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Managing International Acquisitions Term Paper

Financial Analysis of Mergers and Acquisitions In the past few years, the amount of mergers and acquisitions have dramatically increased, raising the importance of the strategies and financial analyses performed before the merger or acquisition is expected to occur. Financial, operational, and technical due diligence have become routine undertakings before companies consummate a merger or acquisition. A review of the literature indicates that the strategies employed have a significant impact on whether the merger or acquisition is a success. An example of a very successful strategy that has been implemented several times in the acquisition or merger of companies is the strategy employed by Pfizer. A strategy that did not work out as well is portrayed by Matsushita in its' failed acquisition with MCA. This paper will illustrate and analyze the strategies employed in such transactions in addition to the financial outcomes of the deals.

Pfizer's overall business philosophy has its' roots in the strong sales of prescription pharmaceuticals, in connection with Pfizer's ultimate mission to become the world's most valued company to patients, customers, investors, colleagues, business partners and the local communities. On April 16, 2003, Pfizer acquired Pharmacia Corporation for a purchase price of approximately $56 billion, which included the issuance of approximately 1.8 billion shares of Pfizer common stock, 180 million options on Pfizer common stock, and vested share awards,...

By acquiring Pharmacia, Pfizer created the world's largest pharmaceutical company. This acquisition gave Pfizer the scientific depth, global marketing strength and financial resources to take greater advantage of new opportunities and to bring innovative new products to the market faster. Revenues increased 40% to $45,188 million in 2003 and 12% to $32,373 million in 2002 (Tsao, 2004). Reports have indicated that revenue increases in 2003 were primarily due to the inclusion of Pharmacia products and strong performance by Pfizer's in line and new launched products across businesses and regions.
In another acquisition, Pfizer exchanged 2.75 shares of Pfizer common stock for each outstanding share of Warner-Lambert stock in a tax-free transaction valued at $98.31 per Warner-Lambert share, or $90 billion, based on the closing price of $35.75 (Tsao, 2004). This represents a 34% premium over the average closing prices of Warner-Lambert during October 1999 (Tsao, 2004). The combined company estimated annual revenues of approximately $28 billion, including $21 billion in prescription pharmaceutical sales, and a market capitalization in excess of $230 billion (Tsao, 2004). By combining both Pharmacia and Warner-Lambert, Pfizer was able to create a financially strong, and fast-growing, major pharmaceutical company in the world. The combination of Pfizer and Warner-Lambert are intended to represent a new competitive standard for the…

Sources used in this document:
Bibliography

Mcgarvey, R. (1997). Due Diligence. Entrepreneur Magazine, October.

Recklies, O. (2003). Vision as Key Factor in Merger Processes. Retrieved July 28, 2005 from http://www.themanager.org.

Tsao, Amy. (2004). Pfizer's Show of Strength. Business Week, December.

Wood, Mackenzie. (2004). Pharmaceutical Overview. Executives Guide, 15-18.
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