Assessment of Post-Merger and Acquisition Success Factors for Small- and Medium-Size German Pharmaceutical and Biotechnology Companies

Mergers and Acquisitions (M&A) are commonly used business strategies, the aims of which are to generate value and synergy. However, research studies provide evidence that most do not generate value and, in fact, many reduce it (Heracleous & Murray, 2001; Schweizer, 2002; Thanos & Papadakis, 2012). As further argued by Schweizer (2012) and Thanos and Papadakis (2012) there is no agreement on a common way of measuring success. According to Papadakis and Thanos (2010), management scholars have mostly used financial performance measures (short-term financial performance, accounting performance, long-term financial performance) to assess success. This thesis suggests that a better post-M&A performance measure of German pharmaceutical and biotechnology companies should be based on individual post-M&A success factors correlated with revenue post-M&A. The use of a broad set of success factors would add to a fuller understanding of post-M&A behavior and lead to a more accurate evaluation of post-M&A performance. By developing a research framework, this study seeks to integrate existing models and research traditions in a practical and comprehensible manner. The framework highlights different post-M&A success factors influencing post-M&A performance and provides important contributions to the deeper understanding of M&A measures. A review of M&A success factors in the pharmaceutical and biotechnology industry yields different success factors: economies of scale and economies of scope, efficient allocation of personnel or resources, clinical success rate, market share, employee retention rate, weakening or eliminating competition, patent rate, gaining new knowledge, tax benefits and escape from bankruptcy. Individual post-M&A success factors are identified to correlate with post-M&A performance, expressed in this thesis as the revenue difference between pre- and post-M&A. This study employed research methodology incorporating qualitative as well as quantitative approaches. In order to assess the research questions and to verify the hypotheses, expert interviews and a survey questionnaire were performed. For the interviews, experts from different managerial levels of pharmaceutical and biotechnology companies involved in M&A processes revealed interesting details about M&A performance measures as well as about post-M&A success factors. The survey questionnaire validated the research framework and the hypotheses. The internal consistency and the validity of the constructs were established, and nearly all hypotheses were supported. This thesis presents a new methodology for evaluating different success factors for M&A performance. The major implication of the research study is to recommend using the post-M&A success factors of economies of scale and economies of scope, efficient allocation of personnel or resources, market share and clinical success rate to measure post-M&A performance of German pharmaceutical and biotechnology companies. These post-M&A success factors may set new guidelines for M&A evaluation and the pre-determination of synergies for future M&A processes within the pharmaceutical and biotechnology industry. Furthermore, this thesis developed a framework for managers to assist them in M&A evaluation of German pharmaceutical and biotechnology companies.