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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Iana Muraveva
Determinants of Takeover Premium in Pharmaceutical Industry
Strategic Corporate Finance
(Master’s programme)
2018
The primary task of the study was to find out specific factors that could potentially influence the size of takeover premium in the US pharmaceutical industry from 1994-2016. The relevance of this topic was explained by regulatory specifications, because many pharmaceutical companies in order to keep its leading position in case of a short period of patent protection, increasing cost of new drugs development, new generic launching, are forced to be engaged in M&A deals. As a result, most of the deals were not successful due to high overpayment. The average takeover premium during that period was nearly 55%.

The review of the literature showed that there is a shortage of studies concerning takeover premium in the pharmaceutical industry because all the studies are not concentrated on pharmaceutical industry.

On a sample of 164 transactions from 1994-2016 in the US pharmaceutical market it was found that there is a significant negative relationship between the takeover premium and the average years until patent expiration and the acquirer's pipeline competitiveness. There is no significant relationship between the takeover premium and acquirer’s previous experience in the same therapy field. Likewise, there is a significant positive relationship between the takeover premium and the number of bidder`s pre-clinical drugs.

These factors should be taken into account for the companies engaging in M&A activity and these factors are significant when the companies tried to keep its leading position in case of a short period of patent protection, when the cost of developing new drugs rises significantly and when new cheap drugs are entering the market.

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