Research On The Motivation And Economic Consequences Of Equity Carve-Outs In Pharmaceutical Companies

Shrinking asset reorganization is an important part of the operation of Chinese enterprises and plays an important role in the development of Chinese enterprises.As one of the forms and methods,the Equity Carve-Outs have the same effect and function.In fact,in the past ten years,the equity carve-outs are still in the process of continuous exploration and development,and the relevant regulations have been continuously improved in practice.And it was not until December 2019 that the domestic and overseas equity carve-outs system of A-share listed companies was established.At the same time,the introduction of policies such as consistency evaluation of generic drugs,supplementary drug tracking and monitoring system,and "4 + 7" volume purchases have led to some changes of competition rules in the pharmaceutical market.Transformation and innovation have become important themes for the pharmaceutical industry.Then the future of pharmaceutical companies is facing the issue of how to obtain more capital to support their own development.As a result,the equity carve-outs as a kind of capital operation method,with a gradually standardized system,have also become a new choice and strategy for pharmaceutical companies.The equity carve-outs can help pharmaceutical companies expand financing channels and gain social support,better promoting transformation and accelerating innovation.Therefore,it is of economic value and practical significance to study the reasons why pharmaceutical companies choose equity carve-outs,and the effects and functions of this shrinking asset reorganization on the development of pharmaceutical companies.This paper summarizes the existing research opinions and theoretical assumptions on equity carve-outs at home and abroad through literature research,and uses case studies to discuss the application of equity carve-outs in the pharmaceutical field.This article selects an example that is closer to the present time,that is,the case of the domestic A-share listed company Fosun Pharma and its overseas subsidiary Sisram,with the specific analysis of these two companies' operations and equity carve-outs process,exploring in depth the motivation with the actual situation and market environment.In addition,using various quantitative analysis methods such as financial indicators,event research methods,EVA indicator methods,etc.,analyzing the change trend before and after equity carve-outs of the parent and subsidiary branch through vertical comparison in time and horizontal comparison in the same industry by the comparative research method,this article will study the economic consequences of the subsidiary on the financing effect and operating effect,and analyze the impact of the parent company on both the market effect and the operating effect.After in-depth research,it is found that the motivation for pharmaceutical companies to separate their subsidiaries is usually to use the capital market to meet financing needs,reduce information asymmetry and transmit signals to increase the overall value of enterprises,and also hope to use this market platform to enhance core competitiveness and broaden market share.What's more,the equity carve-outs can indeed bring positive effects to the parent and subsidiary companies,solving various problems and achieving the original intention.On the one hand,from the perspective of the subsidiary company,it not only eases the pressure on capital,but also enhances core competitiveness.On the other hand,from the perspective of the parent company,not only can it increase market value,it also can achieve strategic focus.However,in the long run,the effect of equity carve-outs will be weakened by the company's operational management capabilities.Therefore,this article puts forward relevant suggestions for the pharmaceutical companies which choose equity carve-outs.For example,pharmaceutical companies need to understand and strictly abide by the policy of equity carve-outs,choose the appropriate method and path,track and follow up after equity carve-outs and improve operational management capabilities,so as to give full play to the advantages and benefits brought by the equity carve-outs.The relevant conclusions and suggestions obtained through the case analysis in this article will help provide more reference for the future equity carve-outs.