Android Project Report
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Test of market efficiency with special reference to mergers in pharmaceutical industry of India Submitted to Lovely Professional University
In partial fulfilment of the Requirements for the award of Degree of Master of Business Administration
Submitted by: Arif Lateef Gilkar. (10800545) Nitish Sen. (10800321) Shamshar Singh.(10800743) Priyanka Thakur.(10800442)
DEPARTMENT OF MANAGEMENT LOVELY PROFESSIONAL UNIVERSITY JALANDHAR NEW DELHI GT ROAD PHAGWARA PUNJAB
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ACKNOWLEDGEMENT
We hereby take an opportunity to express our profound gratitude of all those who have helped and encouraged us towards the successful completion of the Capstone project report. It has been a great experience to work under the supervision of Mr. Gurpreet Grewal and was a great opportunity for us to learn something. We are highly thankful for his support and kind attitude which helped us a lot and made our project a success. Above all our family members have always been our biggest supporters. In spite of our serious efforts to complete this project, if we have committed any error it should be looked upon with sympathy.
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DECLARATION
We Arif Lateef Gilkar, Nitish Sen, Shamshar Singh, Priyanka Thakur, do hereby declare that project report titled Test of market efficiency with special reference to merger in pharmaceutical industry of India submitted to Lovely Professional University Punjab for the partial fulfillment of the requirement for the degree of MBA is one of our original work under the continuous guidance of Mr. Gurpreet Grewal We have not submitted this training report to any University for the award of any other degree.
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CERTIFICATE
This is to certify that the project report titled Test of market efficiency with special reference to merger in pharmaceutical industry of India carried out by Mr. Aarif Lateef Gilkar has been accomplished under my guidance & supervision as a duly registered MBA student of the Lovely Professional University, Phagwara. This project is being submitted by him in the partial fulfilment of the requirements for the award of the Master of Business Administration from Lovely Professional University.
This dissertation represents his original work and is worthy of consideration for the award of the degree of Master of Business Administration.
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CERTIFICATE
This is to certify that the project report titled Test of market efficiency with special reference to merger in pharmaceutical industry of India carried out by Mr.Nitish Sen has been accomplished under my guidance & supervision as a duly registered MBA student of the Lovely Professional University, Phagwara. This project is being submitted by him in the partial fulfilment of the requirements for the award of the Master of Business Administration from Lovely Professional University.
His dissertation represents his original work and is worthy of consideration for the award of the degree of Master of Business Administration.
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CERTIFICATE
This is to certify that the project report titled Test of market efficiency with special reference to merger in pharmaceutical industry of India carried out by Mr. Shamshar Singh has been accomplished under my guidance & supervision as a duly registered MBA student of the Lovely Professional University, Phagwara. This project is being submitted by him in the partial fulfilment of the requirements for the award of the Master of Business Administration from Lovely Professional University.
His dissertation represents his original work and is worthy of consideration for the award of the degree of Master of Business Administration.
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CERTIFICATE
This is to certify that the project report titled Test of market efficiency with special reference to merger in pharmaceutical industry of India carried out by Miss. Priyanka Thakur has been accomplished under my guidance & supervision as a duly registered MBA student of the Lovely Professional University, Phagwara. This project is being submitted by her in the partial fulfilment of the requirements for the award of the Master of Business Administration from Lovely Professional University.
His dissertation represents his original work and is worthy of consideration for the award of the degree of Master of Business Administration.
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Table of contents
Contents
Executive Summary CHAPTER-1 Introduction 1.1 Indian Pharmaceutical Industry 1.2 Indian Market 1.3 Industry structure 1.4 Growth Scenario 1.5 Patents 1.6 Product development 1.7 Small and medium enterprises 1.8 Challenges 1.9 Government support 1.01 Market Efficiency 1.02 The Effect of Efficiency 1.03 The Challenge to Efficiency 1.04 The Efficient market hypothesis (EMH) 1.05 Degrees of Efficiency 14-17 17 17-18 18 19 19 19 20 20 21 21 21 22 22 23 1.01 Mergers and Acquisitions 23 1.002 Distinction between mergers and acquisitions 1.003 Different Types of M&A 24
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1.004 Merger and Acquisition Strategy CHAPTER-2 Review of Literature Cont.. CHAPTER-3 3.0 Scope of the study 3.1 Objectives of study 3.2 Limitations CHAPTER- 4 4.0 Research Methodology 4.1 Purpose of the study 4.2 Objectives of general research 4.3 Objectives of this research 4.4 Hypothesis 4.5 Research design 4.6 Sampling Plan: 4.7 Methods of data collection 4.8 Statistical tools used CHAPTER-5 MERGERS Cont 5.0 Acquisition of Beta pharmaceutical by Dr. Reddys Laboratories 5.1 Sun Pharmaceutical and Taro Pharmaceutical 5.3 Companies vs Shareholder
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49 CHAPTER-6 DATA ANALYSIS AND INTERPETATION 6.1 Dr. Reddy & Beta pharmaceutical 6.01 Sun pharmaceutical & Taro pharmaceutical 6.001 Dr. Reddys laboratories Ltd. 6.002 Sun Pharmaceuticals Ltd. CHAPTER-7 7.1 Findings 7.2 Conclusion 7.3 Suggestions CHAPTER 8 BIBLIOGRAPHY 8.1 Books:8.2 Annual Reports:8.3 Journals:8.4 Websites:-
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Executive Summary
This empirical research indicates that merger announcements have a major impact on market efficiency of pharmaceutical industry in India. Such efficiency is particularly important for countrys economic performance which tends to be highly exposed to external companies. The rise of the competition, the financial liberalization allowing capital flows and the rapid technological changes are the basis of the globalization process extensively favoring the influence, presence and participation of foreign owned firms in national economies. This also triggers a lot of corporate restructuring activities of domestic firms. The process has caused a significant reshuffling and redeployment of firms assets and thereby reshaping of many industrial sectors. The present form of industrial ownership is witnessing strong mergers and acquisitions (M&A) activities around the globe. The phenomenon has tended to facilitate a reconfiguration of firms organizational structure and its core competencies. Most of the M&A deals are motivated, by the desire to obtain financial synergies, to gain market power, to obtain access to distribution channel or to gain entry into new geographical locality, thereby admitting that technological reasons do not motivate all M&A. However in the current globalised scenario there are certain high-tech industries where innovation is a key to competitive edge. Such firms will consider the impact of M&A on technological performance even when the deal is not innovation driven and choose the most appropriate innovation and financial strategy. The purpose of this study is to test market efficiency with respect to merger announcements using standard Past data by conducting event study methodology. Specifically, this study analyzes the effects of mergers announcements on stock prices and market efficiency. Using sixty days and eighty five days data before and after the merger. The positive and negative efficient market hypotheses have been used which tests an overall efficiency and measures the earnings as positive abnormal return on the basis of merger announcements. Specifically, this work focuses on market efficiency in pharmaceutical industry with respect to mergers. Evidence here supports positively that market efficiency along with a positive signal exhibited by the sample of acquiring firms during the event period. Evidence of earning excess returns after the merger announcement was also observed. This event study will test the idea of whether or not it is possible for a shareholder to earn above normal return with the announcement of a merger. This will therefore be a test of the Market Efficiency theory, seeing how quickly the stock price of a firm reacts to the particular announcement. The effect of Six company that enter into mergers agreement on the firms risk adjusted stock price will be examined to test if the announcement includes the positive or negative of the hypothesis with respect to timing and stock price change. The study will include data of 30 and 40 days before and after merger announcements, and will use the standard risk adjusted event study methodology. By reviewing the merger sample companys stock around the announcement date, it will be possible to tell if there is some kind of relationship between the
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two. If the Market exhibits the movement similar to the company, then the theory of an Efficient Market would hold true and an investor would not be able to receive an above normal return. But, if the firm exceeds the Market for a certain period of time relative to the announcement date, then the possibility of gaining an above normal return may occur, thus possibly challenging the Efficiency theory.
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CHAPTER-1
INTRODUCTION
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Contribution of emerging markets to overall sales of key pharmaceutical MNCs (current and future estimates)
Domestic companies are transforming their business model to play a larger role in global pharmaceutical market. The Indian pharmaceutical industry has been able to claim a share in the global market by leveraging its strengths and enhancing its regulatory and technical maturity. Formulations manufactured in India constitute 20 per cent of the global generics market by value, and the overall share of Indian manufactured formulations is as high as 46 per cent in the generics segment in the emerging markets. However, with the onset of the patent regime, the traditional reverse engineering capabilities of Indian pharmaceutical companies are no longer helpful, as they would not be able to replicate the patented product and launch it in the domestic market. Hence, going forward, India would be required to leverage its strengths in supply of low cost medicines across the world and invest in newer areas to drive growth. Opportunities exist ranging from the low value added segment. Thus, domestic companies can look forward to pursue all these opportunities and build capabilities to conduct drug discovery and in house development. Indian pharmaceutical market by 2020 (US $ billion)
After years of anemic growth in the Indian pharmaceutical market until the 1990s mainly due to a feeble intellectual property environment pharmaceutical MNCs have recorded steroid led growth in the domestic market. They have increased investments in the domestic market over the past few years and are now comfortably placed to capture a substantial share of the domestic market. Evidently, pharmaceutical MNCs are projected to capture a 35 per cent market share of
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the market by 2017, compared with 28 per cent in 2009. Over the years, pharmaceutical MNCs have adopted India focused strategies to tap the growing potential of the countrys pharmaceutical market. The advent of the product patent regime in 2005 instilled confidence in the countrys IP regime. With renewed confidence, large pharmaceutical MNCs are now looking to launch their patented drugs in India and such product launches are expected to increase further in future. Companies in Indian pharmaceutical industry can broadly be classified into two categories Indian origin companies (domestic companies) and foreign companies (MNCs). Some of the major players include GlaxoSmithKline, Cipla, Dr. Reddys Laboratories, Ranbaxy, Pfizer etc. India is fast becoming a global hub for all pharmaceutical manufacturing and research, and Indian generics today constitute nearly a fifth of global supplies. India tops the world in exporting generic medicines worth US $ 11 billion. Generics are expected to continue to dominate the market while patent-protected products are likely to constitute 10 per cent of the market till 2015, as per a McKinsey report. Multinational drug companies are showing a healthy growth in the Indian market setting a new trend. In terms of sale, out of 25 top medicine brands in 2011, 13 were global drug majors such as Pfizer, GSK and Novartis Over the past 50 years, the Indian pharmaceutical industry has undergone a massive makeover. They covered the journey from being followers to become strategic partners of MNEs particularly in their drug discovery research and development efforts. The Indian pharmaceutical industry ranked 3rd in the world in terms of production volume (10 percent of global share) and 13th in domestic consumption volume is one of the leading drug industries of developing countries. Over the last 30 years, Indias pharmaceutical industry has evolved from almost being nonexistent to a world leader in the production of high quality generic drugs. It has been valued at $5.3 billion in 2005 accounting for approximately one percent of global pharmaceutical industry. In 1995 when India became member of WTO, its pharmaceutical exports were valued at less than $600 million which has grown to $3.7 billion by 2005 and accounts for 61 percent of Industry turnover (Greene, 2007). The latest data specifies that the amount of exports has increased to $9.1billion. The export of pharmaceutical industry has grown at a CAGR of 14% in last decade (EXIM Bank Report, 2007). Currently India produces 20-22 (in volume) percent of worlds generic drug. The number of purely Indian pharma companies is fairly low. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labour in India at lowest cost. In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the market are small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act,
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multinationals represent only 35% of the market, down from 70% thirty years ago.Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Mirroring the social structure, firms are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise. Although many of these companies are publicly owned, leadership passes from father to son and the founding family holds a majority share.
