MERGERS & ACQUITIONS- ABNORMAL RETURNS IN THE PHARMACEUTICAL INDUSTRY

Abstract

In this thesis we will analyse the long-term effect on the share prices of the public traded company when one large pharmaceutical enterprise acquires or merges with another pharmaceutical company in seek of amplifying their business. Now a day M&A has become a phenomenon, an integral part of commercial activities. This form of inorganic growth for many reasons, which will be discussed later on in this report, has been the choice of many in this day and era. This as a result has had a great impact on the financial markets, with M&A having larger deal values today than ever before. Being a highly developing industry, the pharmaceutical industry forms an interesting case study, with several substantial acquisitions in the past and present decade. The need to analyse this phenomenon is to enable us to understand and confirm whether or not in the long run abnormal returns are generated in such large acquisitions in the pharmaceutical world. Empirical findings show as will be investigated and demonstrated for the pharmaceutical industry in this report as well, that the bidder firm often generate low, zero or even negative abnormal returns.