Mergers and acquisitions in the pharmaceutical and biotech industries
AbstractWe examine the determinants and effects of M&A activity in the pharmaceutical|biotechnology industry using SDC data on 383 firms from 1988 to 2001. For large firms, mergers are a response to expected excess capacity due to patent expirations and gaps in a firm's product pipeline. For small firms, mergers are primarily an exit strategy in response to financial trouble (low Tobin's q, few marketed products, low cash-sales ratios). In estimating effects of mergers, we use a propensity score to control for selection based on observed characteristics. Controlling for merger propensity, large firms that merged experienced a similar change in enterprise value, sales, employees, and R&D, and had slower growth in operating profit, compared with similar firms that did not merge. Thus mergers may be a response to trouble, but they are not a solution. Copyright © 2007 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.
Volume (Year): 28 (2007)
Issue (Month): 4-5 ()
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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976
Other versions of this item:
- Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2004. "Mergers and Acquisitions in the Pharmaceutical and Biotech Industries," NBER Working Papers 10536, National Bureau of Economic Research, Inc.
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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