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Mémoire
Bachelor thesis

Synergies in Mergers & Acquisitions : a comparative sectoral analysis

    2019

112

Mémoire de bachelor: Haute école de gestion de Genève, 2019

Fusion d'entreprises
secteur pharmaceutique
secteur cosmétique
English Synergies or rather the non-achievement of synergies has been the major reason for many failures with regard to mergers and acquisitions. Though success does exist in certain sectors. This brings me to the research question of this thesis: Synergies achieved in the Pharmaceutical and Beauty–Personal Care sectors: Illusion or Real Value Creation? The principal purpose of this research study is to carry out a sectoral comparative analysis, especially for the Pharmaceutical and Beauty–Personal Care sectors as these two are very active in the M&A sector. In order to realize this analysis and answer the core question of this paper, three specific questions have been answered and two hypotheses tested empirically. The first question deals with the identification of common causes for mergers and acquisitions in those sectors. The second relates to the documentation of the component of recorded goodwill (synergies, assembled workforce, and/or others e.g. tax purposes). The third question considers whether economic value is created in the short-term or in the long-term, that is to say whether the synergies come from the first levels of the synergy map and/or the fourth and fifth ones. The first assumption tested can be formulated as follows: There is no relationship between the value of goodwill and the purchase price. The second is: There is no relationship between additional operating cash flows post acquisition (“added_CFO”) and a theoretical 4-year amortization of acquired goodwill (“GW/4”). The research methods include secondary data collection from finance books, consulting companies’ and institutions’ articles/reports, articles in scientific journals related to the topic of mergers and acquisitions, the consolidated annual/financial reports of the acquiring companies from both sectors including the 2018 M&As and 2016 IFRS course slides. The use of these secondary data permitted to collect and evaluate the essential primary data. The automatic function on econometric software Stata, through the commands “regress Goodwill Consideration / DealValue” and “regress Added_CFO GW4 Others4 Location_n”, were then used for both, simple and multiple, regression analyses to test the assumptions discussed above. The t-stat and P-value were considered to see the significance of identified relationships. The F-stat and R-squared tests were also taken into account to see the level of correlation between these variables. The empirical research enables us to observe three outcomes. First, the results of the data analysis demonstrate that the synergies achieved in both sectors are rather “Real Value Creation” than “Illusion”. Second, the simple regression analysis shows a strong correlation between goodwill and the purchase price: the higher the purchase price, the higher the goodwill value. Finally, the multiple regression analysis does not associate any relationship between the added CFO and goodwill when measured post-acquisition. It can be assumed that no positive association between GW and added CFO is an information per se. In other words, corporations cannot prove that the higher the price, the higher the GW, the higher the expectation of added CFO. This may relate to these additional CFO coming from other decisions such as restructuring plans. The recommendation is thus to keep realizing M&As as companies in those sectors do succeed with this activity. However, preparers should understand that a high price / a high level of goodwill will not guarantee value creation through achieved synergies or a stronger assembled workforce, but can result from short-term easy-to-achieve actions such as Reduction in Force and restructuring initiatives.
Language
  • English
Classification
Economics
Notes
  • Haute école de gestion Genève
  • International Business Management
  • hesso:hegge
License
License undefined
Identifiers
  • RERO DOC 327905
Persistent URL
https://sonar.ch/hesso/documents/314912
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