A Study On The Performance Of Horizontal Merger Of Domestic Pharmaceutical Companies

In recent years,the M&A deals continuously happened,especially between 2013 and 2015,the number of M&A cases increased rapidly,which changed from 100 in 2012 to 320 in 2015,and the annual average increase rate was higher than 73.33%.The total amount of M&A has reach 14.11 billion yuan in 2015.It can be seen from the amount and number of M&A cases that domestic pharmaceuticals industry has come into a golden period for M&A.At the same time,domestic pharmaceuticals industry are still hot in overseas M&A,the proportion of which taking in total M&A number has risen from 3% in 2012 to about 10% in 2015.There is a real possibility that the number and proportion of overseas M&A cases in pharmaceuticals industry domestic will become more.Under this background,this paper find a significant point that there are nearly 70% of M&A cases in pharmaceuticals industry are horizontal M&A,and then conglomerate M&A.Therefore,it is worth to do in-depth research in the drivers and performance of overseas M&A in pharmaceuticals industry,and the problems that need to pay attention and solve.So far,domestic and foreign researches on M&A are mostly about the drivers and performance of M&A,while little analyzed a certain M&A case about overseas M&A of pharmaceuticals companies.For example,Sheng Ye and Huili Xie(2015)analyze the M&A case of Sanjiu,and draw a conclusion that the demands for enlarging operation scale,properly making use of sedimentary money(financial synergy),and simplifying layers of management are the drivers for Sanjiu to do M&A.Junmin Yang and Zhiguang Cao(2012)use some non-financial patent data,such as patent adding number,as the bases of long-time performance,and take all M&A cases within 3 years from 2006 as the samples to do empirical research.The result shows that M&A cases for gaining techniques and skills can enhance merger's developing ability considerablely.This paper takes Hepalink Merging SPL Company,the biggest liquaemin bulk drug company in US with 1,380 million yuan for Example,by a wide range of analyzing methods,including event study analysis,financial analysis and documentary analysis and so on.Combined with material instance of the industry,this paper analyzes the drivers and performance of this M&A case,and distills what the pharmaceuticals industry could learn and the problems and obstacles may face in the future,then,take guide for companies of pharmaceuticals industry when doing practical operation in M&A.The first chapter is the introduction.In this part,this paper mainly introduces the background,clarifies the significance of this study,explain the research methods used in this paper,and outlines the overall framework and specifies the innovations and deficiencies.The second chapter reviews and refines the existed relative literatures,and explains the missing parts in the existed literatures.The third chapter makes a brief introduction in the overall process of the M&A deal between Hepalink and SPL Company,including a brief introduction of the two parties,deal scheme and settlement and so on.The forth chapter mainly introduces the basic situation of the specific industry that the acquirers belong to,which is the preliminary to the analysis in the next chapter.The fifth chapter is divided into to parts,including the M&A drivers analysis and performance analysis,and the former takes the stock price of Hepalink as the reflection of short-time performance,selecting 20 market days as the event window period and using market adjustment method.Choose the CSI 300 and medicine 300 index as expected returns,and then calculate abnormal return and cumulative abnormal return as the standards of estimating whether yields are positive or negative.The standards for Long-time performance not only include debt paying ability,profitability,operating capacity,growth ability,but also total profits,main business,expenses,assets structure,funds origins and cash flow and so on,in order to comprehensively analyze the financial situation of Hepalink in the former and later two years of M&A.The sixth chapter draws the conclusion from all of the researching contents in this paper,and points out innovations and deficiencies of this paper,then make suggestions for pharmaceuticals companies to select proper company when doing overseas M&A,at the same time,remind of the probable problems and obstacles may facing in the future.Through the case analysis,we draw the following conclusions: First,there are two kinds of drivers for Hepalink merging SPL,including operating synergy and industry and policy factors,and the former includes market competition and service,internationalization process,supply chain and product development.Industry and policy factors originate in industry current development and policy supports and encouragements.Second,Hepalink merging SPL proves to make positive influences on the short-time performance,and the investors show positive attitude to this M&A deal.Third,by focusing on the key financial data,and making vertical and horizontal comparison,it can be seen that some aspects of Hepalink are improved after the M&A deal finished,including total profits,main business,expenses,especially selling expenses,assets structure,profitability,operating capacity,growth ability and cash adequacy,and in the next year of this deal,long-time performance is shown positive especially obviously.While the management expenses,debt paying ability and funds origins are shown negative in the long run.Innovation of this paper has three aspects.First,this paper is about pharmaceuticals companies doing overseas horizontal M&A,while domestic research seldom analyze deeply in this field.Second,this paper adds total profits,main business,expenses,assets structure and funds origins into the analysis index innovatively,thus this paper analyze long-time performance more comprehensively and thoroughly.Third,this paper combine deeply with the characters and situation of the specific industry that the merger belongs to,and try to deeply compromises finance and industry,not only take internal drivers into consideration,but also dig out the external objective drivers for M&A.The inadequacies of the paper are the following two aspects: first,evaluate long-time performance by financial analysis,but whether financial data are reliable or not still need to confirm,besides,non-financial indexes,such as corporate culture,team building,are hard to be measured.Second,when evaluating the short-time performance,event window period overlaps the period that IPO comes to a standstill to some extent,thus the stock price volatility caused by IPO standstill can not be eliminated.