The economy of size and scale of operations is becoming increasingly important in the post WTO era, companies use the tool of mergers and acquisitions to strengthen their core competence and work out strategic position as a global player. To be an effective player both on domestic as well as export front the companies have to look for strengthening their core competence areas and shedding their extra burden in the departments they are not competent in the process strategic alliances mergers and acquisitions become sine qua non to become a player competent enough to survive in global competition.

Indian pharma sector is 3rd largest manufacturing pharmaceutical formulation and basic drugs in terms of volume. However, in terms of value it is lowly placed on 14th largest position in the world. The Indian pharma market by 2020 is poised to grow to US$ 55 billion from the 2009 levels of US$ 12.6 billion, as per a McKinsey & Company report titled "India Pharma 2020: Propelling access and acceptance realising true potential". According to a PricewaterhouseCoopers (PwC) report the pharmaceutical market in India is expected to touch US$ 74 billion in sales by 2020 from the current US$ 11 billion.

According to consulting firm - Grant Thornton, India will see the largest number of merger and acquisitions in pharmaceutical and healthcare sector. A survey conducted across 100 companies has revealed that one-fourth of the respondents were optimistic about acquisitions in the pharmaceutical sector.

Mergers and acquisitions have long been a popular element of corporate strategy and represent an important alternative for strategic expansion through external growth. Merger is a combination of two or more firms in which only one firm would survive and the other would cease to exist. Mergers and acquisitions are the most popular means of corporate restructuring. Mergers have played an important role in the inorganic growth of a number of major corporate the world over.

M&A from 1995 to 2015
The major mergers and acquisitions of all greater than $1 billion deals for the top five pharma companies over last two decades:

Pfizer: Pfizer ranked no. 1 in terms of revenues (including Allergen) has grown big by mega mergers and acquisitions. Pfizer acquired Warner-Lambert in 2000 for $ 111.8 billion, mainly to gain control of Lipitor. In 2002, Pfizer agreed to buy Pharmacia for stock valued at $ 60.0 billion, again to acquire full rights to a product, this time Celebrex (celecoxib). Pharmacia, itself was formed by the series of mergers including that of Upjohn, Searle and Monsanto. On January 26, 2009, Pfizer agreed to buy Wyeth for $ 68.0 billion. In February 2015, Pfizer acquired Hospira for $ 15.2 billion. Same year on November 23, 2015, Pfizer and Allergan Plc announced the merger for an approximate sum of $ 160 billion.

Novartis: Novartis was created in 1996 from the merger of Ciba-Geigy and Sandoz Laboratories. Ciba-Geigy was formed in 1970 by the merger of J. R. Geigy Ltd and CIBA. In 2005, Novartis grew it’s generic division Sandoz significantly though the $ 8.29 billion acquisition of Hexal and Eon Labs. In year 2006, Novartis agreed to acquire full control of Chiron Corp. for $ 5.1 billion. In 2010, Novartis paid $ 39.3 billion to fully acquire Alcon, the world’s largest eye-care company. In year 2012 Novartis bought Fougera Pharmaceuticals for $1.5 billion in cash.

Sanofi: Sanofi is the result of series of mergers between Sanofi-Synthélabo and Aventis. Sanofi-Synthélabo was formed in 1999 when Sanofi merged with Synthélabo. Aventis was formed in 1999 by Rhône-Poulenc S.A. merger with Hoechst Marion Roussel (HMR). HMR itself was formed from the 1995 merger of Hoechst AG with Cassella, Roussel Uclaf and Marion Merrell Dow. Sanofi-Aventis was formed in 2004 when Sanofi-Synthélabo acquired Aventis for $ 65 billion. In year 2010, Sanofi-Aventis acquired Chattern Inc for around $ 1.9 billion. After acquiring Genzyme for around $ 20.1 billion in year 2011, Sanofi-Aventis changed its name to Sanofi.

Roche: Roche started its M&A activities to gain foothold in USA Pharma market after announcing its first acquisition of Syntex Corporation in year 1994 for $ 5.3 billion. Roche merged its Japan subsidiary Nippon Roche with Chugai in 2002 in a deal worth around $ 1.4 billion to get a majority stake in a Japanese company. On 22 January 2008, Roche acquired Ventana Medical Systems for $ 3.4 billion. In one of the mega deal of year 2009, Roche acquired Genentech for $ 46.8 billion in March 2009.

Merck & Co: Merck & Co originally was established by Merck family in 1668. In November 1993, Merck purchased Medco Containment Services Inc for $ 6 billion. In year 2009, Merck merged with Schering-Plough in a $ 41 billion deal. Schering-Plough had acquired Organon from Akzo Nobel for $ 14.4 billion in 2007. Organon was the result of merger between Diosynth and Organon in year 2004. In June 2014 Merck acquired Cubist Pharmaceuticals for $ 8.4 billion, that was the result of merger between Idenix Pharmaceuticals and Trius Therapeutics.

M&A as a mode of entry by Indian cos in foreign market
Companies are encouraged by the globalised business environment to search for a competitive advantage that is also global in scale. They have been quick to respond to the need of global customers and have started spreading their wings across continents.

M&A as a value-creating strategy
Cross border mergers and acquisitions have given the opportunity to the emerging market MNCs to add value while applying the strategy of internationalization. The pharmaceutical firms from India are also adopting this strategy and the aim of this section is to determine the evidence of value creation for their international M&A activity. Many mergers fail to live up to post-merger expectations. It is important to understand factors that create or destroy shareholder value in mergers.

Effects of M&A in pharma industry

Drivers	Source of productivity gains
Competition	Faster adoption of new technology
	Reduction in inefficiency
Demonstration and imitation	Improvement of new production methods
	Improvement of new management practices
Transfer of technology	Adoption of new technology
	Scope of productivity convergence
Human capital and labor turnover	Tactical knowledge
	Increased productivity
Industrial management skills	Increased access to international
	markets
	Increased knowledge in promotional activities
	Adoption of higher quality standards

Conclusion
Pharmaceutical industry is using mergers and acquisitions as growth strategy. It is becoming popular due to their capacity to create additional revenues. Such companies have the benefits of wide market coverage and extensive growth. While it do not always succeed as companies often fail to adapt to the cultural differences among dissimilar markets across the globe. However, if a company takes care of these issues that it has to confront in the foreign market then it can certainly have the benefits of expansion in operations, synergy and also stay ahead of the competitors in the long run.

(Sonali Chatterjee is Research Scholar, BK School of Management, Gujarat University, Ahmedabad and Dr Jagdish Joshipura is Director, Som Lalit Institute of Management, Ahmedabad)