you’re sick the first thing you think of doing is looking up on the internet. Firms have to work on their communication Social responsibility: related to medications that are meant to cure people. How much money should be made from drugs that are saving lives? At which point should firms renounce to their huge benefits? Importance of emerging markets: some regions in Asia More: New industries for new diseases, geographical differences (some countries don’t have money to spend on drugs) ECONOMIC FACTORS Globalisation: market is going global concerning drugs and pharmaceutical products ...
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...01 Technical takeovers, and managing relevanT To acca QualificaTion paper p3 1 Market growth, for example, by taking over a competitor. This could produce synergy through economies of scale and efficiency gains, and can decrease the threat from competitors. Both of these should help to increase shareholder wealth. There is, in theory, relatively little risk as the company is staying on its home territory which it knows well, but see the information about the Morrison’s – Safeway merger on page 6. 2 Market development and product development. Takeovers and mergers can give rapid access to new markets and to new product lines. There is some greater risk present because new areas are being explored and there is asymmetry of information insofar as the sellers of companies in these new areas usually know more than the buyers. However, it can be appreciated that these categories of takeover can allow a company to expand globally and to present more comprehensive product ranges, thereby allowing the possibility of increases in shareholder wealth. One of the main drivers behind the recent bid for Cadbury by Kraft was the access Cadbury has to many overseas markets, such as the rapidly developing economies of countries like India, Brazil and Mexico where Kraft had poor penetration. 3 Diversification. Both products and markets change and inevitably there is a greater risk that things will go wrong. Diversification has to be divided into two categories: ¤ Related diversification...
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...the partners’ decision? 4. Are there any other issues/considerations Tad should take into account and how should Tad structure his presentation at the partners’ meeting? 5. Choose one deal for Tad and prepare 3 PP slides for him to use in the presentation. (Be prepared to show your slides (bring a flash drive) and explain your recommendation in class.) Also, each student is required to submit a printout of your slides (in a 3-slide per page format, i.e. one page) at the beginning of class Case: “InBev and Anheuser-Busch” 1. What is the basis for competitive advantage in the brewing industry? 2. What was the strategic rationale for the deal? 3. Where will the synergies come from? Do you believe it? 4. What type of merger integration issues do you expect? 5. Will this deal create value for InBev shareholders? Case: “Mars and Wrigley” 1. What are the advantages and disadvantages of Mars’ acquisition of Wrigley? 2. Describe the cultural similarities and differences between Mars and Wrigley. Do you expect any of these cultural characteristics to impact the negotiation? 3. What are Mars’ goals/interests in the negotiation with Wrigley? What do you expect are Wrigley’s goals/interests in the negotiation? 4. What do you believe Wrigley is worth? Explain. What would be your walk-away bid price if you represented Mars, and why? 5. What would be your negotiation strategy if you...
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...organic development. For example Glaxo Smith Klein (GSK) a large UK drugs business reorganised its research and development (R&D) operations to improve expansion. Second, another UK pharmaceutical company AstraZeneca carried out takeovers of bio-science firms (mergers and acquisitions M&A). Compare and contrast these two approaches to growth by discussing their relative advantages and disadvantages. Use examples from any relevant sector, not just "Big Pharma". Summary The paper presents a contrast between conservative and aggressive growth options. It discusses mergers and acquisitions, organic growth and alliances using examples from a range of industries which include online businesses, brewery firms, soft drink giants and also a major pharmaceutical industry merger. In examining the interface between the different growth options the paper posits that they are not mutually exclusive and one may lead to the other, whereas a portfolio of growth options is strategically astute to have. The advantages, disadvantages and issues surrounding the growth options suggest that it is a risk-benefit premise that underpins the value perceptions from a chosen growth route. Competitive situations and resourcing s aspects also govern the choice a chosen route. 1. Introduction This paper discusses the different routes to growth that an enterprise might take. Given the growing popularity and mixed success of aggressive growth option of mergers and acquisitions, the paper compares and contrasts...
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...world of financial uncertainty, it is important for businesses to have a clear idea of what stability involves for their company. One concept that more and more businesses are exploring is one of taking their business to a global level. Using an international strategy is not for every company, but with the availability of the Internet it is becoming easier to take your business to that next level. Global expansion may enable a firm to earn greater returns by transferring the product offerings derived from its core competencies to markets where indigenous competitors lack those product offerings and competencies. One of the global expansion strategies is merger and acquisition. Five waves of mergers and acquisitions took place in the 20th century, with the last two occurring in the 1980s and 1990s. In 2010, corporate merger and acquisition (M&A) activity made a huge comeback. Most of the M&A activity involved North American companies, but activity has also increased around the world, and in various market sectors / industries. M&A activity significantly increased during the second half of 2010 especially for large sized (multi-billion dollar) takeovers. Late July,...
