Merck Acquisition of Medco

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Merck Acquisition of Medco Case Study John X Devry University – Keller Graduate School of Management Finance 561 Professor May 22, 2011 Table of Contents Abstract………………………………………………………………………………………p.g. 3 Company backgrounds……………………………………………………….………………p.g. 3 Merck & Co., Inc. ………………………………………..…………………….…....p.g. 3 Medco Containment Services Inc. ............................……..…………………………p.g. 4 Reasons for Mergers…………………………………………………………………………p.g. 5 Economies of Scale…………………………………………………………………..p.g. 5 Market Share…………………………………………………………………………p.g. 6 Synergy………………………………………………………………………………p.g. 6 Eliminate competition…………………………………………….……….………....p.g. 6 Increase depth and diversity of product line………………………….…….……….p.g. 7 Keeping…show more content…
At the time in 1984 only 2% of the prescriptions filled where through mail-order dispite having been available for nearly 40 years (Medco). The time was right in 1984 for mail-order prescriptions due to the fact large corporations needed to reduce drug costs. Wygod was aggressive in his style of seeking new clients for mail-order and signed up corporate benefit plans like Alcoa, GM, and Georgia-Pacific and my 1992 Medco had over 1300 company accounts and close to 30 million people being served (Medco). Medco has consistently increased revenue 5 years in a row an average of 47 percent and had $2 billion in revenue in 1992. In 1993 Medco had 100 of the Fortune 500 companies. Growth wise in 1991 Medco acquired American Biodyne Inc. that was a provider of managed mental health services and also acquired Personal Performance Consultants, that provided assistance programs (Medco). Technology wise Medco launched Medical Marketing Group Inc. which collects data from drugstores, and physicians on prescribing patterns. It then sells the data to drug companies for promotional and marketing needs. Medical Marketing gathers the information mainly from IMS America Ltd. And from it’s mail-order prescription service of AARP. Reasons for Mergers The board should consider and understand the reasons why Merck would want to merge with another company be it Medco or any other. In deciding whether to merge with Medco a look at what reasons Merck might or might not want to

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