Fi561 Case Study: Merck Essay

2445 Words10 Pages
Case Study: Merck Acquisition of Medco Professor Daniel Weiss FI561 January 23, 2011 Case Study: Merck Acquisition of Medco Abstract The purpose of this case study is to determine whether it would be beneficial to merge Merck Corporation with Medco Containment Services Incorporated. The merger and acquisition between the world’s largest drug manufacturer and the largest prescription benefits management company (PBM) and marketer of mail order medicines in the United States would result in a successful campaign to take over the drug industry if handled appropriately. As Chairman and CEO of Merck Corporation, I have to consider all sides of the arguments, financially, marketing and cultural wise and come to a conclusion as to…show more content…
The marketing sector of the company will also be saving money once and if the acquisition takes place. Looking at Merck’s financial statements, the annual consolidated sales are currently at $27,428.3 million and the Earnings Per Common Share are currently at $5.65, total assets are currently at $112,089.7 (Merck Annual Report, 2009), stock is currently selling at $33.90 per stock and net income is at $340.40 million dollars, Medco’s current stock price is at $63.93, their current sales are at $16,319.80 million, at the moment (Google Finance), Merck are at a good standing to acquire Medco, earnings per share will definitely increase. There is the fear that there won’t be synergy or the integration of different organizational designs and cultures might clash. The premium that will be paid is based on future expectations of synergies. If synergy fails, the premium of $6.6 billion dollars will be money lost, so that is cause for concern and have another look at this acquisition. To be able to have a successful merger and acquisition, there are phases that you go through thoroughly to make sure the right decision was reached. In the book Valuation: Measuring and Managing the value of Companies, the authors noted the following (Evans, 2000 P. 7): “Even in situations where the acquired company is in the same line of business as the acquirer

    More about Fi561 Case Study: Merck Essay

      Get Access