This thesis (Mergers and Acquisitions: Abnormal returns in the pharmaceutical industry) is prepared with reference to the long term effect of stock prices when one giant pharmaceutical business acquires or merges with another pharma company to grow their business. The M&A trend is an exciting part of conducting business today also it can be made for many good reasons, that will be talked about later on in this dissertation. It might have a great impact on the financial markets and we explore it because the Mergers and Acquisitions M&A’s requires larger deal values today than ever before.
This thesis (Mergers and Acquisitions: Abnormal returns in the pharmaceutical industry) is written within the field of finance and covers the Merger & Acquisition (M&A) phenomenon within the pharmaceutical industry. The purpose with this thesis is to examine the pharmaceutical industry and, with some key acquisitions done over the last five years, see if our hypothesis about no abnormal returns after an M&A to the buying firm, holds within the industry.The model used is the Arbitrage pricing model, incorporating the variables; S&P 500, ^DRG, US inflation and stock volume traded on NYSE, to calculate expected returns for a period of 48 months after the M&A’s. Furthermore we use AMEX pharmaceutical index (^DRG) and Standard & Poor 500 (S&P 500) as our base for measuring post-M&A performance 48 months after the M&A’s.
Contents: Mergers and Acquisitions (M & A): Abnormal returns in the pharmaceutical industry
Introduction
1.1 Background
1.2 Problem Definition
1.3 Purpose
1.4 Limitations
1.5 Disposition
2 Methodology
2.1 Choice Of Method
2.1.1 Qualitative Vs. Quantitative
2.1.2 Inductive Vs. Deductive
2.2 Data Collection
2.3 Critique Of Chosen Method
2.3.1 Validity
2.3.2 Reliability
3 Historical Background Of Mergers And Acquisitions M&A
4 Relevant Case Studies
5 Theoretical Framework
5.1 Tobin’s Q
5.2 The Arbitrage Pricing Theory
5.3 Choosing An Index For Post-M&A Mergers and Acquisitions Performance
5.3.1 Standard & Poor 500
5.3.2 Amex Pharmaceutical Index
5.4 The Finance Strategy Perspective
5.4.1 Shareholder Wealth Maximization
6 The Pharmaceutical Industry
6.1 Historical Development Of The Pharmaceutical Industry
6.2 Driving Forces Within The Pharmaceutical Industry
6.3 Facts On The Three Cases
6.3.1 Pfizer
6.3.2 Bristol-Myers Squibb
6.3.3 Glaxosmithkline
7 Empirical Findings
7.1 Estimating Future Returns
7.2 Post-M&A Mergers and Acquisitions Performance…
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