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Mergers and Acquisitions in the Indian Pharmaceutical Sector

Author

Listed:
  • Santosh K. Sahu

    (Madras School of Economics)

  • Nitika Agarwal

    (Madras School of Economics)

Abstract

Mergers and acquisitions (M and A) are common strategies of firms to increase its performance. Although, the motives of M and A are different however, the determinants are discreet. This study tries to determine the factors affecting M and A activities in the Indian pharmaceutical sector. The empirical findings suggest; export intensity, import intensity, firm size and research and development intensity as the major determinants of M and A in the Indian pharmaceutical sector. In the context of acquisition, there is a riskiness associated with any business strategy, for to which a firm may choose to finance the deal either via cash, stock or assets. This study further looks at the firm’s decision on the types of acquisitions and arrives at the determinants of such decisions. The factors such as capital intensity was found more important when acquisition by share was undertaken compared to others. The success of the M and A is observed by considering the financial performance of the firm measured in terms of profit margin at firm level. Using propensity score matching technique, this study concludes that M and A have positive effect on the profit margin in the post M and A scenario.

Suggested Citation

  • Santosh K. Sahu & Nitika Agarwal, 2015. "Mergers and Acquisitions in the Indian Pharmaceutical Sector," Working Papers 2015-122, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2015-122
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    References listed on IDEAS

    as
    1. Helen Louri, 2001. "Entry through Acquisition: Determinants of Multinational Firm Choices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(2), pages 199-209, September.
    2. Pradhan, Jaya Prakash & Abraham, Vinoj, 2004. "Overseas Mergers and Acquisitions by Indian Enterprises: Patterns and Motivations," MPRA Paper 17076, University Library of Munich, Germany.
    3. Gautier Duflos & Etienne Pfister, 2008. "Searching for innovations? the technological determinants of acquisitions in the pharmaceutical industry," Documents de travail du Centre d'Economie de la Sorbonne bla08057, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007. "Mergers and acquisitions in the pharmaceutical and biotech industries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
    5. Gautier Duflos & Etienne Pfister, 2008. "Searching for Innovations ? The Technological Determinants of Acquisitions in the Pharmaceutical Industry," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00331211, HAL.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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