The theoretical framework of this
research is based on the ideology between pharmaceutical companies on mergers
and acquisitions and how promotion plays a significant role around M&A and patent
expiration. Copeland and Weston (1998) defined M&A as a combination of two
or more commercial companies including takeovers, related to corporate restructuring,
corporate control, and changes in ownership structure of corporations.
There are three means of achieving
growth for any pharmaceutical organisation. Langford and Male (2001) stated
either internally by a company investing in their own capital, or externally
through M&A where growth is required or by combining both factors. Homburg
and Bucerius (2005) asserted that M&A has become a widely popular practice
for pharmaceutical businesses especially for horizontal integration. Horizontal
M&A often occurs between direct competitors (Krishnan and Park., 2002).
observed that the rationale behind why pharmaceutical companies M&A remains
prominent that the joining of two companies is more beneficial in several various
aspects for business than what might be achieved through individually. Ghosh
& Lee (2000) said that shareholders might earn significant returns around
takeover announcements and effects of significant wealth of corporate takeovers
(Draper & Paudyal., 1999).
Wang and Moini (2012) further
suggested that M&A can have a success in industrial restructuring in
different regions globally. Considering pharmaceutical companies in the UK and
the US, it is evident that the big companies intend to make strategic decisions
to fight against the anticipated losses in revenue amidst the patent expiration
of their product portfolios. Subsequently, the big companies announce
initiatives such as M&A being a diversified nature of companies to decrease
costs and increase revenues. Other companies may focus on the development of
their product portfolios. In response to generic competition and patent
expiration, Duff (1994), Kelly (1993), and Schiller (1993) claimed that many
pharmaceutical companies may decide to change their promotional strategies from
diversification of products to a concentrated effort on its core products,
services and markets.