Page 227 - DMGT548_GLOBAL_HRM

Global HRM

Notes and preferential issue of warrants to acquire a majority in Ranbaxy, that is, at least 50.1%.
After the acquisition, Ranbaxy will operate as Daiichi Sankyo’s subsidiary but will be
managed independently under the leadership of its current CEO and Managing Director
Malvinder Singh.
The main benefit for Daiichi Sankyo from the merger is Ranbaxy’s low-cost manufacturing
infrastructure and supply chain strengths. Ranbaxy gains access to Daiichi Sankyo’s research
and development expertise to advance its branded drugs business. Daiichi Sankyo’s strength
in proprietary medicine complements Ranbaxy’s leadership in the generics segment and
both companies acquire a broader product base, therapeutic focus areas and well distributed
risks. Ranbaxy can also function as a low-cost manufacturing base for Daiichi Sankyo.
Ranbaxy, for itself, gains smoother access to and a strong foothold in the Japanese drug
market. The immediate benefit for Ranbaxy is that the deal frees up its debt and imparts
more flexibility into its growth plans. Most importantly, Ranbaxy’s addition is said to
elevate Daiichi Sankyo’s position from #22 to #15 by market capitalisation in the global
pharmaceutical market.

Source: ipfrontline.com

Self Assessment

State whether the following statements are true or false:
6. Motives behind merger and acquisition can be to gain economies of sale in operations.

7. Increase in market share is never a motive behind merger and acquisition.
8. Chances to be a global company through mergers and acquisitions is the motive for most
of the firms.

9. Vertical integration occurs when an upstream and downstream firm merges (or one acquires
the other).
10. Merger and acquisition can help in the reduction of the tax burden.

12.3 Risks Involved in M&A

M&A are very risky when done internationally as here are various reasons for the same:
1. It takes time to understand the global markets and companies often have to rely on the
information provided by the secondary sources which may not be necessarily authentic.

2. Regulations in the global markets could be a dampener. Industries like healthcare,
pharmaceuticals and energy are often regulated very closely by the foreign laws and
regulations.
3. There is a danger of making acquisitions when an industry is on an upswing as the buyer
could take a long time to recover investments if the cycle turns.
4. There are cultural integration issues which play a major role in adding risks to the
international M&A different languages and sellers employees having new owners could
be major hurdles.
5. Economic downturn in the global markets plays havoc with the buyers and will severely
affects the business prospects and forecasts.

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