drug company and Ranbaxy became Romanias third largest generic drug company and one of Belgiums top 10 generic providers.31 Indias pharmaceutical industry should witness a significant decline in the number of smaller companies that either leave the market or are acquired by larger Indian or foreign companies. Since 2000, a number of smaller Indian pharmaceutical companies have been acquired by larger companies including Wockhardts acquisition of Merind and Tata Pharma; Ranbaxys purchase of Crosland; Nicholas Piramals acquisition of Roche, Boehringer, and Sumitra Pharma, and Glaxo-Wellcomes merger with Ciba-Sandoz. Matrix, one of Indias and the worlds leading producers of APIs, was acquired by Mylan (US) in January 2007 for $546 million. Mylan, one of the largest generic drug producers in the United States, acquired Matrix to expand its manufacturing capabilities, gain a foothold in key markets, and gain access to Matrixs technical and scientific expertise. Since 2005, Europe has become a counterweight to the U.S. market and its growing pricing pressures. In exploring Western Europe for acquisitions, Indian pharmaceutical companies found a wider range of companies available at more reasonable valuations.
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1.5 Patents
As it expands its core business, the industry is being forced to adapt its business model to recent changes in the operating environment. The first and most significant change was the January 1, 2005 enactment of an amendment to Indias patent law that reinstated product patents for the first time since 1972. The legislation took effect on the deadline set by the WTOs Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which mandated patent protection on both products and processes for a period of 20 years. Under this new law, India will be forced to recognize not only new patents but also any patents filed after January 1, 1995. Indian companies achieved their status in the domestic market by breaking these product patents, and it is estimated that within the next few years, they will lose $650 million of the local generics market to patent holders. In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The multinationals narrowed their focus onto high end patients who make up only 12% of the market, taking advantage of their newly bestowed patent protection. Meanwhile, Indian firms have chosen to take their existing product portfolios and target semi-urban and rural populations.
party manufacturing. Under this these factories produced goods under the brand names of other parties on job work basis.
1.8 Challenges
Even after the increased investment, market leaders such as Ranbaxy and Dr. Reddys Laboratories spent only 5-10% of their revenues on R&D, lagging behind Western pharmaceuticals like Pfizer, whose research budget last year was greater than the combined revenues of the entire Indian pharmaceutical industry. This disparity is too great to be explained by cost differentials, and it comes when advances in genomics have made research equipment more expensive than ever. The drug discovery process is further hindered by a dearth of qualified molecular biologists. Due to the disconnect between curriculum and industry, Parmas in India also lack the academic collaboration that is crucial to drug development in the West and so far.
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1.04 The Efficient market hypothesis (EMH) The EMH does not dismiss the possibility of anomalies in the market that result in the generation of superior profits. In fact, market efficiency does not require prices to be equal to fair value all of the time. Prices may be over- or undervalued only in random occurrences, so they eventually revert back to their mean values. As such, because the deviations from a stock's fair price are in themselves random, investment strategies that result in beating the market cannot be consistent phenomena. Furthermore, the hypothesis argues that an investor who outperforms the market does so not out of skill but out of luck. EMH followers say this is due to the laws of probability: at any given time in a market with a large number of investors, some will outperform while other will remain average. In order for a market to become efficient, investors must perceive that a market is inefficient and possible to beat. Ironically, investment strategies intended to take advantage of inefficiencies are actually the fuel that keeps a market efficient. A market has to be large and liquid. Information has to be widely available in terms of accessibility and cost and released to investors at more or less the same time. Transaction costs have to be cheaper than the expected profits of an investment strategy. Investors must also have enough funds to take advantage of inefficiency until, according to the EMH, it disappears again. Most importantly, an investor has to believe that she or he can outperform the market.
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system. This means that synergy can obtained through many forms including such as; increased market share, cost savings and exploring new market opportunities. A vertical merger represents the buying of supplier of a business. In the same example as above if a health care system buys the ambulance services from their service suppliers is an example of vertical buying. The vertical buying is aimed at reducing overhead cost of operations and economy of scale. Conglomerate M&A is the third form of M&A process which deals the merger between two irrelevant companies. The example of conglomerate M&A with relevance to above scenario would be if health care system buys a restaurant chain. The objective may be diversification of capital investment.
Arm's length mergers An arm's length merger is a merger: 1. Approved by disinterested directors and 2. Approved by disinterested stockholders: The two elements are complementary and not substitutes. The first element is important because the directors have the capability to act as effective and active bargaining agents, which disaggregated stockholders do not. But, because bargaining agents are not always effective or faithful, the second element is critical, because it gives the minority stockholders the opportunity to reject their agents work. Therefore, when a merger with a controlling stockholder was: 1) Negotiated and approved by a special committee of independent directors and 2) Conditioned on an affirmative vote of a majority of the minority stockholders, the business judgment standard of review should presumptively apply, and any plaintiff ought to have to plead particularized facts that, if true, support an inference that, despite the facially fair process, the merger was tainted because of fiduciary wrongdoing.
Strategic Mergers
A Strategic merger usually refers to long term strategic holding of target (Acquired) firm. This type of M&A process aims at creating synergies in the long run by increased market share, broad customer base, and corporate strength of business. A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process
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CHAPTER-2
Review of Literature
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statistically significant also. Thus, the bidder banks got significant positive abnormal returns. The two-factor model results reveal that the merger announcement in the Indian private sector banks generated a positive and statistical significant CAR of 5.24%, 7.83% and 8.59% in a oneday, two-day, and three-day run-up window respectively to the shareholders of the bidder banks. The single-factor model finds that the combined CAR for all target banks is positive, significant and substantial. The combined CAR has been propped up due to very high CAR registered by Bank of Madura. The bidder banks created a wealth of Rs 4,117.98 million in a one day window (single-factor model) as a result of the merger announcements. In case of target banks, the shareholders of the Global Trust Bank and Bank of Punjab appear to be the losers as they lost Rs 382.55 million in a one day run up window (single-factor model) and Rs 128.74 million in a oneday window (single-factor model) respectively. Oriental Bank of Commerce and Global Trust Bank combined lost 14.78% in value on weighted average basis in a 11 days period (-5, 5) window. This merger was first major move to bail out sick bank. The merger announcements in the Indian banking industry have positive and significant shareholder wealth effect both for bidder banks and target banks. The market value weighted CAR of the combined bank portfolio as a result of merger announcement is 4.29% in a three-day period (-1, 1) window and 9.71% in 11-days period (-5, 5) event window.
formation of one, new, corporate structure. This new corporate structure retains its original identity. An acquisition is a little different from a merger in that it involves many problems being dissolved, and an entirely new company being formed. The overall goal is to ensure future stability and growth in the market. Reasons for mergers include reduced competition and/or product diversification, opportunity to expand by establishing their presence in a host country, to adopt technology from the other business rather than spending the time and money to develop it, Economies of scale and scope, to reduce its foreign exchange operating exposure. One major problem that may be incurred is cultural differences between the two businesses. This may lead to tension, conflict, and stresses between the organizations, namely its employees, lessening the chances of a smooth merger.
abnormal stock return at the merger announcement is a good predictor of the post-merger cash flow changes, whereas subsample analyses yield varying results that cast doubt to market efficiency. The variation of the findings across subsamples suggests that the market sticks to its dynamic clichs in the evaluating mergers future success in the environment of asymmetric information and these clichs sometimes incorporate misleading information content.
together a number of these scattered pieces of anomalous evidence regarding Market Efficiency. As Ball (1978) points out in his survey article: taken individually many scattered pieces of evidence on the reaction of stock prices to earnings announcements which are inconsistent with the theory don't amount to much. Yet viewed as a whole, these pieces of evidence begin to stack up in a manner which make a much stronger case for the necessity to carefully review both our acceptance of the efficient market theory and our methodological procedures.
