Merck & Medco You Decide Assignment Essay

3017 Words May 14th, 2013 13 Pages
Merck’s acquisition of Medco:
Merger Analysis and Recommendation

by Marzena Porebski
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Table of Contents

1.0 INTRODUCTION 2 2.0 THE COMPANY OVERVIEW 3 2.1 Merck & Company 3 2.2 Medco Containment Services Inc. 5 2.3 The Companies Advantages 6 3.0 MERCK & MEDCO MERGER 7 3.1 Acquisition Details 7 3.2 Merger Analysis 7 4.0 CONCLUSION 11 5.0 APPENDIX 12 5.1 Financial Reports 12 5.2 Sales of Drugs and Prices 13 5.3 Merger and Acquisition Activity 14 5.4 Market Share 15 5.5 Additional Documents 15 6.0 References 15

1.0 INTRODUCTION

Mergers and acquisitions occur because directors see benefits that could come from combining two or more businesses, which could improve the
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The report provides the reasons why Merck should acquire Medco. On July 28, 1993, Merck & Company announced that it planned to acquire Medco Containment Services Incorporated for $6.6 billion (Weston, 2004). Through the acquisition of Medco, Merck will be able to market their drugs more effectively to managed care providers. The company will add value to its operations and expand its organizational boundaries. Merck’s acquisition of Medco will increase the number of drugs on Medco’s formulary list and it will help Merck to increase its market share in an industry (HubPages). The worldwide industry is populated by hundreds of companies, however none of them have more than 5% of market share (McGahan , 1994).
Pharmaceutical firms in order to sustain the growth rates that were driving their pre-1991 stock prices, they would have to do so through one or more of three basic approaches - counteract buyer power, develop unique drugs quicker, or cut costs. The industry uses mergers and acquisitions to address all three approaches. The vertical integration of Merck and Medco is to attempt to address buyer power by co-opting that power and managing it through information. The merger will increase the challenges faced by the rest of the industry that lack access to prescription benefits management companies (PBMs) and their information capabilities (Kaplan). Merck executives claim the Medco has computer profile of 33 million customers, which allows Merck to

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