In the global pharma sector, M&A is a core strategy. One common approach is to buy small biotech companies, which have little scale, so as to fill the drug pipeline.
Over the next few years, however, the pharma industry is confronted with the expiration of a variety of key products. As a result, the small-deal approach has its limitations.
What to do? How about merge with another global pharma company?
Well, according to a piece in the FT, this appears to be on the mind of the CEO of Pfizer (NYSE: PFE), Jeff Kindler. He thinks this will be a quick way to bulk up revenues (keep in mind that the top pharma players are already the result of mega mergers – even Pfizer).
He's right. However, it will also lead to some needed cost synergies, which should help improve cash flows , making it easier to get financing for deals.
Still, it's never easy to pull off mega deals. Thus, we may see hostile deals in 2009. Oh, and if this is the case, it will certainly be good news for Wall Street banks, which will get some juicy fees.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.