Thursday, April 23, 2015

Offense and Defense in the Drug Industry: Teva and Mylan

A frequent topic in these posts is the fact that certain catalysts set an industry into play with regard to mergers and acquisitions.  It could be regulation, competition, the economy, changes in consumer tastes or something else.  (See Catalysts for Merger).  Our own research has shown that when a firm is an initial target or an initial bidder in an industry, following at least a 12 month minimum dormant period in the industry, the prices of rivals adjust in anticipation.  Moreover, the price adjustments are correlated with the probability of being a subsequent target or  bidder.

The industry consolidation in the drug industry has been going on for some time, and we certainly haven't seen a long dormant period in a while.  What is happening now is that rivals are positioning themselves in anticipation of future industry changes.  Hence, Teva launches a bid for Mylan industries in an attempt to break up Mylan's bid for Perrigo.  This will be a fun one to follow as it illustrates both offensive and defensive techniques of merger strategy.   In this case, the catalyst seems to be slowing growth in the industry and the decision to grow through acquisition to achieve a more dominant role.

(See Joe's related posts on this industry: Build or Buy, Chance Favors the Prepared Mindand The Hammer and Nail).

All the best,


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