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CHAPTER-3
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3.2 Limitations
This research was limited because of the fact that the major source of data was from the annual reports of the companies, which were subject to accounting policies and practices followed by the company. The major limitations are 1. Due to strict confidentiality policy of the company the financial department disclosed screened information. 2. Accuracy of the data provided cannot be guaranteed which does not clear idea with regard to the actual functioning. 3. The study was limited by shortage of time also. 4. The results are drawn from the companies past performance which may have no relevance in the future. 5. The scope of the study is limited to because only few companies were included in the research.
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CHAPTER- 4
RESEARCH METHODOLOGY
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4.4 Hypothesis
Null Hypothesis: 1. The Return of the stock price of the companies announcing a merger is not significantly affected by this type of information on the announcement date. 2. The Return of the stock price of the companies announcing a merger is not significantly affected by this type of information after the announcement date.
Alternative Hypothesis:
1. The Return of the stock price of the companies announcing a merger is significantly affected in a positive way by this type of information on the announcement date.
2. The Risk Adjusted Return of the stock price of the sample of firms announcing a merger is significantly affect in a positive way around the announcement date, as defined by the event period.
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Conclusive research is designed to assist the decision maker in determining evaluating and selecting the best course of action to take in a given situation. Conclusive research can be further divided into two types:1. Descriptive 2. Experimental
Descriptive study as the name implies is designed to describe something. The term descriptive research refers to the type of research question, design, and data analysis that will be applied to a given topic. It can involve collections of quantitative information that can be tabulated along a continuum in numerical form. Descriptive research involves gathering data that describe events and then organizes, tabulates, depicts, and describes the data collection. Exploratory research is often conducted because a problem has not been clearly defined as yet, or its real scope is as yet unclear. It allows the researcher to familiarize him/herself with the problem or concept to be studied, and perhaps generate hypotheses (definition of hypothesis) to be tested. It is the initial research, before more conclusive research is undertaken. Exploratory research helps determine the best research design, data collection method and selection of subjects, and sometimes it even concludes that the problem does not exist. In this project we have used Exploratory as well as Descriptive Research to understand the behavior of different types of mergers which in turn provided me an opportunity to know about the market efficiency and thus made it easier for me to formulate the above
mentioned hypothesis so that my project could reach to a logical conclusion. As mentioned above the Exploratory research was carried so as to come up with the real problem which was to reveal the pattern by how the mergers improves the market efficiency and what are the characteristics that companies observe in the industry before going for merger.
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Primary data consists of original information for the specific purpose at hand. It is first hand information for the direct users or respondents. The tools used to collect the data may vary depending upon the nature of the problem. The primary data was collected through Questionnaire, Interviews Secondary data may be defined as data that has been collected earlier for some purpose other than the purpose of the present study. Any data that is available prior to the commencement of the research project is secondary data and it is called historic data Uses of secondary data 1. It acts as a reference for the present study. 2. The secondary data can be a useful benchmark, which the findings of the study can be tested. 3. At times it may be the only source of data.
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Sources of secondary data 1. Published Sources 2. Unpublished sources Data collection methods can be classified as follows 1. Observation 2. Interviewing 3. Experimentation 4. Simulation 5. Projective techniques 6. Questionnaire In this project secondary data from published sources was collected.
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CHAPTER-5
MERGERS
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Introduction
On 7 Mar 2006, Dr. Reddy's Laboratories Limited (DRL), a leading Indian pharmaceutical company, acquired the fourth-largest generic pharmaceutical company in Germany, Beta pharmaceutical Arzneimittel GmbH (Beta pharmaceutical) from the 3i Group PLC (3i) for US$570 million (480 million). The sale deal also included the 'beta institute for socio medical research GmbH' (beta Institute), a non-profit research institute founded and funded by Beta pharmaceutical to conduct research on issues related to social aspects of medicine and health management. The acquisition was hailed as the biggest overseas acquisition made by an Indian pharmaceutical company. The synergies from the acquisition were expected to benefit both DRL and Beta pharmaceutical. Stated above is the vision with which DRL went for the acquisition of Beta pharmaceutical. Understand and appreciate the role of mergers and acquisitions as a growth strategy. Understand and discuss the rationale behind the acquisition of Beta pharmaceutical by Dr. Reddy's Laboratories. Understand the impact of business and regulatory environment (domestic and international) on mergers and acquisitions.
Announcement The Hyderabad based company Dr. Reddys signed a definitive agreement with 3i, the private equity house that controls Beta pharmaceutical, on Thursday, 16th February 2006, to acquire 100 per cent equity of the German drug major. Dr Reddy's said the transaction, subject to customary closing conditions, was expected to close in the first week of March 2006.Valuation at the time of acquisition Beta pharmaceutical was highly profitable, with estimated EBITDA margin of 2426%. With assumptions and available industry data, we have done a quick NPV valuation of Beta pharmaceutical and arrived at a value of 550-560 million (or Rs 380-400 per share) assuming WACC of 12% and a sustainable growth rate of 5%. The payback period is likely to be 6-7 years. Analysts expected the Beta pharmaceutical acquisition to add $ 200 million to Dr Reddy's top line immediately and the company's shares jumped 9.38 percent to hit its 52-week high price on the Bombay Stock Exchange
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Synergies from the Acquisition Not only is Dr. Reddy's non-existent in Germany, but the market has deep-rooted sales and distribution networks that makes inorganic expansion there tough and expensive for an outsider. Saion Mukherjee, Research Analyst, Brics Securities,in July 2006 The synergies from the acquisition were expected to benefit both DRL and betapharm. Through this acquisition DRL could get immediate access to the German generic market, the second-largest generic market in the world after the US. Germany also accounted for 66 percent of the generic market in Europe. The acquisition was expected to help DRL gain a strategic presence in the European market as the generic drug market in Europe was expected to show strong growth due to rising public healthcare costs. It was also expected to help DRL realize its ambition of becoming a US$1 billion mid-size global pharmaceutical company by 2008. Beta pharmaceutical was expected to benefit from the acquisition as it would be able to add more products to its portfolio and grow at a much faster rate in Germany. Besides, the acquisition would help it to utilize DRL's global product development and marketing infrastructure to expand its presence in the European market in the long run. Dr. Wolfgang Niedermaier (Niedermaier), CEO of Beta pharmaceutical, commented, "Dr. Reddy's impressive pipeline of generic and innovative products and its high quality standards combined with competitive manufacturing costs will help further develop our position in the German market and offer an entry platform for the European market. Its extensive and well-recognized corporate social responsibility activities perfectly fit with our successful corporate philosophy and business model. We see Dr. Reddy's as our partner of choice to build a successful joint future and continue betapharm's growth and success story." Though DRL was not the highest bidder, it clinched the deal largely due to the perceived synergies between the two companies. DRL's strong commitment to corporate social responsibility (CSR) initiatives too helped swing the deal in its favor as Beta pharmaceutical identified with such initiatives through the activities conducted by beta Institut. However, some analysts were of the opinion that DRL had paid too much to 3i for the acquisition as the value of the acquisition was estimated to be more than three times the annual sales of Beta pharmaceutical. Their argument was strengthened by the fact that another Indian pharmaceutical major, Ranbaxy Laboratories Limited7 (Ranbaxy), which had also aggressively competed for the acquisition and was a pre-sale favorite to bag the Beta pharmaceutical deal, pulled out at the last minute quoting the high price. DRL, however, justified the premium price saying that the advantages from the acquisition were manifold. A few also expressed their doubts as to whether DRL could leverage any benefits in the short term as Beta pharmaceutical was reportedly emerging from a lean period. A few months after the acquisition, there were already early signs of trouble, as the Economic Optimisation of Pharmaceutical Care Act (AVWG) took effect in Germany on May 1, 2006. Though the act was expected to increase the scope for the use of generic drugs, it also put some
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price caps in place, which affected the margins of Beta pharmaceutical. Analysts opined that the payback to DRL from this acquisition would take a few years longer than previously expected. It was reported that DRL, which had plans for more acquisitions in Europe after the Beta pharmaceutical acquisition, had shelved its plans of any further acquisitions in Europe
Financing of the deal DRL had its war chest ready with a $200 million cash and remaining debt arranged from domestic FIs. DRL funded the acquisition through a combination of internal accruals and borrowings. Closure of the deal Dr. Reddy's Laboratories, announced the completion of 100 per cent acquisition of Beta pharmaceutical Group, Germany's fourth largest generic pharmaceutical firm, with a total enterprise value of 480 million Euros on Mar 07, 2006 Subsequent performance Dr Reddy's share price shot up by 9.3% to close at Rs 1,281 on February 16, 2006, when it announced the $560 million Beta pharmaceutical deal. Shares were trading higher at Rs 1,600 in early May. With the German government reducing prices of drugs in the range of 10-20%, the pricing environment became a little negative for the company in the first quarter, and the returns were on the lower side in Sep 2006. Of late DRLs subsidiary, Beta pharmaceutical, has returned to its usual sales levels at $51 million, and lower selling, general & administrative (SGA) expenses led to better-than-expected operating margin adjusted for one-off opportunities. Beta pharmaceutical has achieved a 600 bps improvement in its active pharmaceutical ingredients (API) margins, which the management attributed to a better product mix, citing Amlodipine Besylate as one of the key products being sold.
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multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products.
