Global Financial System Assignment PDF
Perform analysis on a cross-country acquisition, including background research, evaluation of risks and returns, comprehensive valuation, and event analysis to test EMH.
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Added on 2020-01-28
Global Financial System Assignment PDF
Perform analysis on a cross-country acquisition, including background research, evaluation of risks and returns, comprehensive valuation, and event analysis to test EMH.
Added on 2020-01-28
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Global Financial
Table of ContentsTable of Contents.............................................................................................................................2INTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Stating the reasons behind acquisition of target company and reflection of chronicle events....1TASK 2............................................................................................................................................3Evaluating the risk and return as well as advantages of international acquisition to theacquiring company.......................................................................................................................3TASK 3............................................................................................................................................5Conducting comprehensive valuation on target company...........................................................5TASK4.............................................................................................................................................8Conducting event analysis to test efficient market hypothesis (EMH).......................................8TASK 5............................................................................................................................................9Stating trading strategy which in turn helps in exploiting price inefficiency during theacquisition process.......................................................................................................................9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTION Global financial system is highly concerned with the meeting of investment and tradefinancing purpose. In addition to this, global financial aspect lays high level of emphasis ondoing cross country transactions which in turn helps organizations in meeting their goals andobjectives. Moreover, with the motive to maximize productivity and profitability as well asexploring the business operations firm focuses on undertaking acquisition strategy. Hence,acquisition strategy is highly significant which in turn provides assistance to the firm in gettingthe benefits of high economies of scale. The present report is based on Johnson & Johnson whichis the leading American multinational pharmaceutical and consumer packaged goodsmanufacturing company whose headquarter situated in New Jersey. Such business unit has 250subsidiary companies and products of the firm in over 175 countries. In June, 2017 J&J hasacquired Actelion, Switzerland based company, which is also one of the leading pharmaceuticaland bio-technology company. In this, report will present the chronicle events which are related tothe acquisition done by Johnson & Johnson. Besides this, it will also shed light on the risk,return, EMH and trading strategy which is associated with the acquisition process. TASK 1Stating the reasons behind acquisition of target company and reflection of chronicle events In the present study, acquisition of Actelion by J&J has been undertaken. Deal in relationto acquisition has been signed between the two concerned parties such as J&J and Actelion onJune, 2017. From assessment, it has been identified that after getting approval from regulatoryauthorities deal has been signed by the concerned individuals. In addition to this, meeting wasorganized by Actelion for getting approval from the shareholders. The rationale behind this,shareholders act as an owner of the firm and they have right to take participate in the decisionmaking aspect. Without having consensus of shareholders company is not position to finalize thedeal as per the legal and ethical aspects. Hence, by meeting all the aspects Actelion has acquiredby J&J in June, 2017. In order to acquire Actelion, Johnson & Johnson paid $30 billion which is considered asone of the main acquisition performed by it (Johnson & Johnson to acquire Actelion for $30billion with spin-out of new R&D company, 2017). Moreover, for acquiring Actelion huge priceor amount was paid by Johnson & Johnson. There are several reasons due to which Johnson &1
Johnson laid high level of emphasis on acquiring Actelion. From assessment, it has beenidentified that acquisition of Actelion will offer opportunity to J&J to diversify its drug portfolio.Moreover, after acquiring Actelion, J&J would become able to offer high margin medicines tothe customers related to the rare diseases. Hence, acquisition enables firm to develop portfolio asthe biggest product and helps in reducing the level of competition to the significant level. Hence,it can be stated that to track new opportunities and for gaining competitive edge over othersJohnson & Johnson acquired Actelion. Enhancement of productivity and profitability is one ofthe main motives which in turn encouraged Johnson & Johnson to acquire Actelion. Hence, suchacquisition will assist J&J is gaining competitive edge over others in the pharmaceutical sector. Detailed discussions have been done between the authorities of J&J and Actelion are as follows:In the period of November, J&J held preliminary discussion with Actelion regarding thetakeover of firm. During this time, Actelion was valued at approximately $20 billion. 29th November 2016: On this date, Actelion explored a deal with J&J that is consideredas more complex in comparison to outright buyout. 30th November 2016: Counter bidding took place between the two parties such asActelion and Sanofi. At the same time of acquisition proposed by J&J, Sanofi, another firm wasalso contacted Actelion for such deal. 7th December 2016: At this time, confirmation was given by Actelion that J&J waswithdrawn from talk. However, on the same time discussion was taken place between Swissbiotech and Sanofi regarding the possible strategic transaction. 13th December 2016: Discussion between the two concerned parties namely J&J andActelion ended on December 2016. J&J announced that still there is no agreement between thetwo but such deal will create value for the shareholders to a great extent.16 December 2016: According to the news articles, Sanofi was continuously donegotiation with Actelion on an offer price of €28billion. During this, share price of Actelionincreased by 10% significantly whether it was not cleared that agreement will take between suchtwo parties. 29 December 2016: Negotiation was taken place between J&J and Actelion in relation tothe deal of acquisition. At this time, J&J presented its willingness pertaining to acquire Actelionwith a cash offer such $260 per share. Results of negotiation regarding Actelion acquisition byJ&J on proposed offer price turned into disagreement 2
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