Performance Analysis Of Horizontal M&A In CRO Industry

The pharmaceutical industry is an industry closely related to people’s lives and is related to people’s livelihood.In recent years,with the promotion of an aging society and the support of policies,the pharmaceutical industry has developed rapidly.The effective development of innovative drug research and development has become the top priority of the development of pharmaceutical companies.With the increase of drug research and development costs and resource constraints,pharmaceutical companies are constantly looking for cooperative outsourcing institutions.At this time,the CRO(Contract Research Organization)industry came into being.CRO companies provide pharmaceutical companies with outsourcing of R&D services.Their mission mainly includes shortening the R&D cycle of new drugs,improving R&D efficiency and controlling costs.The CRO industry flourished in developed countries in the 1970 s.After more than 20 years of development in my country,a relatively stable market has been formed,and my country’s CRO enterprises have a compound growth rate higher than the global average.Due to the low threshold,low concentration and few professional and technical talents in the industry,mergers and acquisitions have become a common expansion method for large enterprises.The purpose is to break through the performance ceiling,expand the scale,and improve their own competitiveness.The CRO industry can be divided into three sub-fields,pre-clinical CRO,clinical CRO and process research and development.Clinical CRO has the largest market size and the highest technical barriers among the three sub-fields,and is the key development area of CRO enterprises.Therefore,this paper takes Tigermed,the largest local clinical CRO company,as a case,and analyzes the impact of several horizontal mergers and acquisitions carried out by the company on its own performance.This paper analyzes the market environment of the CRO industry based on the multi-perspective factors of policy,economy,society and technology.The main M&A events in 2020 are the research objects.According to the industry background and Tigermed’s business module,we deeply dig out the reasons for its horizontal mergers and acquisitions several times,sort out the type,strength and process of horizontal mergers and acquisitions of enterprises,and analyze short-term market performance and long-term market performance through event research method and financial indicator analysis method.For financial performance,the excess rate of return and cumulative excess rate of return during the event period are calculated according to the market model of the event research method,and the long-term financial performance is evaluated with reference to the four indicators of Tigermed’s profitability,operating ability,solvency and growth ability.Then use the comparative analysis method to compare the performance of Tigermed and Pharmaron,which has a similar starting point in the same industry.Finally,on the basis of economies of scale and synergies,the reason for the success of Tigermed’s several horizontal mergers and acquisitions was deeply explored.The conclusions of this paper are as follows: First,among the six large-scale horizontal mergers and acquisitions of Tigermed,the cumulative excess return during the event window period was positive for five,that is,80% of horizontal mergers and acquisitions had a positive impact on Tigermed’s stock price.,resulting in excess returns for shareholders.Second,although the financial indicators of Tigermed from2009 to 2020 fluctuated,with the accelerated frequency of horizontal mergers and acquisitions,the overall development trend was positive.Combined with the evaluation of synergy effect and scale economy effect,it is pointed out that Tigermed’s clinical trial technology,high-quality customer resources and clinical business at home and abroad have been integrated,and human resources have been optimized,which has brought a positive impact on corporate performance.Third,compared with Pharmaron,Tigermed’s profitability and market value growth rate are superior.Tigermed has continuously acquired companies of the same type horizontally for many years,deeply cultivated in the clinical field,built technical barriers,and promoted the continuous improvement of corporate performance.The purpose of the analysis in this paper is to help enterprises to sum up experience,promote the rapid and sound development of enterprises,and at the same time provide inspiration and reference for other enterprises in the industry.