Performance of Mergers and Acquisitions in the Pharmaceutical Industry: A Comparative Perspective

This study provides new evidence on the nature of value creation in M&A activity based on a sample of giant pharmaceutical M&As and independent non-M&A rival firms. Relying on multiple indicators of performance, their post-M&A performance was compared with their pre-M&A performance as well as with the performance of other major pharmaceutical firms that have not been involved in M&A activity. Based on three measures of operating M&A performance, it has been noted in general that no value creation was realized in the sample M&As in terms of research productivity, return on investment, and profit margin. The sample M&As had lower research productivity than that of both pre-M&A and independent non-M&Arival firms. In a similar vein, with regard to return on investment, M&As were not better than their pre-M&A firms, but performed relatively better than their non-M&A rivals. As far as the profit margin is concerned, the sample M&As, however, appeared to have better performance than pre-M&Afirms and almost on par with the non-M&A rivals.