Merger Sun Pharmaceutical and Taro Pharmaceutical Industries Ltd. announced that they have entered into a merger agreement together with certain affiliates of Sun Pharmaceutical. The merger agreement provides that all shareholders of Taro other than Sun Pharmaceutical and its affiliates will receive a cash payment of $ 39.50 per share upon the closing of the merger. Sun Pharmaceutical and its affiliates collectively own approximately 66.0% of the outstanding Taro ordinary shares and 100% of Taros founders shares, representing approximately 77.5% of the outstanding voting power in Taro. Upon completion of the merger, Taro will become a privately held company, will be wholly owned by affiliates of Sun Pharmaceutical, and its ordinary shares will no longer be traded on the New York Stock Exchange. The closing of the merger is subject to certain terms and conditions customary for transactions of this type, including the affirmative vote at the shareholder meeting to be convened to approve the merger 1) At least 75% of the voting power of the Taro ordinary shares voting at the Shareholder Meeting, 2) At least 75% of the voting power of the Taro founders shares voting at the Shareholder Meeting and 3) At least 75% of the total voting power of Taro (ordinary shares and founders shares together) Voting at the Shareholder Meeting, including at least a majority of the voting power voted that is not held by Sun Pharmaceutical or its affiliates unless the total voting power of Taro held by holders other than interested shareholders and voting against the merger does not exceed 2% of the total voting power of Taro. In connection with the proposed transaction, Taro intends to mail a proxy statement to its shareholders and to file relevant materials with the United States Securities and Exchange Commission. The merger agreement was approved by Taros Board of Directors based upon the recommendations and approvals of the Special Committee of Taros Board of Directors the Special Committee and the Audit Committee of Taros Board of Directors. The Special Committee was advised by its independent financial advisor Citigroup Global Markets Inc. and its independent legal counsel Goldfarb Seligman & Co. as its Israeli legal counsel and Willkie Farr & Gallagher LLP as its United States legal counsel. Safe Harbor Statement Certain statements in the press release are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements that do not describe historical facts and statements that refer or relate to events or circumstances that Sun Pharmaceutical or Taro estimates, believes, or expects to happen or similar language. The forward-looking statements in the press release are based on the current expectations of Sun Pharmaceutical and Taro and are made only as of the date of this
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announcement and involve certain risks and uncertainties that could cause actual results to differ materially from future results that may be expressed or implied by such forward looking statements. Various factors that could cause actual results to differ materially from those expressed in such forward-looking statements include, but are not limited to, risks associated with uncertainty as to whether the transaction will be completed, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, potential litigation associated with the transaction, the failure to obtain shareholder approval and the failure of either party to meet the closing conditions set forth in the merger agreement. Unless required by law, neither Sun Pharmaceutical nor Taro undertake any obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.
Successful acquisition On 13 August 2012, Sun Pharmaceutical Industries Ltd had completed the acquisition of a controlling stake in Taro Pharmaceutical Industries Ltd ending a three-year battle for control of the Israeli drug maker. Sun Pharmaceutical's units have increased their economic interest in Taro to 48.7% and their voting rights to 65.8%. The victory for Sun Pharmaceutical comes after a legal battle in Israel and in U.S. following Taro's termination in 2008 of a merger agreement signed between the two companies in 2007.In connection with the closing of the Option Agreement, Sun and the members of the current Board of Directors of Taro, including members of the Levitt and Moros families, have settled all outstanding litigation among themselves. Sun Pharmaceutical intend to build on Taro's market presence in U.S., Israel and Canada and its expertise in dermatology and pediatrics, along with specialty and generic pharmaceuticals, and over-the-counter products. Sun Pharmaceutical Chairman Dilip Shanghvi has been appointed to serve as chairman of the Taro board. Israeli Supreme Court ruled in favour of Sun Pharmaceutical by unanimously dismissing the appeal by Taro of the previous ruling by the Tel-Aviv District Court holding that the Israeli special tender offer (STO) rules do not apply to the Tender Offer by Sun Pharmaceuticals subsidiary, Alkaloida Chemical Company Exclusive Group Ltd. to purchase all outstanding Ordinary Shares of Taro for $7.75 net per ordinary share in cash. At that time, Sun Pharmaceutical had a 36% equity stake in Taro with 24% voting rights. Sun Pharmaceutical had signed a $454 Mn merger agreement with Taro in 2007 including equity purchase of approximately $230 Mn at $7.75 per share in cash. However, in May 2008, Taro unilaterally terminated the agreement claiming lower valuations. In 2008, Sun Pharmaceutical launched an open offer to acquire additional stake in Taro, which was challenged by the latter. Both companies then filed suits in Israeli and the US courts. In a separate statement, Taro said its current board members were resigning and that appointees of Sun Pharmaceutical would become
directors of Taro, effective immediately.
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CHAPTER-6
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0.015892202 0.011395931 -0.003144667 0.002344626 -0.005896088 -0.014415477 -0.006820323 -0.000713153 -0.006720581 0.000315749 -0.008224064 0.022983417 0.007526053 -0.005888062 0.008982662 0.014222109 0.019105407 -0.002204484 0.007194617 -0.006111963 -0.001560969 -0.010289652 0.024412425 0.010205983 -0.003715429 0.006585484 0.006159646 -0.008514487
1.821649911 1.507563052 0.464458614 -1.222460696 3.398142865 -2.295204594 -0.839809815 -0.106219469 0.402730301 -2.526467132 1.107520501 -1.857764874 -0.928320096 -0.23596702 0.043228494 2.930161151 -2.764980661 4.858556458 -1.749647804 4.933138987 -0.930280489 -1.168479661 0.572814403 1.540616502 -2.590262171 0.214679228 -1.773342586 -2.561606915
1.82165 3.32921 3.79367 2.57121 5.96935 3.67415 2.83434 2.72812 3.13085 0.60438 1.71190 -0.14586 -1.07418 -1.31015 -1.26692 1.66324 -1.10174 3.75682 2.00717 6.94031 6.01003 4.84155 5.41436 6.95498 4.36472 4.57940 2.80605 0.24445
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15-Feb06 17-Feb06 20-Feb06 21-Feb06 22-Feb06 23-Feb06 24-Feb06 27-Feb06 28-Feb06 1-Mar-06 2-Mar-06 3-Mar-06 6-Mar-06 7-Mar-06 8-Mar-06 9-Mar-06 10-Mar06 13-Mar06 14-Mar06 16-Mar06 17-Mar06 20-Mar06 21-Mar06 22-Mar06 23-Mar06 24-Mar06 27-Mar06 28-Mar06 29-Mar06 30-Mar06 31-Mar06
1171.9 1286.1 1326.45 1386.8 1351.5 1367 1308.55 1319.3 1306.1 1325.35 1316.2 1326.85 1323.5 1308.35 1303.65 1332.55 1351.05 1358.7 1361.15 1351.95 1347.9 1365.35 1361.85 1486 1446.15 1432.65 1449.75 1422.1 1425.65 1419.45 1421.4
10,113.18 9,981.11 10,079.30 10,168.11 10,224.32 10,244.05 10,200.76 10,282.09 10,370.24 10,565.47 10,626.78 10,595.43 10,735.36 10,725.67 10,508.85 10,573.54 10,765.16 10,803.71 10,801.72 10,878.74 10,860.04 10,941.11 10,905.20 10,841.35 10,840.59 10,950.30 11,079.02 11,086.03 11,183.48 11,307.04 11,279.96
0.004586173 0.097448588 0.031373921 0.04549738 -0.025454283 0.011468738 -0.042757864 0.0082152 -0.010005306 0.014738535 -0.006903837 0.008091475 -0.002524777 -0.011446921 -0.003592311 0.022168527 0.013883156 0.005662263 0.001803194 -0.006758991 -0.002995673 0.012946064 -0.002563445 0.091162757 -0.026816958 -0.009335131 0.011935923 -0.019072254 0.002496308 -0.004348893 0.001373772
0.002632197 -0.013059196 0.009837583 0.008811128 0.005528068 0.001929713 -0.004225868 0.007972935 0.00857316 0.018825987 0.005802865 -0.002950094 0.013206637 -0.000902625 -0.020215054 0.006155764 0.018122597 0.003580996 -0.000184196 0.007130346 -0.001718949 0.007464982 -0.003282117 -0.005855005 -7.0102E-05 0.010120298 0.011754929 0.000632727 0.008790342 0.011048439 -0.002394968
0.007030638 -0.001125111 0.010775705 0.010242195 0.008535793 0.006665515 0.003466094 0.009806536 0.010118509 0.015447512 0.008678622 0.004129189 0.012526802 0.005193381 -0.004844435 0.008862045 0.015081918 0.007523785 0.005566791 0.009368593 0.004769089 0.009542523 0.003956618 0.002619335 0.005626092 0.010922648 0.011772263 0.005991395 0.010231391 0.011405058 0.004417721
-0.244446481 9.857369882 2.059821656 3.525518547 -3.399007673 0.480322368 -4.622395809 -0.159133637 -2.012381449 -0.0708977 -1.55824589 0.396228597 -1.505157873 -1.664030195 0.125212449 1.33064823 -0.119876163 -0.186152231 -0.376359668 -1.61275832 -0.776476153 0.340354152 -0.652006284 8.854342176 -3.244305062 -2.025777941 0.016365984 -2.506364836 -0.773508312 -1.57539519 -0.304394985
0.00000 9.85737 11.91719 15.44271 12.04370 12.52402 7.90163 7.74250 5.73011 5.65922 4.10097 4.49720 2.99204 1.32801 1.45322 2.78387 2.66400 2.477843 2.101483 0.488725 -0.28775 0.052603 -0.5994 8.254939 5.010634 2.984856 3.001222 0.494857 -0.27865 -1.85405 -2.15844
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Regression Statistics Multiple R 0.244089 R Square 0.059579 Adjusted R Square 0.024749 Standard Error 0.021574 Observatio ns 29 ANOVA df Regression Residual Total 1 27 28 Coefficient s SS 0.00079 6 0.01256 6 0.01336 2 Standar d Error 0.00413 8 0.39740 5 MS 0.00079 6 0.00046 5 F 1.71055 5 Significan ce F 0.20194
P-value 0.18249 9
Lower 95%
Intercept
0.005663
-0.00283
X Variable 1 0.519759
0.20194
-0.29565
It is being presents by the above mentioned tables 1 that the CER (cumulative excess returns) of Dr. Reddy and Beta Pharma accumulated for the period (-30 to +30), i.e., from 30 days before the merger to 30 days after the merger. From the table it is clear that the entire time window is displaying marginal changes in CERs for Dr. Reddy. In relative terms, the CER is increasing marginally during the 30 days prior to the announcement of merger. After the date of merger announcement through the next 30 days it experienced a positive excess returns reflecting that the shareholders expected benefits from the merger. However, if CER is re-evaluated after omitting this positive announcement day excess return, CER for the period of next 30 days after merger announcement it declined it declines with a minimal rate as the information of merger is diffused in the market.
