Fi561 Case Study: Merck
Case Study: Merck Acquisition of Medco
Professor Daniel Weiss
FI561
January 23, 2011
Case Study: Merck Acquisition of Medco
Abstract
The purpose of this case study is to determine whether it would be beneficial to merge Merck Corporation with Medco Containment Services Incorporated. The merger and acquisition between the world’s largest drug manufacturer and the largest prescription benefits management company (PBM) and marketer of mail order medicines in the United States would result in a successful campaign to take over the drug industry if handled appropriately. As Chairman and CEO of Merck Corporation, I have to consider all sides of the arguments, financially, marketing and cultural wise and come to a conclusion as to whether this merger would be a good idea for the company. Like any other investment and merger, there are risks, and I have to decide what would be best in the interest of this company. The details as to whether the decision to acquire or not acquire Medco will be described in this paper. Along with data that helps make that final decision.
There are a few things one must take into account before making a decision. You have to look at the long term run, whether or not the merger and acquisition will be successful. You also have to take synergy into account; it is the most important reason why there are a lot of mergers and acquisitions. Synergy would be when two companies join forces to create additional value and cut costs that would be unnecessary. You would also have to take into account changes in forces, like technological changes, economies of scales, type of merger you want to have and the process it takes to make a decision especially when it comes to a merger and acquisition worth millions if not billions of dollars. In the case of Merck and Medco, the role of prescription benefits management companies are to “manage the provision of prescription drugs which include managing insurance claims, negotiating volume
Professor Daniel Weiss
FI561
January 23, 2011
Case Study: Merck Acquisition of Medco
Abstract
The purpose of this case study is to determine whether it would be beneficial to merge Merck Corporation with Medco Containment Services Incorporated. The merger and acquisition between the world’s largest drug manufacturer and the largest prescription benefits management company (PBM) and marketer of mail order medicines in the United States would result in a successful campaign to take over the drug industry if handled appropriately. As Chairman and CEO of Merck Corporation, I have to consider all sides of the arguments, financially, marketing and cultural wise and come to a conclusion as to whether this merger would be a good idea for the company. Like any other investment and merger, there are risks, and I have to decide what would be best in the interest of this company. The details as to whether the decision to acquire or not acquire Medco will be described in this paper. Along with data that helps make that final decision.
There are a few things one must take into account before making a decision. You have to look at the long term run, whether or not the merger and acquisition will be successful. You also have to take synergy into account; it is the most important reason why there are a lot of mergers and acquisitions. Synergy would be when two companies join forces to create additional value and cut costs that would be unnecessary. You would also have to take into account changes in forces, like technological changes, economies of scales, type of merger you want to have and the process it takes to make a decision especially when it comes to a merger and acquisition worth millions if not billions of dollars. In the case of Merck and Medco, the role of prescription benefits management companies are to “manage the provision of prescription drugs which include managing insurance claims, negotiating volume
References: Evans, M. (2000, March). Course 7: mergers & acquisitions (part 1). Retrieved from http://www.exinfm.com/training/pdfiles/course07-1.pdf Fred, J, Mitchell, M, & Harold, J. (2004). Takeovers, restructuring, and corporate governance. Upper Saddle River, New Jersey: Prentice Hall. Google Finance, Initials. (2011, January 23). Financial statements for Medco Health Solutions Inc. Retrieved from http://www.google.com/finance?q=NYSE:MHS&fstype=ii Google Finance, Initials. (2011, January 23). Financial statements for Merck & Co Inc. Retrieved From http://www.google.com/finance?q=NYSE:MRK&fstype=ii