Have Acquisitions Impacted the Performance of the Indian Pharmaceutical Industry?
The study seeks to find out whether there is variation in the performance of Indian pharmaceutical firms that have acquired other firms in the industry. The measures for the impact assessment are synergistic in approach. A total of 109 mergers and acquisition (M&A) events in the time period from 1999 to 2011 were considered for the analysis. The total events included 47 Indian pharmaceutical firms who were acquirers in the sale of assets, takeovers, and minority and substantial acquisitions of other pharmaceutical firms. The variables selected for testing the hypothesis were measures of profit, operating efficiency, research and development function, financial risk and market value. The paper suggests that the expected gains from such a transaction shall be more in market valuations than in other areas like operating efficiency, research and development, and return on capital employed. Though the study reports an increase in debt solvency and a greater allocation of expenses towards research and development after the transaction, the statistical tests do not reveal a significant change even a year after the M&A event’s announcement on the stock exchange/media. Since the study incorporates measures of performance including market value and the firm’s internal measures of performance, it presents an integrated view of the variation in performance of the acquirer firm after one year of the occurrence of the M&A event. The study is unique in terms of the overall assessment of the impact of acquisitions in the Indian pharmaceutical industry.