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Dr. Reddy experienced high positive returns during 30 days through 5 days prior to merger announcement deal. It was followed by the high positive return again after the merger announcement for next 5 days and after that the share prices resumed an upward trend. Hence, on the whole Dr. Reddys shareholders experienced almost positive returns during the entire time window of -30 to +30. This further supports our hypothesis, it is analyzed that: Dr. Reddy experienced negative returns during the period -10 to -15 days except on the date of announcement of the deal. Dr. Reddy experienced high positive returns during the period 15 to 20 days and again during +52 to +54 days.
These trends started around 30 days before the announcement of the deal compatible with Beta pharmaceutical and lasted for further 30 days. However, an opposite trend is observed immediately after few days of announcement. In case of Dr. Reddy, after the trend of negative returns for few days it experienced positive returns for the next upcoming days. On the other hand, in case of Beta Pharma, after the trend of positive returns it experienced negative returns for the next 5 days. The subsequent opposite trend can be due to overshooting of market expectations. The information about the proposed merger deal was taken as positive information for the shareholders of Dr. Reddy and it also act as positive information for the shareholders of Beta Pharma. Hence, the market responded to the information positively
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06 16-Mar06 17-Mar06 20-Mar06 21-Mar06 22-Mar06 23-Mar06 24-Mar06 27-Mar06 28-Mar06 29-Mar06 30-Mar06 31-Mar06 3-Apr-06 4-Apr-06 5-Apr-06 7-Apr-06 10-Apr06 12-Apr06 13-Apr06 17-Apr06 18-Apr06 19-Apr06 20-Apr06 21-Apr06 24-Apr06 82.75 83.25 83.4 84 83.9 84.7 84.65 86.55 87 88.5 90.6 110.15 99.25 97.25 97.1 95.05 98.7 99.05 100 103.1 101.25 103.05 100.4 98.35 99.65 9328.92 9533.52 9716.16 9647.31 9903.46 9958.22 10275.6 10335.93 9586.88 9406.47 9110.05 13000 13525.99 13349.65 13964.26 13926.24 13469.85 13330.51 12676.19 12575.8 13111.85 13635.4 13850.04 13900.2 13910.3 0.01784 0.00604 0.00180 0.00719 -0.00119 0.00954 -0.00059 0.02245 0.00520 0.01724 0.02373 0.21578 -0.09896 -0.02015 -0.00154 -0.02111 0.03840 0.00355 0.00959 0.03100 -0.01794 0.01778 -0.02572 -0.02042 0.01322 -0.02506 0.02193 0.01916 -0.00709 0.02655 0.00553 0.03187 0.00587 -0.07247 -0.01882 -0.03151 0.42700 0.04046 -0.01304 0.04604 -0.00272 -0.03277 -0.01034 -0.04908 -0.00792 0.04263 0.03993 0.01574 0.00362 0.00073 -0.01381 0.01360 0.01199 -0.00332 0.01630 0.00404 0.01940 0.00424 -0.04147 -0.01017 -0.01757 0.24991 0.02441 -0.00680 0.02767 -0.00078 -0.01831 -0.00522 -0.02783 -0.00381 0.02568 0.02410 0.00999 0.00292 0.00123 3.16452 -0.75625 -1.01846 1.05181 -1.74903 0.54993 -1.99935 1.82101 4.66675 2.74097 4.13026 -3.41292 -12.33702 -1.33555 -2.92112 -2.03340 5.67094 0.87709 3.74162 3.48101 -4.36209 -0.63266 -3.57090 -2.33412 1.19841 3.31282 2.55658 1.53812 2.58993 0.84091 1.39084 -0.60851 1.21250 5.87925 8.62022 12.75048 9.33756 -2.99947 -4.33502 -7.25614 -9.28953 -3.61859 -2.74150 1.00012 4.48113 0.11904 -0.51362 -4.08452 -6.41864 -5.22023
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Regression Statistics Multiple 0.514033 R 336 0.264230 R Square 271 Adjusted 0.261227 R Square 129 Standard 0.025646 Error 195 Observat ions 247 ANOVA Df Regressi on Residual Total 1 245 246 Coefficie nts 0.000810 062 0.583385 108 SS 0.057869 883 0.161143 188 0.219013 07 Standard Error 0.001639 142 0.062194 498 MS 0.057869 883 0.000657 727 F 87.98461 495 Significa nce F 4.64559 E-18
The CER of Beta Pharma declined during the 30 days prior to the merger announcement with almost all the figures in negative terms and some of them are in positive, and rose with significant figures till next 30 days after the merger. On the announcement date, Beta Pharma experienced 3.44% positive returns. This high positive return supports the fact that the shareholders were satisfied by the swap ratio declared by Beta Pharma. Further, the positive change in CER does not last for a long period of time which could have benefited shareholders. If CER is considered after excluding the announcement days return, it is found that CER for the period (-30 to -1) increased overall and then there is additional increase during the 30 days after the merger. Thus, on ignoring 0 day CER, it is found that CER stays at positive for Beta Pharma shareholders during 30 days after the announcement of merger deal. Overall, it can be concluded that the period under review supports positive return to the target shareholders.
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Above graph shows a mixed trend during the 60 days (from -30 to +30) around the announcement of merger. During 30 days through few days prior to the announcement of offer the CER declined during the time period it accounted for about 6%. The trend of negative returns changed to positive after the announcement it yielded positive return of 17% immediately after the decline. Moreover, there was a positive shift in CER of 11%.However, CER fallen to near about 15%. This is consistent with our hypothesis. When Dr. Reddys and Beta Pharma merger was announced, Beta Pharma shareholders presumably expected that the proposed merger would lead to good returns given the lower risky business of Beta Pharma. This was due to the fact that pre merger Beta Pharma was 0.583385108. The shareholders of Beta Pharma were able to increase their returns with a significant amount which reviles that the merger by the two companies has benefited both the participants of the merger.
Since the study concentrates on stock price performance rather than free cash flow, the evidence provided by the study is adequate to accept hypothesis. Effectively, the Dr. Reddy and Beta pharmaceutical merger deal generated positive excess returns for the combined firm. The results are consistent with the Managerialism hypothesis that postulates positive excess returns for the combined firm due to empire building strategy or risk reduction. This is evident from several facts. Beta Pharma shareholders were able to obtain most of the gains. Dr. Reddys ambitious plans for diversification were dependent in large measure on Beta Pharma strong cash flows and it also needed to increase the size of its balance. The merger benefited both. Despite Dr Reddy professed objective of attaining leadership in the industry peer group, not only in terms of assets base, revenues, production volumes and market share, but also in terms of maximization of total shareholder returns the negative combined returns clearly indicate that the deal was undertaken by Dr. Reddy managers to maximize the utility of Beta Pharma business at the expense of Dr. Reddys shareholders returns can be studied both for the short term as well as the long term and the performances compared. Stock price movements are one of the tools to study the performance of mergers
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1-Feb-07 2-Feb-07 5-Feb-07 6-Feb-07 7-Feb-07 8-Feb-07 9-Feb-07 12-Feb-07 13-Feb-07 14-Feb-07 15-Feb-07 19-Feb-07 20-Feb-07 21-Feb-07 22-Feb-07 23-Feb-07 26-Feb-07 27-Feb-07 28-Feb-07 1-Mar-07 2-Mar-07 5-Mar-07 6-Mar-07 7-Mar-07 8-Mar-07 9-Mar-07 12-Mar-07 13-Mar-07
1045.7 1043.8 1052.85 1037.65 1048.4 1047.4 1034.5 1012.35 1015 1020.35 1031 1035.25 1029.7 1017.95 1004.75 974.15 982.45 953.6 929.3 955.25 969.05 942 948 948.9 966.95 984.5 1012.5 1020.9
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14-Mar-07 15-Mar-07 16-Mar-07 19-Mar-07 20-Mar-07 21-Mar-07 22-Mar-07 23-Mar-07 26-Mar-07 28-Mar-07 29-Mar-07 30-Mar-07 2-Apr-07 3-Apr-07 5/4/2007 9/4/2007 10/4/2007 11/4/2007 12/4/2007 13/04/07 16/04/07 17/04/07 18/04/07 19/04/07 20/04/07 23/04/07 24/04/07 25/04/07 26/04/07 27/04/07 30/04/07 3/5/2007 4/5/2007 7/5/2007
1002.1 1011.9 1012.4 1004.95 991.1 1016.45 1030.4 1030.25 1014.9 999.3 1014.05 1056.45 1046.05 1041.35 1060 1060 1089 1095 1097 1099 1098.2 1105.2 1156 1165 1176 1055 1061 1059 1073 1041 1028.05 1022 1010 1010.05
12,529.62 12,543.85 12,430.40 12,644.99 12,705.94 12,945.88 13,308.03 13,285.93 13,124.32 12,884.34 12,979.66 13,072.10 12,455.37 12,624.58 12,856.08 13,177.74 13,189.54 13,183.24 13,113.81 13,384.08 13,695.58 13,607.04 13,672.19 13,619.70 13,897.41 13,928.33 14,136.72 14,217.77 14,228.88 13,908.58 13,872.37 14,078.21 13,934.27 13,879.25
-0.018415124 0.009779463 0.00049412 -0.007358751 -0.01378178 0.025577641 0.013724236 -0.000145575 -0.014899296 -0.015370973 0.014760332 0.041812534 -0.00984429 -0.004493093 0.017909444 0 0.027358491 0.005509642 0.001826484 0.001823154 -0.000727934 0.006374067 0.045964531 0.007785467 0.00944206 -0.102891156 0.005687204 -0.001885014 0.013220019 -0.029822926 -0.012439962 -0.005884928 -0.011741683 4.9505E-05
-0.034919564 0.001135709 -0.009044273 0.017263322 0.004820091 0.018884081 0.027974151 -0.001660652 -0.012163996 -0.018285138 0.007398128 0.007121912 -0.047179107 0.013585305 0.018337244 0.025020068 0.000895449 -0.000477651 -0.005266535 0.020609571 0.023273919 -0.006464859 0.004787963 -0.00383918 0.020390317 0.002224875 0.014961593 0.005733296 0.000781416 -0.022510556 -0.002603429 0.014838128 -0.010224311 -0.003948538
