The effects of merger and acquisition on Vietnam's pharmaceutical firm performance - The case of Traphaco JSC and Dak Lak pharmacy - medical supplies JSC
Abstract
In the context of the mergers and acquisitions trend in major pharmaceutical
companies to generate higher revenues, this study examines the impact of the M&A cases
on the post-merger operating performance of Vietnamese pharmaceutical companies
using accounting data (financial ratios). With the availability of data and time constraints,
the only case between Traphaco JSC (TRA) and Dak Lak Pharmacy - Medical Supplies
JSC (DBM) was investigated. In order to measure firms‘ post-merger performance nine
financial ratios are employed and selected accounting data from 2009 to 2014 are
compared for the post-merger operating performance of the group at three years after the
M&A announcements. The results revealed, in general, that the M&A have provided a
better post-merger operating performance for both the acquiring firm and the target firm.
It is found that M&A combined the unique competitive advantages of the two companies
to create 2 types of synergies: operational and financial synergies. While operational
synergies had a significant impact on distribution capacity, asset utilization and cost
reduction, financial synergies contributed to improve internal market gain and reduce the
overall risks of both TRA and DBM. Regarding to the statistical test results, significant
improved ratios of TRA after M&A were found to be Operating Profit Margin, Net Profit
Margin, Long term Debt Ratio and Debt-to-Equity. The results also showed that mergers
had not yielded improvements in financial performance by way of Asset Turnover,
Inventory Turnover, ROCE, Equity Ratio and Current Ratio.