Mergers, Acquisitions and Takeovers Case Study

Merck's Acquisition of Serono: Creation of the Largest Biotechnology Company of Europe

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Abstract:

Germany based pharmaceutical company Merck KgaA was set to acquire the Switzerland based biotechnology company, Serono SA (Serono) in September 23, 2006 at US$13.3 billion (10.4 billion euros). The acquisition proved to be of strategic advantage to Merck. Until the recent past, Merck was only into the branded and generic pharmaceutical business with very little focus on biotechnology. The acquisition of the world’s third largest biotechnology company provided it with an avenue to enter into the segment of biological medicines. With a strong presence in the US, Serono also provided Merck an opportunity to fortify its market position in the country.

The case discusses Merck’s inorganic growth strategies by which it tries to enter the new business segment of biological medicines and strengthens its position in the US market. However, the acquisition has its own challenges. Considering the steep decline in total revenue and net margin of Serono between 2001 and 2005, critics were skeptical about the success of such an acquisition. Therefore, the case also raises a debate between the possible synergies and challenges of the acquisition.

Pedagogical Objectives:

• To understand the Drug development life cycle of a pharmaceutical company
• To have a brief idea of the recent trends in Biotechnology industry
• To understand the problems associated with the commercialisation of a drug
• To understand the synergies of a merger of two pharmaceutical companies.

Keywords : Mergers,Acquisitions,Alliances Case Study;Merck KgaA; Serono SA; Biotechnology; Inorganic growth; Pharmaceutical company; Multiple sclerosis; Product portfolio; Drug development; Acquisition; Moody's; Biological medicines; Generics; Patented drugs; Recombinant generic engineering

Contents : 
Company Background
Synergies Of The Acquisition
Possible Challenges
The Major Drugs Of Merck
Serono- Major Developmental High Lights
The Consolidated Income Statement Of Serono