0.018258319 0.002283019 0.003516699 0.011471211 0.004382078 0.012394587 0.017573363 0.000689883 0.005294062 0.008781387 0.005850833 0.005693467 0.025242801 0.009375779 0.012083044 0.015890369 0.002146139 0.001363859 0.001364454 0.013377629 0.014895557 0.002047161 0.004363774 0.000551264 0.013252716 0.002903537 0.010159874 0.004902348 0.002081173 0.011188684 0.000152765 0.010089534 0.004188989 -
-0.015680496 0.749644377 0.401081944 -1.882996266 -1.816385832 1.318305434 -0.384912688 -0.083545705 -0.960523423 -0.658958573 0.890949972 3.61190666 1.539851142 -1.386887159 0.582640086 -1.589036917 2.52123513 0.41457828 0.31909385 -1.155447542 -1.56234912 0.842122795 4.160075713 0.83367316 -0.381065635 -10.57946934 -0.447267063 -0.678736171 1.113884625 -1.863424275 -1.259272679 -1.597446208 -0.755269432 0.06630728
-1.33753 -0.58789 -0.18680 -2.06980 -3.88619 -2.56788 -2.95279 -3.03634 -3.99686 -4.65582 -3.76487 -0.15296 1.38689 0.00000 0.58264 -1.00640 1.51484 1.92942 2.2485104 1.0930629 -0.469286 0.3728366 4.5329123 5.3665854 4.9855198 -5.59395 -6.041217 -6.719953 -5.606068 -7.469492 -8.728765 -10.32621 -11.08148 -10.32621
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0.000613568 8/5/2007 9/5/2007 10/5/2007 11/5/2007 14/05/07 15/05/07 16/05/07 17/05/07 18/05/07 21/05/07 22/05/07 23/05/07 24/05/07 25/05/07 28/05/07 29/05/07 30/05/07 31/05/07 1/6/2007 4/6/2007 5/6/2007 6/6/2007 1005 1007 993.1 983 995 1015 1009 1010 1015 1067.75 1082.25 1082.3 1060.05 1069 1065 1105 1095 1135 1088.5 1075.1 1086.25 1072 13,765.46 13,781.51 13,771.23 13,796.16 13,965.86 13,929.33 14,127.31 14,299.71 14,303.41 14,418.60 14,453.72 14,363.26 14,218.11 14,338.45 14,397.89 14,508.21 14,411.38 14,544.46 14,570.75 14,495.77 14,535.01 14,255.93 -0.004999752 0.00199005 -0.013803376 -0.010170174 0.012207528 0.020100503 -0.00591133 0.00099108 0.004950495 0.051970443 0.013579958 4.62E-05 -0.020558071 0.008442998 -0.003741815 0.037558685 -0.009049774 0.03652968 -0.040969163 -0.012310519 0.010371128 -0.013118527 -0.00819857 0.001165962 -0.000745927 0.001810296 0.012300524 -0.002615664 0.014213175 0.012203314 0.000258747 0.008053324 0.002435743 -0.006258596 -0.010105645 0.008463853 0.004145497 0.007662234 -0.006674152 0.009234369 0.001807561 -0.005145926 0.002706997 -0.019200537 0.003034887 0.002300255 0.001211018 0.002667344 0.008643816 0.000145795 0.009733487 0.008588433 0.001783398 0.00622411 0.003023672 -0.00192965 0.004121382 0.006457995 0.00399775 0.006001298 0.002166399 0.006896972 0.002665786 0.001295741 0.00317821 0.009302906 -0.196486518 -0.031020525 -1.501439392 -1.283751792 0.356371219 1.995470793 -1.564481724 -0.75973531 0.316709692 4.574633383 1.055628577 0.197584956 -1.643668865 0.19850026 -0.773956462 3.155738723 -0.688337469 2.963270846 -4.363494869 -1.101477797 0.719291796 -0.381562076 -11.08148 -11.01517 -10.5227 -11.1125 -12.51661 -11.80645 -10.75613 -10.52114 -13.37093 -11.51587 -10.20443 -8.796298 -10.46024 -10.00685 -10.43997 -10.26174 -10.7808 -7.284228 -10.95007 -7.817533 -11.64772 -12.05155
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Regression Statistics Multiple R 0.632882 R Square 0.40054 Adjusted R Square 0.385169 Standard Error 0.013264 Observation s 41 ANOVA df Regression Residual Total 1 39 40 Coefficien ts Intercept 0.001636 X Variable 1 0.569718 SS 0.004585 0.006861 0.011446 Standard Error 0.002095 0.111605 MS 0.00458 5 0.00017 6 F 26.0585 7 Significan ce F 8.99E-06
As reveled by the table CER (cumulative excess returns) of Sun pharmaceutical and Taro accumulated for the period (-42 to +42), i.e., from 42 days before the merger to 42 days after the merger. From the table it is clear that the table shows all the CERs for Sun pharmaceutical with the average of 1.68%. In relative terms, the CER declined during the 30 days prior to the merger from the date of merger through the next 42 days. On the date of announcement of merger Sun pharmaceutical experienced positive excess returns reflecting that the shareholders expected benefits from the merger.Further more it is evident from the table that prior to merger i.e; before 42 days sun pharmaceutical experienced CER in negative terms but as the merger announcement came it slowly stated shifting upwards.
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Above graph displays a clear positive slop in the return and CER after the merger announcement between the 85 days (from -42 to +42). 4 days prior to the announcement of offer the CER declined more than that of the others in the trend. The trend of negative returns continued for the next few days but on the day of merger it yielded positive return. Further, there was a sudden drop in the share prices of Sun Pharmaceuticals during the next 10 days after the announcement of offer. However, the trend gained rise during 55 day of the announcement of merger. This helps us to find out that information about merger affect the market value of shares and their return which further helps us to make decisions about our hypothesis. At the time of Sun pharmaceuticals and Taro merger announcement, Taros shareholders expected that the proposed merger would lead to will lead to good returns. Hence, the news about merger would have been positive impact on the shareholders of Sun Pharmaceuticals.
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17-Apr-07 18-Apr-07 19-Apr-07 20-Apr-07 23-Apr-07 24-Apr-07 25-Apr-07 26-Apr-07 27-Apr-07 30-Apr-07 1-May-07 04-May-07 07-May-07 08-May-07 09-May-07 10-May-07 11-May-07 14-May-07 15-May-07 16-May-07 17-May-07 18-May-07 21-May-07 22-May-07 23-May-07 24-May-07 25-May-07 28-May-07 29-May-07 30-May-07 31-May-07 01-Jun-07 4-Jun 2007 5-Jun 2007 6-Jun 2007 7-Jun 2007 08-Jun-07
25.1 23.2 23.4 23.5 23.7 23.6 24 22 22.7 22.9 22.3 39.46 39.5 39.6 40.4 41.75 41.81 42.25 42.02 41.83 41.79 41.44 41.54 41.76 42.74 43.43 43.93 43.25 43.45 43.44 43.35 42.98 43.4 43.27 44.24 43.94 45.45
2516.95 2510.5 2505.35 2526.39 2523.67 2524.54 2547.89 2554.46 2557.21 2525.09 2531.53 3016.98 3030.93 3062.39 3076.59 3076.21 3067.26 3073.67 3053.4 3069.79 3073.19 3077.14 3081.19 3048.71 3066.96 3075.06 3069.27 3135.81 3136.42 3104.02 3104.53 3114.31 3155.83 3183.95 3178.67 3177.8 3182.62
0.032921811 -0.075697211 0.00862069 0.004273504 0.008510638 -0.004219409 0.016949153 -0.083333333 0.031818182 0.008810573 -0.026200873 0.769506726 0.001013685 0.002531646 0.02020202 0.033415842 0.001437126 0.010523798 -0.005443787 -0.004521656 -0.000956251 -0.008375209 0.002413127 0.0052961 0.023467433 0.016144127 0.011512779 -0.015479171 0.004624277 -0.00023015 -0.002071823 -0.008535179 0.009771987 -0.002995392 0.022417379 -0.006781193 0.034365043
-0.000547982 -0.002562625 -0.002051384 0.008398028 -0.001076635 0.000344736 0.00924921 0.002578604 0.001076548 -0.012560564 0.002550404 0.191761504 0.004623829 0.010379652 0.004636901 -0.000123513 -0.002909424 0.002089813 -0.006594722 0.005367787 0.001107568 0.001285309 0.001316157 -0.010541382 0.005986138 0.002641052 -0.00188289 0.021679422 0.000194527 -0.010330249 0.000164303 0.003150235 0.013332006 0.008910493 -0.001658317 -0.000273699 0.001516773
0.003568793 0.003506734 0.003522482 0.003844365 0.003552508 0.003596292 0.003870585 0.003665104 0.003618835 0.003198758 0.003664235 0.009492688 0.003728105 0.003905407 0.003728508 0.003581868 0.003496051 0.003650047 0.003382529 0.003751022 0.00361979 0.003625265 0.003626216 0.003260956 0.00377007 0.003667028 0.003527672 0.004253485 0.003591665 0.00326746 0.003590734 0.003682713 0.003996352 0.003860151 0.00353459 0.003577242 0.003632395
2.935301794 -7.92039449 0.509820765 0.042913888 0.495813015 -0.781570131 1.307856738 -8.699843737 2.819934707 0.561181514 -2.986510872 76.0014038 -0.271442033 -0.137376172 1.647351245 2.98339735 -0.205892522 0.687375081 -0.882631614 -0.827267828 -0.457604176 -1.20004748 -0.121308824 0.203514377 1.969736334 1.247709962 0.798510689 -1.973265646 0.103261247 -0.34976097 -0.566255718 -1.221789132 0.577563547 -0.685554304 1.888278923 -1.035843525 3.073264784
11.58562 3.66523 4.17505 4.217964 4.713777 3.932207 5.240064 -3.45978 -0.63985 -0.07866 -3.06517 72.93623 72.66479 72.52741 74.17476 77.15816 76.95227 77.63964 76.75701 75.92974 75.47214 74.27209 74.15078 74.3543 76.32403 77.57174 78.37025 76.39699 76.50025 76.15049 75.58423 74.36244 74.94001 74.25445 76.14273 75.10689 78.18015
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11-Jun-07 12-Jun-07 13-Jun-07 14-Jun-07 16-Jun-07 28-Jun-07 1-Jul-07 2-Jul-07 3-Jul-07 4-Jul-07 5-Jul-07 8-Jul-07 9-Jul-07 10-Jul-07 11-Jul-07 12-Jul-07 15-Jul-07 16-Jul-07
46.7 46.35 45.72 45.01 44.92 45.34 45.69 45.76 45 45.5 44 42.4 40.1 41.9 41.08 40.1 40 40.1
3175.96 3179.96 3160.78 3117.73 3093.7 3136.6 3116.23 3113.53 3120.04 3135.23 3149.46 3136.19 3112.35 3065.02 3051.78 3049.41 3044.11 3064.18
0.02750275 -0.007494647 -0.013592233 -0.015529309 -0.001999556 0.009349955 0.007719453 0.001532064 -0.016608392 0.011111111 -0.032967033 -0.036363636 -0.054245283 0.044887781 -0.019570406 -0.023855891 -0.002493766 0.0025
-0.002092616 0.001259462 -0.006031522 -0.013620056 -0.007707531 0.013866891 -0.006494293 -0.000866432 0.002090874 0.004868527 0.004538742 -0.004213421 -0.00760158 -0.015207159 -0.004319711 -0.000776596 -0.001738041 0.00659306
0.003521212 0.003624469 0.003399878 0.003166121 0.00334825 0.004012828 0.003385623 0.003558983 0.00365008 0.003735643 0.003725484 0.003455883 0.003351514 0.003117232 0.003452609 0.003561751 0.003532134 0.003788765
