The role of brand equity on mergers and acquisition in the pharmaceutical industry: When do firms learn from their merger and acquisition experience?

Abstract

Purpose

The purpose of this paper is to describe the role of brand equity on mergers and acquisition (M&A) in the pharmaceutical sector; also to emphasize the various strategies and the benefits incurred in the arena of M&A in this sector.

Design/methodology/approach

The author studies two major mergers in recent years, i.e. the Daiichi‐Ranbaxy and the Pfizer‐Wyeth deals. Brand equities were calculated. This study applied the “RKS” model developed by the author and Inter‐brand model for calculation of brand equity. The results obtained after the application of the two models were analysed for financial‐based decisions.

Findings

The study captures the perceived importance of brand equity factors to M&A decision making. Although this strategy carries a high price tag, it offers quick returns, including access to new markets or a stronger position in current markets. A study on the recent acquisition and mergers in the pharmaceutical industry indicates that there is consolidation in medical devices, generic and consumer health segments of the healthcare industry.

Originality/value

The paper studies two recent mergers which indicate that often these decisions are based on emotion rather than rationality. Therefore, it is suggested that managers should be more rational while taking decisions on mergers or acquisition.

Citation

Srivastava, R.K. (2012), "The role of brand equity on mergers and acquisition in the pharmaceutical industry: When do firms learn from their merger and acquisition experience?", Journal of Strategy and Management, Vol. 5 No. 3, pp. 266-283. https://doi.org/10.1108/17554251211247571