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...headquartered in Ashburn, Virginia. The corporation was originally formed as a result of the merger of WorldCom and MCI Communications. For a time, WorldCom was the United States's second largest long distance phone company (after AT&T). WorldCom grew largely by aggressively acquiring other telecommunications companies, most notably MCI Communications. It also owned the Tier 1 ISP UUNET, a major part of the Internet backbone. It was headquartered in Clinton, Mississippi, before being moved to Virginia. Corporate founding The company began as Long Distance Discount Services, Inc. (LDDS) in 1983, based in Hattiesburg, Mississippi. In 1985 LDDS selected Bernard Ebbers to be its CEO. The company went public in 1989 through a merger with Advantage Companies Inc. The company name was changed to LDDS WorldCom in 1995, and later just WorldCom. The company’s growth under WorldCom was fueled primarily through acquisitions during the 1990s and reached its apex with the acquisition of MCI in 1998. Among the companies that were bought or merged with WorldCom were Advanced Communications Corp. (1992), Metromedia Communication Corp. (1993), Resurgens Communications Group(1993), IDB Communications Group, Inc (1994), Williams Technology Group, Inc. (1995), and MFS Communications Company (1996). The acquisition of MFS included UUNET Technologies, Inc., which had been acquired by MFS shortly before the merger with WorldCom. In February 1998, a complex transaction saw WorldCom purchase online pioneer CompuServe from...
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...TABLE OF CONTENTS EXECUTIVE SUMMARY 3 MERGERS & ACQUISITIONS 4 DISTINCTION BETWEEN MERGERS AND ACQUISITIONS 5 TYPES OF MERGERS AND ACQUISITONS 7 Horizontal Merger 7 Vertical Merger 7 Co-Generic Merger 7 Conglomerate Merger 7 RECENT EXAMPLES 8 REASONS FOR MERGERS AND ACQUISITIONS 10 Growth of the company 10 Synergy 10 Diversification and expansion 11 Elimination of competition 11 × REASONS WHY MERGERS AND ACQUISITONS CAN FAIL 12 No common vision 12 Weak leadership and poor governance 12 Poor strategic fit 12 Cultural and Social Differences 13 Incomplete and Inadequate Due Diligence 13 Poorly Managed Integration 13 Overpaying the target company 13 Changing market condition 13 ARTICLE STATING REALITIES OF M&A for HR 14 SUCCESS MANTRA for M & As 15 Cultural integration 15 Change Management 16 Management resources 16 Role of HR in M&A’s 18 Three Stage Model of Mergers and Acquisitions 21 Stage 1-Pre-Combination (HR Issues): 21 Stage 2-Combination and Integration (HR Issues): 22 Stage 3: Solidification and Assessment (HR Issues): 22 Role of the HR Department in M&A Activity 23 INDUSTRY EXAMPLE – Schnieder 26 Challenges due to acquisitions 26 Industry Example – MTS 29 Conclusions 30 At the Company Level 30 At the HR Level 31 REFERENCES 33 EXECUTIVE SUMMARY Mergers and acquisitions, as a means of rejuvenating and restoring business, have become increasingly popular...
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...Management Fall 2009 Non-financial risk assessment in mergers, acquisitions and investments Identifying sources of business risk in the ICT industry Bachelors thesis Erik Allenstr¨m, 1984-11-26 o Fredrik Njurell, 1984-01-30 ¨ Tutor: Osten Ohlsson January 14, 2010 Abstract The number of company mergers and acquisition activities has increased dramatically the last two decades. The reasons for conducting these activities are many and the uncertainties of their results are high. To reduce the uncertainties when making an investment, merger or acquisition it is vital to do a thorough assessment of the risks involved with the activity. This thesis focuses on a specific part of this risk assessment, namely the non-financial risks. Mergers and acquisitions are done in almost all industries around the world and the reasons for and benefits of these activities can vary between industries. We have chosen to investigate the risk assessment of non-financial risks in the Information and Communication Technology (ICT) industry. The thesis aims at investigating what business characteristics, for companies in the ICT industry, that give rise to non-financial risks that must be assessed when doing investments, mergers or acquisitions. Further on we present a risk pattern that points out what business characteristics that are the most important when conducting a risk assessment of non-financial risks on companies in the ICT industry. From a literature study we find evidence that ten different...
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