2.398153836 -1.111911589 -1.699211096 -1.869542983 -0.534780589 0.53371274 0.433383025 -0.202691934 -2.025847162 0.737546836 -3.669251702 -3.981951906 -5.759679695 4.177054862 -2.302301427 -2.741764149 -0.60258998 -0.128876521
80.57831 79.4664 77.76718 75.89764 75.36286 75.89657 76.32996 76.12726 74.10142 74.83896 71.16971 67.18776 61.42808 65.60514 63.30283 60.56107 59.95848 59.8296
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Regression Statistics Multiple R 0.172023 R Square 0.029592 Adjusted R Square 0.005923 Standard Error 0.027299 Observatio ns 43 ANOVA df Regression Residual Total 1 41 42 SS 0.00093 2 0.03055 5 0.03148 7 MS 0.00093 2 0.00074 5 F 1.25026 9 Significanc eF 0.27001
P-value 0.39899 9
Lower 95%
Intercept
0.003586
-0.00491
X Variable 1 0.030804
0.27001
-0.02483
0.08644
0.08644
Taros CER was increasing during the 42 days prior to the merger by 4.7% and rose till 30 days after the merger. On the announcement date, Taro experienced positive returns. Due to this high positive return it is justified that Taros shareholders gain intensively from this merger and was a win-win position for both companies. Further more if CER is considered after excluding the announcement days return, it is found that CER for the period (-42 to -1) was impressive but at the time of announcement and after that it increased further more. Thus, after the merger day it is found that CER stays at positive for Taro shareholders during 42 days prior to and 42 days after the announcement of merger deal.
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Above table shows Taro experienced high positive returns during 42 days and few days prior to merger announcement deal. It was followed by the high positive returns during the next 42 days and after that the share prices further moved upward trend has been notices after the announcement. Hence, it is evident that Taros share holders have earned good returns from the with increased CER .This again supported our hypothesis Taro experienced positive increase in the value of their shares on the date of announcement of the deal. Taro experienced high positive returns during the period of +42 days. The upward state of CER and return trends started around one day after the announcement of the deal compatible However, an opposite trend is observed before the announcement. In case of Sun Pharmaceuticals, after the trend of negative returns for 5 days it experienced positive returns for the next 5 days. On the other hand, in case of Taro, after the trend of positive returns it experienced small negative returns for the next one day. The information about the proposed merger deal was taken as positive information for the shareholders of Taro and somehow negative for the shareholders of Sun pharmaceutical. Hence, the market responded to the information likewise.
good synergy gains. But ultimately it helped both the companies to gain sufficiently and improve their existence in other markets. Effectively, the Sun pharmaceutical and Taro merger deal generated positive excess returns for the combined firm. The results are consistent with the hypothesis that positive excess returns for the combined firm due to empire building strategy or risk reduction. This is evident from several facts. Taro shareholders were able to obtain most of the gains even when there was no competition for the acquisition of Sun pharmaceutical. Sun pharmaceuticals ambitious plans for diversification were dependent in large measure on Taros strong cash flows and its existence in overseas market. Stock price movements are one of the tools to study the performance of mergers. Other tools also can be used to calculate the synergy generated by such deals.
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2005-06
2006-07
2007-08
2008-09
15.82
35.08
17.42
18.95
Gross operating 13.63 Margin (%) Net Profit Margin (%) Return On Capital Employed (%) Return On Net Worth (%) Debt Ratio Earnings Share Equity 4.06
18.65
38.66
12.58
14.11
10.08
29.01
13.57
13.20
5.34
8.90
30.79
10.55
13.46
3.16
9.33
26.91
9.87
10.66
0.13
0.41
0.08
0.10
0.12
Per
8.55
27.53
70.09
28.26
33.29
On carefully observing the above table it can be seen that the operating margin was at straight 4 year decline before the merger took place the year in which merger there was an immediate rise in operating margin which declined next year and after that there has been a gradual increment in operating margin ( it is a positive sign to the companys performance). Gross operating margin was on gradual upward move till the merger. In the year merger took place gross operating margin was at its 5 years highest 38.66% after the merger there was a huge decline of nearly 26% in gross operating margin but after that there was a stagnant increase in the years till now ( The response is positive for the company). The net profit margin was very strong in the year 2006-07(29.01%) when the merger took place it was on a steep rise after that there was a big decline to 13.57% in the next year and net profit margin stagnated after that ( It shows the negative impact of merger over the company).
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Return on capital employed had a similar moment to that of net profit margin of the company as it was very good in the year the company merged (2006-07) but after a decline in the next year it stagnated (This shows the negative impact of merger). Return on net worth was rising steeply till the year of merger (2006-2007) and was 10 years highest in 2006-07 but in the year 2007-2008 it fell almost 17%, but after that till now there has been a gradual rise in return on net worth (This is a positive sign for the company). The companys debt- equity has decrease from $410 to $1000 equity to$120 to $1000 equity (This is a positive sign for the company). The earnings per share was 10 year high in the year 2006-07(70.09) when the merger happened. The year after the merger there was a huge decline and EPS fell to 28.26 but after that there has been a continuous gradual increase in EPS every year. This is a positive sign for the company. Overall it can be seen that the merger between Dr. Reddys laboratories and Beta Pharma was a successful move for Dr. Reddy as the company is facing negative impact on net profit margin and return on capital employed only but the impact of merger over all other factors analyzed was positive . It has been seen that it was difficult for Dr. Reddy to control its operations in both the companies the year next to the merger because the company was not in a good position in year 2007-08 but after that the company is on a rise. Its also seen that the company was in a very strong position in the year when the merger took place (2006-07). So the growth potential of Dr.Reddy laboratories is good after the merger.
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2006-07
2007-08
2008-09
2009-10
-3.28
8.38
2.91
13.63
Gross operating 27.81 Margin (%) Net Profit Margin (%) Return On Capital Employed (%) Return On Net Worth (%) Debt Ratio Earnings Share Equity 25.85
26.73
6.01
0.79
9.86
26.69
31.01
31.43
33.99
14.53
16.83
24.21
24.57
17.05
31.49
25.68
24.09
24.56
15.71
1.19
0.44
0.02
--
0.01
Per
24.83
32.52
48.96
61.09
43.39
On carefully looking at the above figures it can be seen that the operating margins of the company was on negative side before the merger took place and after the merger took place there was a relevant improvement in the operating profit margin which reached to its five year high in 2009-10(13.63%)( This is a positive sign for the company). Gross operating margin was very high at 27.81% in 2005-06 but in year of merger and the year next to the merger the gross operating margin had gone close to nil which is not good for the company.(This is negative for the company).
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The net profit margin has gradually increased from the year 2005-06 till now and was not affected by the merger this is positive sign for the company). The return on capital employed has increased after the merger took place as the year in which merger took place and the year next to the merger there was almost equal return on capital employed (This is a positive sign for the company). The return on net worth for the company is on a decline path there might be an effect of merger over it (this is a negative sign for the company). The companys debt-equity ratio was quiet high at 1190$ debt to 1000$ equity in the year 20052006 but the company has decreased it 10 times till the year 2009-10 to 100$ debt to 1000$ equity (which is a good sign for the company). Earnings per share has raised from 24.83 in year 2005-06 to 61.09 in 2008-09 which is showing that merger was successful there have been decline in EPS in the year 2009-2010. But still (it is a good for the company). It is easily visible that the merger between Sun Pharmaceutical Industries Ltd. and Taro pharmaceutical Industries in the year 2007 was a successful for Sun Pharmaceutical Industries as the company is facing negative impact on Gross operating margin and return on net worth only but the impact of merger over all other factors analyzed was positive . So the growth potential of Sun Pharmaceutical Industries Ltd laboratories is good after the merger because the company is performing well after the merger.
