Mega-Mergers In The Pharmaceutical Industry

Mega-Mergers In The Pharmaceutical Industry

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When two companies decide to combine forces and become one bigger, richer mega company, it is called merging. This process forms a new company, combining the money and ideas of what used to be two different entities into one. This, however, is not the only thing that results from merging two different companies, and since we will be discussing the merging of two companies in the pharmaceutical industry, the impact will be incredible. Of course, the merging of two companies will not only have positive impacts but it will have many negative side effects as well. Furthermore, depending on the size of the merging companies and the goals of the people leading these companies there will always be contradictions according to the long-term goals or short-term goals depending on what both parties’ interests are. Our company, Verduga Inc. is contemplating to merge with Coronado-Salinas Inc., so before we rush into such a merger we must contemplate the positive and negative aspects of such a move. When it comes to mergers there are always many possible positive and negative impacts due to the effects of merging; these effects more widely impact the fields on research and development, on employment and management, stocks and shareholders, monopolization, and ingenuity.

In recent years, the price of research and development has skyrocketed, making it very difficult and expensive to introduce new drugs into the market. Companies are spending more than ever from their profit of sales revenues into research and development. Now looking at it from this point of view, a newly merged company will have such high profit and revenue that they will have the opportunity to spend as much as they want on research and development, without money being an issue or a concern. Technology is improving by the day, and with the merging of companies-these companies will join technologies and join their research making their progress advance exponentially. Our company- Verduga Inc.-has wasted a lot of money recently on research and development. If we were to merge with Coronado-Salinas Inc., we would see a vast increase in the amount of capital available to us to use in research and development. The downside is that research and development sometimes turns out to be just research. Big companies can get overconfident and after getting a couple of results they might get too compulsive and overspend in research and development.

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Overspending can bring in huge results but at the same time its a ludicrous gamble because if this gamble doesn’t produce a result and the spending results to be fruitless then the mega company will have just wasted a big part of their allotted spending money. Another even greater disadvantage is the effect that mega-mergers can have on research and development has to do with the actual research scientists. “

Research scientists like to specialize in their work and conduct experiments and research individually. So when mega-mergers are in progress, the scientists feel like they are not as much of a part of their research as they would be in a smaller company. In comparison, it is almost like a school, where the different departments are always itching for a bigger part of the budget. Research scientists do not want to be part of the same problem and therefore find bigger companies unappealing.

When two companies merge some of their offices get shut down. Some get transferred to different departments in different cities, but most end up becoming unemployed. Verduga Inc. Has offices in six different cities. We are a very big company and to excel in our customer satisfaction and product quality we maintain high standards in our obligations to our employees. This means that there is a great possibility that when we merge we will risk losing the smaller, but in no means less important, offices. Since we value our employees as much as our customers we consider this to be a heavy loss and a great disadvantage to the possibility of merging with a greater company. This will augment unemployment in those cities and greatly affect their local economies as well. However, with the merging of our companies we will also gain valuable assets and new employees from the other company. This will expose us to fresh, and more innovative ideas that can ultimately lead in more progress and profit for our company.

Different companies also have varying ways of managing their companies. Some companies may prefer to centralize their decision-making as opposed to others that may decide to give more autonomy to their regional companies. Also, the company that we are interested in merging with is based in Western Europe. We are hoping that their radically different approach to problem-solving and management can lead to different perspectives and hopefully, new better ideas that can increase out profit and help us accomplish our goals. However, at the same time, the same reason that we are hoping will lead us to success can also be the cause of a culture-clash and descent within the company. It is unpredictable whether the changes and differences in structure and decision making will either help in the progress of this company, or rather hinder its path to success.

The pharmaceutical industry is a profit-based industry, and as such we must seek to meet the demands of our shareholders. We must seek to maximize profit and increase the number of stocks exponentially. Ever since rumors and speculation started about the possibilities of a merge between Coronado-Salinas Inc. and us the value of our stocks has skyrocketed. Meeting the demands of our shareholders has always been a challenge that we strive to meet. However, now that the rumors have been spread, their demands and expectations for our future will be a much greater, and our actions to meet them will be more of a struggle than it ever has been. However, with the merging of the two companies our capacity to meet those demands will be much higher than it ever has been. Were we to merge we would have an increased amount of shareholders and income and with our increased manpower, we have a broader range of possibilities and more ways than ever to make profit for our shareholders. We are not the only ones that can possibly benefit from this merge. Our business partners can also profit and see an increase in the value of their stocks as well because there is a chance that we may also merge with them in the future. And at the same time, they will also benefit from our joint increase in newfound creativity.

With the merging of these two companies, we believe that an influx of new ideas will lead to an increased spectrum of innovation for us. We will be working hand in hand with a company that was trying to out compete us. But if the merger goes through then they can help us improve our existing products and we can do the same for them, either way it will ultimately result in the progress of the merged company. Furthermore, if the merge happens then we will be combining with one of our greatest competitors and in turn, it will not only decrease our competition but also simultaneously increase the profit to be had. Now, instead of focusing on outdoing our competition, our focus will be more fixed on satisfying and exceeding customer needs and demands. At the same time, Coronado-Salinas Inc. will also have one less competitor and in turn can shift its attention towards coming with more innovative ideas for higher quality products. However, the same aspects that can lead to our success and innovation can at the same time hinder the industry. Less competition in the pharmaceutical industry can also lead to less innovation. Companies will also feel less pressured to compete and not have the same drive to come up with new ideas to outdo other companies. Because when there is more competition, the drive to survive from other companies, drive the industry to come up with new ways to outdo each other, and this in turn brings new innovations every time. The difficulty of entering the pharmaceutical industry makes mergers such as these also dangerous because it creates virtual monopolies. The cost of entering the industry is in the millions, so existing companies can have a reasonably based sense of security. They can feel safe that new companies are unlikely to emerge.

All things being considered, we feel it would be in the best interests of our company to complete the merge. The benefits definitely outweigh the risks. Though some of the risks may, in the long run, end up hurting the pharmaceutical industry and, to a lesser extent, maybe even end up hurting us, we feel as though we have the means and the will to overcome any possible adversity that we may be faced with. The flood of money and new ideas that would inundate our company will lead to increased profit and customer satisfaction and ensure our success for many years to come.



Bibliography

Gershon, Diane. "Are mega-mergers good medicine for the pharmaceutical industry?". Nature. 09 Mar 2008 .

Lundvall, Karl. "The Pros and Cons of Merger Control". Social Science Research Network. 09 Mar 2008 .

Subramanyan , S. . "ILO study on M&As -- The pros and cons of mergers ". Business Line. 09 Mar 2008 .
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