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Mergers and Acquisitions

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The other theory is the synergistic mergers theory, wich 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). I the year 2012, GaxoSmithKline (GSK) acquired Human Genome Sciences (HGS). GaxoSmithKline is pharmaceutical giant company based in London and Human Genome Sciences is company based in the United States. Bying Human Genome Sciences gave GlaxoSmithKline full control of lupus drug Benlysta and pipeline drugs; Abiglutide and Darapladib, wich the two companies were working Genome Sciences was not performing well as expected hence they had to let go of some of their employees to reduce its operation cost.

I was a difficult move for GlaxoSmithKline to let HGS fail because they were collaborating on making the Benlysta drug, wich had taken much longer to start. Te 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 heart diseases and diabetes.

GK acquired all the outstanding shares of HGS and they started working together, iproving people’s life by enabling them to do more, fel better and live longer. Buner (2011) defined economies of scale as the cost advantage that arises with increased output of a product. Buner (2011) continued to state that the greater the quantity of products produced, te lower the per-unit fixed costs because these costs are shared over a larger number of goods. Te acquisition improved the economies of scale of the because Company was successful and performed even better after acquiring HGS.

Tgether 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). Te merged companies would be able to improve the production of their products and get goods of high quality since the production costs are shared, ad hence lower. Abrecht et al (2011) defined economies of vertical integration as a process when a company expands its enterprise into areas that are different points the same production path, sch as when a manufacturer owns its supplier. ...

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