A Study On The Motivation And Performance Of High Premium M&A In China’s Pharmaceutical Industry

The pharmaceutical industry is important to China’s economic transformation in the new era.It not only relates to the whole economy and people’s livelihood,but also reflects the ability of China’s scientific research then enhances China’s position in the international medical community.However,compared with the top standards,our pharmaceutical industry is like a baby who just learned to walk.There are so many problems.One is that small-scale enterprises are the majority in the market,another one is that most companies lack of R&D.With the rise of the capital market in recent years,there has been a surge in M&A among the pharmaceutical industry.Companies expect to expand their scale and enhance their sustainability through M&A.This has led to an increase in the number and amount of M&A,but there has risk behind the wave.The rising average premium rate has gradually attracted people’s attention.The discussion of the reasonable price range has caused market participants to ponder,how to grasp the relationshipthe between final price and the value effect after M&A is very important.The case selected in this paper is“Baihuacun Acquired Nanjing Warwick Medicine”.Firstly,this paper outlines the basic theories related to M&A,and collates the research in related fields to give support to the following part.Secondly,this paper introduces the current development trends and M&A trends of China’s pharmaceutical industry,paving the way for the statement of the case.Thirdly,this paper focuses on the process of the case,including the background of bothside,the motivation of the merger,the transaction plan,the valuation process,and the analysis of the premium level.Forthly,this paper explores the market performance and financial performance after merger and conducts horizontal comparison among the industry,and the impact of the premium on the value effect.In the end,this paper gives conclusions based on case analysis and gives some comments and suggestions.Through the research on the case of“Baihuacun Acquired Nanjing Warwick Medicine”,some rules can be find: Most of the motivations for M&A in the pharmaceutical industry stem from the chase for scarce resources and the expectation of synergy after M&A.The premium within a reasonable range is an affirmation of the future development prospects of the acquired party.It not only provides a continuous source of motivation for the sustainable development of both parties,but also provides stable income for investors.However,the underlying assets generally belong to "light assets".Although the present value is high but the future risks are notsmall,and the market is eager for the concept of strong targets,under the effect of the two phases,the wave of M&A is not difficult to understand.In response to the problems reflected in the case,take the characteristics of pharmaceutical industry into account at the same time,this paper puts forward some opinions and suggestions in the end,hoping to make a little effort to rationalize the pharmaceutical industry M&A and the premium.