The other theory is the synergistic mergers theory, which holds that firm managers achieve efficiency gains by combining an efficient target with their business and then improving the target’s performance (Stahl and Mendenhall, 2005).In the year 2012, GlaxoSmithKline (GSK) acquired Human Genome Sciences (HGS). GlaxoSmithKline is pharmaceutical giant company based in London and Human Genome Sciences is company based in the United States. Buying Human Genome Sciences gave GlaxoSmithKline full control of lupus drug Benlysta and pipeline drugs; Albiglutide and Darapladib, which the two companies were working on. Human Genome Sciences was not performing well as expected hence they had to let go of some of their employees to reduce its operation cost. It was a difficult move for GlaxoSmithKline to let HGS fail because they were collaborating on making the Benlysta drug, which had taken much longer to start. The offer of GlaxoSmithKline to buy Human Genome Sciences had been rejected hence the hostile takeover process made the longtime partners hate each other at first but later on they decided to work together in peace to find treatment for heart diseases and diabetes. GSK acquired all the outstanding shares of HGS and they started working together, improving people’s life by enabling them to do more, feel better and live longer.Bruner (2011) defined economies of scale as the cost advantage that arises with increased output of a product. Bruner (2011) continued to state that the greater the quantity of products produced, the lower the per-unit fixed costs because these costs are shared over a larger number of goods. The acquisition improved the economies of scale of the businesses because GSK Company was successful and performed even better after acquiring HGS. Together the firm was able to borrow from lending institutions at lower interest rates and the costs involved in the business operation reduced (Brito and Catalao-Lopes, 2006). The merged companies would be able to improve the production of their products and get goods of high quality since the production costs are shared, and hence lower.Albrecht et al (2011) defined economies of vertical integration as a process when a company expands its enterprise into areas that are at different points on the same production path, such as when a manufacturer owns its supplier.
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