Merck Acquisition of Medco
Merck Acquisition of Medco
Case Study
John X
Devry University – Keller Graduate School of Management
Finance 561
Professor
May 22, 2011
Table of Contents
Abstract………………………………………………………………………………………p.g. 3
Company backgrounds……………………………………………………….………………p.g. 3 Merck & Co., Inc. ………………………………………..…………………….…....p.g. 3 Medco Containment Services Inc. ............................……..…………………………p.g. 4
Reasons for Mergers…………………………………………………………………………p.g. 5
Economies of Scale…………………………………………………………………..p.g. 5
Market Share…………………………………………………………………………p.g. 6
Synergy………………………………………………………………………………p.g. 6
Eliminate competition…………………………………………….……….………....p.g. 6
Increase depth and diversity of product line………………………….…….……….p.g. 7
Keeping opportunities from competitors……………………………….……………p.g. 7
Merger Areas of Caution………………………………………………………….….………p.g. 7 Technology Integration……………………………………………………..………..p.g. 8 Culture Shock…………………………………………………………….…..………p.g. 8
Consolidated Financials………………………………………………………………..…….p.g. 9 Consolidated Combined Statement of Income……………………………………….p.g. 9 Consolidated Combined Balance Sheet and Owners Equity……………………p.g. 10, 11
Summary Discussion…………………………………………………………….…………p.g. 11 Recommendation……………………………………………………………..…….p.g. 12
References……………………………………………………………….……………..p.g. 14, 15
Abstract Mergers are done for many reasons. Merck & Co., Inc.’s , Merck, consideration of a merger or acquisition of Medco Containment Services Inc., Medco, will need to be based on several factors and need to be in the best interest of Merck’s stockholders. This assessment will go over the reasons mergers occur and how Medco will achieve this reason or not and if so if it is reasonable enough to offer an offer comparable to Medco’s Chief Financial Officers request of $6.6 billion dollars. Reasons to be evaluated are economies of scale, market share, synergy, elimination of competition, increasing depth and diversity of product line, and keeping opportunities
Case Study
John X
Devry University – Keller Graduate School of Management
Finance 561
Professor
May 22, 2011
Table of Contents
Abstract………………………………………………………………………………………p.g. 3
Company backgrounds……………………………………………………….………………p.g. 3 Merck & Co., Inc. ………………………………………..…………………….…....p.g. 3 Medco Containment Services Inc. ............................……..…………………………p.g. 4
Reasons for Mergers…………………………………………………………………………p.g. 5
Economies of Scale…………………………………………………………………..p.g. 5
Market Share…………………………………………………………………………p.g. 6
Synergy………………………………………………………………………………p.g. 6
Eliminate competition…………………………………………….……….………....p.g. 6
Increase depth and diversity of product line………………………….…….……….p.g. 7
Keeping opportunities from competitors……………………………….……………p.g. 7
Merger Areas of Caution………………………………………………………….….………p.g. 7 Technology Integration……………………………………………………..………..p.g. 8 Culture Shock…………………………………………………………….…..………p.g. 8
Consolidated Financials………………………………………………………………..…….p.g. 9 Consolidated Combined Statement of Income……………………………………….p.g. 9 Consolidated Combined Balance Sheet and Owners Equity……………………p.g. 10, 11
Summary Discussion…………………………………………………………….…………p.g. 11 Recommendation……………………………………………………………..…….p.g. 12
References……………………………………………………………….……………..p.g. 14, 15
Abstract Mergers are done for many reasons. Merck & Co., Inc.’s , Merck, consideration of a merger or acquisition of Medco Containment Services Inc., Medco, will need to be based on several factors and need to be in the best interest of Merck’s stockholders. This assessment will go over the reasons mergers occur and how Medco will achieve this reason or not and if so if it is reasonable enough to offer an offer comparable to Medco’s Chief Financial Officers request of $6.6 billion dollars. Reasons to be evaluated are economies of scale, market share, synergy, elimination of competition, increasing depth and diversity of product line, and keeping opportunities
References: Merck Settles FTC Charges that Its Acquisition of Medco Could Cause Higher Prices and Reduced Quality for Prescription Drugs (Merck, 1998); http://www.ftc.gov/opa/1998/08/merck.shtm Published August 27, 1998; Retrieved May 19, 2011 Merck to spin-off Merck-Medco (Merck, 2002); by John George http://www.bizjournals.com/philadelphia/stories/2002/01/28/daily15.html Published January 29, 2002; Retrieved May 19, 2011 Merger as Marriage: Communication Issues in Post – Merger Integration (Merger); by Kevin J Retrieved May 19, 2011 Successful Post-Merger Integration: Realizing the Synergies (Synergies); by Bohlin, Dale, and Retrieved May 19, 2011 Reasons why Mergers and Acquisitions Can Fail (Reasons); by Freda Turner http://www.bizjournals.com/jacksonville/stories/2000/08/28/smallb2.html Published August 28, 2011; Retrieved May 20, 2011 Retrieved May 20, 2011 Merck & Co., Inc http://www.referenceforbusiness.com/history2/23/Merck-Co-Inc.html Retrieved May 21, 2011 Retrieved May 21, 2011 Information Technology and Post Merger Integration (Info); by Gopal Sondur www.infosys.com/finacle/finacle-connect/Issue_08/.../feature.doc Retrieved May 21, 2011