Merck’s acquisition of Medco:
Merger Analysis and Recommendation

by Marzena Porebski
.

Table of Contents

1.0 INTRODUCTION 2 2.0 THE COMPANY OVERVIEW 3 2.1 Merck & Company 3 2.2 Medco Containment Services Inc. 5 2.3 The Companies Advantages 6 3.0 MERCK & MEDCO MERGER 7 3.1 Acquisition Details 7 3.2 Merger Analysis 7 4.0 CONCLUSION 11 5.0 APPENDIX 12 5.1 Financial Reports 12 5.2 Sales of Drugs and Prices 13 5.3 Merger and Acquisition Activity 14 5.4 Market Share 15 5.5 Additional Documents 15 6.0 References 15

1.0 INTRODUCTION

Mergers and acquisitions occur because directors see benefits that could come from combining two or more businesses, which could improve the company’s overall financial performance. Mergers and related acquisitions have occurred in the United States in a series of waves over the last century or more, as can be seen on the chart in Appendix 5.3. Over time, mergers have become popular and in recent times, the growth has been steeper outside of the United States. One of many reasons why mergers occur is due to macroeconomic factors that contribute to a merger wave such as economic conditions, credit availability, industry shocks, government policy changes, competitive business environment, innovation, technological developments, or globalization (Thompson).
Mergers and acquisitions can generate cost efficiency through economies of scale, can increase the revenue through gain in market share, reduce the cost of capital, and can even generate tax gains. Among the major benefits of mergers and acquisitions are increased value generation, increase in cost efficiency and increase in market share. (M&A Due Diligence)
This report analyses the merger between Merck & Company, the world’s largest drug manufacturer, and Medco Containment Services Incorporated, the largest