Scribd Logo
Upload

Welcome to Scribd!

  • 94 views

    Mercks

    Uploaded by

    akhilyerawar7013
    The document discusses the evolving finance function at Merck & Co. In the 1980s and 1990s, Merck grew significantly in size through sales and market capitalization. The finance department transitioned to become more involved in business decisions by providing analytical skills, managerial skills, and client relationships. In 1985, Merck created the Financial Evaluation and Analysis (FE&A) group to provide quantitative assessments of risk and returns for significant investment decisions. FE&A gained credibility by adding value through high quality analysis. Judy Lewent led various roles within Merck's finance department, applying her skills in financial analysis, option pricing, and modeling. Her work developing models for R&D projects and manufacturing helped Mer

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd

    Mercks

    Uploaded by

    akhilyerawar7013
    94 views15 pages
    The document discusses the evolving finance function at Merck & Co. In the 1980s and 1990s, Merck grew significantly in size through sales and market capitalization. The finance department transitioned to become more involved in business decisions by providing analytical skills, managerial skills, and client relationships. In 1985, Merck created the Financial Evaluation and Analysis (FE&A) group to provide quantitative assessments of risk and returns for significant investment decisions. FE&A gained credibility by adding value through high quality analysis. Judy Lewent led various roles within Merck's finance department, applying her skills in financial analysis, option pricing, and modeling. Her work developing models for R&D projects and manufacturing helped Mer

    Original Description:

    merck

    Original Title

    mercks

    Copyright

    © © All Rights Reserved

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the evolving finance function at Merck & Co. In the 1980s and 1990s, Merck grew significantly in size through sales and market capitalization. The finance department transitioned to become more involved in business decisions by providing analytical skills, managerial skills, and client relationships. In 1985, Merck created the Financial Evaluation and Analysis (FE&A) group to provide quantitative assessments of risk and returns for significant investment decisions. FE&A gained credibility by adding value through high quality analysis. Judy Lewent led various roles within Merck's finance department, applying her skills in financial analysis, option pricing, and modeling. Her work developing models for R&D projects and manufacturing helped Mer

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    94 views15 pages

    Mercks

    Uploaded by

    akhilyerawar7013
    The document discusses the evolving finance function at Merck & Co. In the 1980s and 1990s, Merck grew significantly in size through sales and market capitalization. The finance department transitioned to become more involved in business decisions by providing analytical skills, managerial skills, and client relationships. In 1985, Merck created the Financial Evaluation and Analysis (FE&A) group to provide quantitative assessments of risk and returns for significant investment decisions. FE&A gained credibility by adding value through high quality analysis. Judy Lewent led various roles within Merck's finance department, applying her skills in financial analysis, option pricing, and modeling. Her work developing models for R&D projects and manufacturing helped Mer

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 15

    The Evolving Finance

    Function:
    Judy C. Lewent at Merck & Co., Inc.

    Introduction

    In 1994
    Sales 9.7 Billion
    Net income 2.4 billion
    Since 1985 sales growth 15%+ pa
    Market capital 5 billion (1980) to 45
    billion (1993)
    Operated 31 production facilities in 61
    countries with 11,600 employees

    Transition

    Finance personnel would become involved earlier and


    more directly in many business decisions, contributing

    Mercks Finance Function

    Focused functional knowledge

    Broad knowledge base in several additional


    disciplines

    Mercks strategy, value creating decisions

    Communications skills

    Monte corlo simulation, option pricing

    Managerial skills

    Applied economics, finance, applied statistics

    Analytical skills

    Accounting, cash management, tax etc

    Client relationships

    Learning capability

    Update knowledge in analysis skills

    Finance decisions

    Control
    Budget
    Traffic cop

    Business decisions

    Client relationship
    Effective decision at business level

    Financial Evaluation & Analysis


    (FE&A)

    Created in 1985

    Investments in Research, Manufacturing etc

    Report to CFO
    Not to controller, treasurer
    Analytical skills
    Advisory responsibility

    Analytical tools
    Clients
    Not limited to CEO, Board etc

    Mid level executives, Division heads, spending decisions

    Anyone making significant investment decision was to be


    provided before hand with quantitative assessment of risk
    and returns

    what decision, what


    analysis

    Financial Evaluation & Analysis


    (FE&A)

    Credibility

    Quality of analysis
    Documentation of their value

    Value addition is difference

    Decision on basis of analysis


    Do it in the old way

    Lewent Career

    Acquisition and Capital

    analysis

    Financial check on valuation analysis in


    various divisions
    Cost of capital at Mercks
    Capital investment decisions
    Head of licensing becomes a regular
    client

    Lewent Career

    Assistant controller

    financial evaluation and control of


    MSDRL
    Development of original, interpretive
    financial models for R&D projects
    R&D projects faced relatively little
    economic or financial scrutiny

    Complexity of R&D process


    Lack of historically adequate data
    Computing resources

    Lewent Career

    Assistant controller

    Top priority

    Capability to asses risk and return


    Ability to assess contribution of R&D to firm value

    Inputs
    Mote carlo simulation
    Capital expenditure
    Macro economic variables
    Production and selling
    costs
    Product prices and
    quantities

    Out puts
    Cash flows
    Revenues
    Return on investment
    Net present value

    Executive director
    Analysis

    Manufacturing
    R&D

    Option pricing for


    structure licensing
    agreements

    Treasurer
    Dynamic long term
    hedging model
    Commercial prospects
    of products under
    development
    Improved
    allocation/optimization
    of resources
    Debt restructuring
    Treasury activities

    Transferability

    Can this skills or tools developed in


    Merck transferable?
    Success path

    Understanding the questionnaires business


    Worked with them
    Designed a tool for analysis

    Financial Programming and


    Organizational Adaptability

    Introduction of innovative and new


    approaches
    Adaptability of the new processes
    Short term benefits

    Research planning model


    Yearly predections of Mercks future market
    capitalization

    Long run horizon benefits

    R&D eventually boost by factor 10

    Thank You

    You might also like