| Summary: | Due to advancements in globalization, mergers and acquisitions have been on an increasing trend over the past few decades. More, specifically, various factors have influenced the pharmaceutical industry, prompting it towards takeovers as a form of salvation. By addressing the concept of “patent cliffs”, where blockbuster drugs lose their patents at a rapid pace, acquiring firms in this industry anticipate that such deals could patch up gaps in their research and development. Being an issue of great controversy, mergers and acquisitions have been argued amongst consultants, economists as well as financial organizations as to determine the effect these have on firms.
There are numerous studies conducted to test whether mergers and acquisitions add value from the perspective of shareholders of both the acquiring firm and the target firm. This research study focuses on the effects mergers have on shareholders of the acquiring firm following the announcement date. In order to address this issue, an event study was conducted to the sample of 7 large UK-Listed firms in the pharmaceutical industry over the past decade. The results show that the majority of firms seemed to experience positive returns following the announcement date.
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