Evaluation of Synergetic Effect in Mergers and Acquisitions in the Pharmaceutical Market

ABSTRACT Mergers and acquisitions are getting more and more popular each year, especially in pharmaceutical industry due to peculiarities of the industry. The aim of such deals is not just business expansion but getting the synergetic effect that can be obtained due to allocation of resources that takes the form of revenue enhancement, cost savings that are expected to be reached by entering new markets, acquiring new technologies and getting access to results of innovative researches. However, despite the fact, that popularity of M&A activities is getting more attractive, most of the deals do not result in increased value for the acquirer’s shareholders. That is why, profound and correct estimation of synergy by choosing the most appropriate way of calculation and realizing what factors influence efficiency of the deal is crucial. The work is aimed at analysing characteristics of pharmaceutical market, M&A deals on it and evaluating the efficiency of the merger of Abbot Laboratories and St Jude Medical by calculating net present value synergy (NPVS). So, results of the work include detailed analysis of M&A deals on pharmaceutical market and evaluation of synergetic effect of the merger that shows that the deal was successful due to considering factors important for pharmaceutical M&A’s like financial analysis and knowing features of innovative products of the company-aim. Key words: pharmaceutical industry, mergers and acquisitions, synergetic effect, efficiency of M&A’s.