The Empirical Research On M&A Performance Of A-share Listed Pharmaceutical Companies Based On Financial Indicators

M&A is a big topic. In the recent years, with the development of Chinese marketeconomy and capital market, more and more enterprises tend to obtain epitaxial growththrough M&A. The pharmaceutical industry is where M&A has been most active. Theauthor have three years’ working experience, one year investment research experience inpharmaceutical industry and wants to explore deeply into this topic.The thesis firstly reviews the research achievements of M&A performance bothChinese and abroad, both by all industries and by pharmaceutical industry only. Also itclarifies corresponding M&A concepts and theories. Then the thesis introduces currentdevelopment of Chinese pharmaceutical industry, its drivers and constraints, and has astatistical description of M&A deals of A-share listed pharmaceutical company in recentyears.Upon this, the thesis researched157M&A deals of A-share listed pharmaceuticalcompany from2000-2011. Firstly14financial indicators from5aspects have been chosento carry out factor analysis, so as to discover how the companies’ performance scorechanged from one year before M&A to two years after M&A. Then let the performancescore be the dependent variable, and9elements from M&A, industry and shareholders beindependent variables, so as to discover which elements resulted in companies’performance change. The research not only covers the whole pharmaceutical industry, butalso divides into7sub-industries of chemical raw medicine, chemical medicine,traditional Chinese medicine, biological medicine, medical equipment, medical services,medical trade. The third part is research for specific M&A examples. The thesis finallycomes to the following conclusions:1. Pharmaceutical companies had a significantly downward performance in the yearM&A happened, although one year and two years after M&A the performance rose againbut still didn’t equal the performance score one year before M&A. It can be seen thatM&A didn’t bring long-term performance for pharmaceutical companies. As to differentsub-industries, M&A brought significant performance improvement in chemical rawmedicine, medical services and medical trade. M&A had neutral effect for performance intraditional Chinese medicine, biological medicine. M&A had a significantly negativeeffect in chemical medicine. It didn’t come to a conclusion for medical equipment sub-industry, because of lack of sample.2. If we analyze why the performance score changed, we discovered that theproportion of institutional investors and the proportion of acquisition are two positiveindicators for the whole pharmaceutical industry. The high the proportion of institutionalinvestors, the higher the proportion of acquisition, the more significant performance improvement. As to different sub-industries, the proportion of institutional investors haspositive regression coefficient for biological medicine, medical trade, chemical medicine,traditional Chinese medicine. Proportion of top10shareholders has negative regressioncoefficient for biological medicine and chemical medicine, but positive for chemical rawmedicine, so we can come to conclusion that it is a negative indicator for mature medicinecompanies, but a positive indicator for the upstream companies. Deal size has negativeregression coefficient for medical trade and medical services, but positive for traditionalChinese medicine. Proportion of shares outstanding has negative regression coefficient forbiological medicine and chemical medicine.All in all, the thesis is based on financial indicators method and carries out statisticalfactor analysis and regression analysis. Many discussions about A-share listedpharmaceutical companies have been fostered, so as to have theoretical interpretation ofM&A activity of Chinese listed pharmaceutical companies and provide basis andreference for M&A decision.