The Allergan Board under Fire Case Study Solution
Board has stepped back from approving acquisition of the Salix a multinational company specialized in GI treatment medications. The company could have created good synergies for both companies to benefit from but, the situation was much worst as compared to Valeant. As far as Valeant could not acquire the Allergan, it had left hope and remained on its business model of merger and acquisition.
The board presented argument that Salix is an open-ended liability for the company that it cannot accept at any cost and owners of the Salix would come forward as the new owners of the Allergan. There was also doubt in the valuation of the Salix and its operations were also questionable, as one director raised concern that what price should be offered, and what if company could not provide revenues for complete one year.
On the other hand, the Valeant acquired the Salix to grow into the market, but no product innovation was focused. Suddenly, the price of the Valeant fell by 70% as the U.S Congress showed reservations over the pricing practices, and its relationship with the Philidor Pharmacy that was selling the product of the company. So, it can be determined that acquisition of the Salix could have created value for the company, but it felt continuingits practices.
Meanwhile, the Allergan was acquired by the Actavis, and Actavis is one of the largest pharmaceutical companies worldwide. It has a diversified portfolio of products into the market, and good brand recognition. Actavis acquired Allergan for $219 per share, approximately $66 billion. So, it is estimated that both companies would have cuts of $1.7 billion. This is a huge amount for both the companies.
The Allergan Board under Fire Harvard Case Solution & Analysis
There is a huge synergistic benefit of acquisition of the Allergan by the Actavis since, revenues of both companies combined expected to be $23 billion. On the other hand, Pearson also announced to acquire the Salix and also announced to step back from acquiring the Allergan. Meanwhile, the Valeant has paper profit of
$2.6 billion from the stocks hold by the Valeant and Perishing Square.
It can be concluded that acquisition of the Salix by Allergan was inefficient as Salix was not considered as potential value creation company for the Allergan. Thus, company was acquired by the Actavis and Allergan Board has good expectations from that acquisition in terms of costs cutting and synergistic benefits......................
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