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CHAPTER-7
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7.1 Findings
In order to examine the performance of a firm prior to a merger and after the merger, therefore, it is necessary to identify which of the merging firms are taken into consideration and analyze their past performance. To do so, we rely on past and present performance. The findings that we have found out of this research are as following The merger between Dr. Reddy and Beta Pharmaceuticals helped both the companies to improve their prices and returns of the stock moreover it helped Dr. Reddy to diversify its business in other markets and increase their market share. Dr. Reddy experienced negative returns during the period -10 to -15 days except on the date of announcement, after the announcement of the deal it increased significantly from this we came to know that announcement deals play an important part in determining the market efficiency. It has been found that the cumulative excess returns of Dr. Reddy and Beta Pharma accumulated for the period (-30 to +30), i.e., from 30 days before the merger to 30 days after the merger is increasing marginally during the 30 days prior to the announcement of merger. After the date of merger announcement through the next 30 days it experienced a positive excess returns, reflecting that the merger announcement information plays a positive role in determining the market efficiency. Excess returns to the Dr. Reddy and Beta pharmaceutical combined have been found to be positive. There is average cumulative gain to the combined firm in terms of market capitalization as well as book value. The means of both the indicators have been found to be of marginal value. Thus, positive returns have arisen because of the diversification and sentiments of the firms. Dr. Reddy managers to maximize the utility of Beta Pharma business at the expense of Dr. Reddys. It has been found that on the date of announcement of merger Sun pharmaceutical experienced positive excess returns reflecting that the shareholders expected benefits from the merger. Taro experienced positive increase in the value of their shares on the date of announcement of the deal. Taros CER was increasing during the 4-2 day prior to the merger by 4.7% and rose till 30 days after the merger. On the announcement date, Taro experienced positive returns. Due to this high positive return it is justified that Taros shareholders gain intensively from this merger. Excess returns for both companies Sun pharmaceutical and Taro have been found to be favorable to the Taro more than Sun pharmaceutical. There is average cumulative loss to the sun pharmaceutical in terms of market capitalization as well as book value
A traditional economic motive for mergers, of course, can be to increase market share and market power to gain competitive advantage. This has not been a major issue in the case of the pharmaceutical mergers in India and elsewhere mergers are subject to scrutiny prior to their implementation by the antitrust authorities.
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7.2 Conclusion
This study looked to see how quickly the Market reacts to information, exploring the idea of an investors ability to earn an above normal return against the Market. In essence, it possible to outperform the Market when the information about industry is appropriate, with the new information being introduced, like a merger, it would be expected that the Actual Average Return, within the event period, and the Expected Average Returns within the event period would differ. If a significant difference is shown, then the hypothesis that states the information announcement did increase or decrease the stock should be supported. A paired sample was conducted and found that the announcement of the merger may be insignificant in determining its effect on the stock price. A reaction in the Market can be seen in the days leading up to the announcement and shortly after, but the merger announcement play an efficient role in determining the market efficiency. In this research it has been found that merger announcements play an important role in stock prices of the companies announcing the merger and it is evident from this research that stock prices of the companies moved positively when the information about the merger was announces in the market, this helps us to accept the Alternative hypothesis. The research on mergers between pharmaceutical entities is more encouraging in nature. There is evidence of a positive relation between a firms announcing merger and leads to successful outcomes. Indian Pharmaceutical manufacturers are demanding more liberalization, arguing that competition, and not price control, will improve availability and affordability of essential drugs The Indian pharmaceutical industry is on a major growth trajectory and is expected to reach US$ 74 billion by 2020. In order to realize the full potential of the market and tap growing global opportunities, companies operating here will have to collaborate in a mutually beneficial manner. As we move into the next decade, mergers will drive future growth. MNCs will not be averse to acquisitions but high valuations will make M&As expensive in India. Alternatives such as alliances and partnerships will actually prove to be more flexible and value enhancing in the long term. MNCs can benefit from the local market knowledge of Indian companies, the strength of their sales force and significant cost advantage across drug development and the manufacturing process. Global pharmaceutical companies have the capability of bringing in newer products, technology, capital and quality leadership. They can help their Indian counterparts in their desire to ascend the innovation curve. However, mergers face significant challenges of quality, valuation, management control, corporate governance as well as cultural issues. Success will depend on thorough due diligence of quality aspects, appropriate valuation and synergy derived from the association. Given the price sensitive nature of the Indian consumer as well as cost pressures from developed economies, pharmaceutical companies will have to focus on improving operational efficiencies. Creating an agile and responsive supply chain that is operationally efficient and minimizing the incidents of supply chain fraud will be of significant importance. At the same time, companies entering cross border transactions should proactively monitor their policies and maintain robust documentation. This will assist companies in optimizing their business operations. Health insurance is a significant driver for the growth of the overall healthcare market by improving access to state-of-the-art medicines and therapies. Medical technology can also help improve access to quality healthcare delivered in a cost effective way. Medical technology will also help drive the trend towards personalized medicine. The medical technology sector needs to reduce its import reliance as well as create innovative products and solutions keeping in mind the realities of the Indian market. Government and industry must work
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together to reduce the barriers to innovation and create a vibrant innovation ecosystem to deliver patient-centric solutions. In meeting the challenges of growth, pharmaceutical companies will have to ensure that it is sustainable. Pharmaceutical MNCs as well as large Indian companies are taking an interest in sustainability by implementing initiatives and reporting on their success in the areas of energy and water consumption, emissions and waste treatment and handling, access to medicine by using differential pricing and voluntary licensing. The pharmaceutical industry in India is poised for a period of robust growth driven by mergers. Success in the market will be dependent not only on pharmaceutical companies but also on other stakeholders like healthcare providers, health insurance companies, medical technology companies, government, patient groups as well as society at large acting in concert. How well they do will determine the future of the Indian pharmaceutical industry.
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7.3 Suggestions
The suggestions that have been entitled below are for the companies that have entered into merger agreement, by opting these suggestions these companies might get benefited in one or other way and can remain ahead in the market to its competitors. Pharmaceutical companies that have entered into merger agreement with other companies should establish their production plants where they can achieve Cost effective manufacturing to gain competitive advantage over its competitors. Pharmaceutical companies should improve their supply chain in order to be grow with the emerging markets and should concentrate more on embedding the culture of ones organization with the merged organization. Pharmaceutical companies should improve their global competitiveness by making their presence in foreign markets and should diversify their business in related aspects by Creation and entry to new markets. Pharmaceutical companies that have entered into merger agreement should increase their product portfolio by adding the products of merged company in their product line. Pharmaceutical companies that have entered into merger agreement should acquire assets of merged firms, in order to boost their outsourcing capabilities and new products. Pharmaceutical companies that have entered into merger agreement should consolidate their market shares. Pharmaceutical companies that have entered into merger agreement should adopt the technology of merged firm and should try to maximize its returns from the adopted technology, further more it will help the company to reduce its expenditure on innovating the same technology. Pharmaceutical companies that have entered into merger agreement should extensive experimental on the manufacturing new drugs.
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CHAPTER 8
BIBLIOGRAPHY
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8.1 Books:NAME OF THE BOOK 1. Financial Management NAME OF THE AUTHOR I.M.Pandey 6th EDITION
2. Financial Engineering
John F. Marshall
2011
3. Fundamentals of financial management (Authored by vyuptakesh sharan, chapter 16. Page no:230)
8.2 Annual Reports:1. Annual reports of Dr. Reddy Laboratories. 2. Annual reports of Beta Pharmaceuticals. 3. Annual reports of Sun Pharmaceuticals. 4. Annual reports of Taro Pharmaceutical Industries Ltd
8.3 Journals:1. Note for Guidance on Parametric Release, CPMP/QWP/3015/99 (EMEA, 7 Westferry Circus, Canary Wharf, London E14 4HB, UK, 2001). 2. H.L. Avallone, Pharm. Eng. 10(4), 3841 (1990). 3. C. DeSain and C.V. Sutton, Pharm. Technol. 19(10), 131136 (1995).
4. J. Agalloco, J. Parenter. Sci. Tech. 47(May/June 1993). 5. D.C. Montgomery, Design and Analysis of Experiments (John Wiley & Sons Inc., 6. Hoboken, New Jersey, USA, 1997) pp 315322. 7. B.T. Loftus in I.R. Berry et al., Eds., Pharmaceutical Process Validation, 2nd Edition Marcel Dekker Inc., New York, New York, USA, 1993) pp 18. 8. G.W. Melliger, Pharm. Ind. 42(Nr.11a), 11991202 (1980).
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9. E.M. Fry, Pharm. Ind. 46(6), 601605 (1984). 10. Andrade, G. and Stafford, E. (2004) Investigating the Economic Role of Mergers. Journal of Corporate Finance 10: 1-36. 11. E.M. Fry, Drug Cosm. Ind. 133(7), 4651 (1985). 12. J.R. Sharp, Pharm. J. 236(1), 4345 (1986). 13. B.T. Loftus, Pharm. Ind. 42(Nr. 11a), 12021205 (1980). 14. Beena, P.L. (2008) Trends and Perspectives on Corporate Mergers in Contemporary India. Economic and Political Weekly 43(39): 48-56.
8.4 Websites:1. http://www.bse.com 2. http://www.moneycontrol.com 3. http://www.investopedia.com 4. http://www. nse.com 5. http://www.allbusiness.com 6. http://www.uri.pdu 7. http://Businessballs.com 8. http://sebi.org
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