IMPACT OF ACQUISITION ON PROFITABILITY AND GROWTH IN PHARMACEUTICAL INDUSTRY: A STUDY ON SELECTED INDIAN COMPANIES

Authors

  • Biswadeep Dutta Scottish Church College, Kolkata, India
  • Soumya Mukherjee Maharaja Manindra Chandra College, Kolkata, India

Abstract

Merger & Acquisition (M&A) is an important facet of corporate strategy. It plays a pivotal role in the development of any nation. On the other hand, the growth of the Pharmaceutical Industry and their contribution to Indian economy can never be overemphasized.

In this paper an attempt has been made to analyze the impact of acquisition on the Pharmaceutical Industry based on selected companies (Ranbaxy Laboratories Ltd. and Sun Pharmaceutical Industries). For this study, various profitability ratios, different descriptive statistics and time series analysis has been used to make a comparative analysis on the profitability, operating performance in the pre and post-acquisition period. This study also helps to analyze the synergic growth achieved by the acquiring firms in the post-acquisition period.

This research showed that there is no significant impact on profitability (as per T-Test) and over the time, the growth assumed by the acquisition is profitable for Sun Pharmaceutical Industries Ltd. in some aspects (as per time series analysis), i.e. competitive advantage has been gained by the Sun Pharmaceutical Industries Ltd. through acquisition.  However, it has been found that for Ranbaxy Laboratories Ltd., there is no significant impact on profitability (as per T-Test) and over the time growth assumed by the acquisition is not profitable at all for Ranbaxy Laboratories Ltd. (as per time series analysis) i.e. competitive advantage has not been gained through Acquisition. Moreover, the performance was much better during the pre-acquisition period.

Keywords:

Acquisition, Pharmaceutical Industry, Profitability and Growth, Acquiring Firms, Target Firms

Downloads

Download data is not yet available.

References

Andrade, G. & Stafford, E., (2004). Investigating the Economic Role of Mergers. Journal of Corporate Finance, 10(1), pp 1-36.

Andrade, G., Mitchell, M. & Stafford, E. (2001). New Evidence and Perspectives on Mergers. Journal of Economic Perspectives, 15(2), pp 103-120.

Danzon, P.M., Epstein, A. & Nicholson, S. (2007). Mergers and Acquisitions in the Pharmaceutical and Biotech Industries. Managerial and Decision Economics, 28(4‐5), pp 307- 328.

Demirbag, M., Ng, C.K. & Tatoglu, E. (2007). Performance of Mergers and Acquisitions in the Pharmaceutical Industry: A Comparative Perspective. Multinational Business Review, 15(2), pp 41-62.

Grabowski, H. & Kyle, M. (2008). Mergers and Alliances in Pharmaceuticals: Effects on Innovation and R&D Productivity. In: Gugler, K.P. & Yurtoglu, B.B., The Economics of Corporate Governance and Mergers, Chapter 11, page 262-287. Edward Elgar Publishing. UK.

Khan, A.A. (2011). Merger and Acquisitions (M&As) in the Indian Banking Sector in Post Liberalization Regime. International Journal of Contemporary Business Studies, 2(11), pp 31- 45.

Malik, M.F., Anuar, M.A., Khan, S. & Khan, F. (2014). Mergers and Acquisitions: A Conceptual Review. International Journal of Accounting and Financial Reporting, 4(2), pp 520-533.

Mantravadi, P. & Reddy, A.V. (2007). Mergers and Operating Performance Indian Experience. ICFAI Journal of Mergers & Acquisitions, 4(4), pp 52-66.

Roll, R. (1988). Empirical Evidence on Takeover Activity and Shareholder Wealth. In Coffee Jr., J.C., Lowenstein, L. and Rose-Ackerman, S., Eds., Knights, Raiders, and Targets: The Impact of the Hostile Takeover, Oxford University Press, Oxford, pp 241-252.

Tamragundi, A.N. & Devarajappa, S. (2016). Impact of Mergers on Indian Banking Sector: A Comparative Study of Public and Private Sector Merged Banks. International Journal of Research in Management, Social Sciences & Technology, 13(13), pp 1-18.

Trautwein, F. (1990). Merger Motives and Merger Prescriptions. Strategic Management Journal, 11(4), pp 283-295.

Vyas, V., Narayanan, K. & Ramanathan, A. (2012). Determinants of Mergers and Acquisitions in Indian Pharmaceutical Industry. Eurasian Journal of Business and Economics, 5(9), pp 79- 102.

Zhu, P. & Hilsenrath, P.E. (2015). Mergers and Acquisitions in US Retail Pharmacy. Journal of Health Care Finance, 41(3), pp 1-20.

Downloads

Published

01-07-2019

How to Cite

Biswadeep Dutta, & Soumya Mukherjee. (2019). IMPACT OF ACQUISITION ON PROFITABILITY AND GROWTH IN PHARMACEUTICAL INDUSTRY: A STUDY ON SELECTED INDIAN COMPANIES. International Journal on Recent Trends in Business and Tourism (IJRTBT), 3(3), 70-82. Retrieved from https://ejournal.lucp.net/index.php/ijrtbt/article/view/757

Metrics