Merger/Acquisition Glaxo Wellcome (UK) - SmithKline Beecham
2. Price Paid What are the factors used in determining the price paid? What are the pros and cons of merging or acquiring another company? Done
3. Measurements of Success How can you determine whether this deal was considered a success or failure, and why? Need to be complete in essay form and properly sited and need to be including 300-400 words.
4. Behavior of Stock after Announcement. Why the acquiring company's stock rose or fell after the deal was announced? Need to be complete in essay form and properly sited and need to be including 300-400 words.
5. Expected Benefits Realized. How can you determine whether or not the anticipated benefits were realized? done
6. Special Problems of doing Business Internationally
What are at least four international financial management issues the combined company doing business internationally must address that would not be a concern of a company just doing business domestically?
What are some ways in which an international company can protect itself from any adverse effects of or risks from the issues chosen in h. above, giving specific examples from your specific companies?
2. Price Paid What are the factors used in determining the price paid? What are the pros and cons of merging or acquiring another company?
Some of the factors used in determining the price paid for the acquired company:
If the acquired firm is a listed entity, the prevailing prices of the shares of the company on the stock exchange is a major criteria for valuing the company. If it is an unlisted company, the valuation is done by comparing the valuation of its listed peers, and adjusting the valuation in comparison to the listed company by giving suitable premium or discount to the acquired firm, based on host of factors such as market share, product range, reach, brand awareness, competitive advantages/weaknesses, etc.
The pros of merging or acquiring company is certainly the synergies obtained due to the merger or acquisition, as evident from increase in revenues, profitability, market share, operating margins, etc. If successful, mergers can result in significant cost savings, thereby allowing the firm to become more competitive in the marketplace. Mergers or acquisition allow the firm to vertically or horizontally integrate and thus, become more competitive in the marketplace.
The cons are those related to risks due to differences in cultures, management styles and practices of two distinct entities, which , if not successful, can result in trouble and erosion of value for the merged entity.
3. Measurements of Success: How can you determine whether this deal was considered a success or failure, and why? Need to be complete in essay form and properly sited and need to be including 300-400 words.
In any merger or acquisition deal, the success can be best determined by looking at the improvement in performance levels, as indicated by the financial statements of the merged entity. As it is truly said that the "Whole" is greater than the sum of two parts, the merger of Glaxo and Smithkline can be termed successful only if the combined financial performance of he merged entity resulted in benefits or improvements that would not have been possible if the companies would have operated on a standalone basis. This quantitative benchmark for judging the success is the most objective measure for judging the outcome of a merger.
Another indicator that can display the success or failure of the merger is the improvement in operating efficiency of the combined entity, which clearly reflects the level of operating synergies due to the merger. The improvement in operating margins signify that the merger has resulted in positive synergies for the merged entity.
Further, improvement in market share as well as market reach also critical indicators for evaluating the success of any merged entity. The combined strength of both Glaxo and Smithkline's products, brand recognition and reach can be combined and leveraged to obtain higher growth, increased market share and brand recognition in the marketplace. Therefore, such indicators clearly display the success of the merger transaction.
One of the primary reasons such as large scale mergers between pharma companies like Glaxo and Smithkline is taking place to reduce cost ...
This solution discusses factors used in determining the price paid and the pros and cons of merging or acquiring another company structured to match the the questions (2) through (6) above in 1989 words.