Pfizer Inc. (US) acquired Allergan, an Irish based Pharmaceutical, in 2015, sinc

Question

Pfizer Inc. (US) acquired Allergan, an Irish based Pharmaceutical, in 2015, since the latter has been a successful growing firm. In general acquisitions may have many sources to create value; due to synergies, economies of scales, reduction in administrative costs, etc.... Use the following links to get information on Pfizer and its recent activities (you may make further research if you’d like)
1. Based on information in the above sources, what is a main potential motive for the merger that is important for you as an accountant? (1-2 lines)
2. ( Suppose that you make an analysis of Pfizer using its ROIC for the last 10 years but also include the current year after the merger, and one or several (1-3) years forthcoming. What kind of ROIC measure would you use and why? (1-2 lines)
3. Would your answer change and how would it change if you are comparing Pfizer in 2016 with its competitors in the US in the same year? (1-2 lines)
Bloomberg has this variable.
a) Compare Pfizer with its industry peers based on the latest data available with respect to the variables below, using Global Large Pharma valuation peer group created by (Bloomberg Intelligence!) Market capitalization Asset turnover Profit margin Hint: use the “custom tab” Provide a screenshot of your Bloomberg screen (in your handout) based on which your analysis and comparisons are made (in case you are doing in excel, data with original variable names)
b) Add the previous two year values of profit margin and asset turnover into your current custom template. What can you say about Pfizer’s ROIC and its breakdown on average for the three years, in comparison to BAYER AG-REG? Provide a screenshot of your Bloomberg screen in your handout (in case you are doing in excel, provide data with original variable names to me electronically)
c) What can you say about ROIC and its breakdown for the Large Pharma industry in comparison to two other industries; “commercial vehicles” and “Food&Drug Stores” Provide a Bloomberg screenshot in your handout for each of the industry (in case you are doing in excel, provide data with original variable names to me electronically)
5. Pfizer is considered a cash rich company. At the same time, the company itself is rather large.
a) Bring total assets and cash&cash equivalents data to excel from 2000, annually. Provide a graph of cash to assets ratio for the period (provide a printout of the graph in your handout, with axis showing variables, and state the original names of variables you have used).
b) Can we say it has too much cash that is not kept for operational purposes but is rather idle? How would you support your answer (3-4 lines). Pfizer Inc. (US) acquired Allergan, an Irish based Pharmaceutical, in 2015, since the latter has been a successful growing firm. In general acquisitions may have many sources to create value; due to synergies, economies of scales, reduction in administrative costs, etc.... Use the following links to get information on Pfizer and its recent activities (you may make further research if you’d like)
1. Based on information in the above sources, what is a main potential motive for the merger that is important for you as an accountant? (1-2 lines)
2. ( Suppose that you make an analysis of Pfizer using its ROIC for the last 10 years but also include the current year after the merger, and one or several (1-3) years forthcoming. What kind of ROIC measure would you use and why? (1-2 lines)
3. Would your answer change and how would it change if you are comparing Pfizer in 2016 with its competitors in the US in the same year? (1-2 lines)
Bloomberg has this variable.
a) Compare Pfizer with its industry peers based on the latest data available with respect to the variables below, using Global Large Pharma valuation peer group created by (Bloomberg Intelligence!) Market capitalization Asset turnover Profit margin Hint: use the “custom tab” Provide a screenshot of your Bloomberg screen (in your handout) based on which your analysis and comparisons are made (in case you are doing in excel, data with original variable names)
b) Add the previous two year values of profit margin and asset turnover into your current custom template. What can you say about Pfizer’s ROIC and its breakdown on average for the three years, in comparison to BAYER AG-REG? Provide a screenshot of your Bloomberg screen in your handout (in case you are doing in excel, provide data with original variable names to me electronically)
c) What can you say about ROIC and its breakdown for the Large Pharma industry in comparison to two other industries; “commercial vehicles” and “Food&Drug Stores” Provide a Bloomberg screenshot in your handout for each of the industry (in case you are doing in excel, provide data with original variable names to me electronically)
5. Pfizer is considered a cash rich company. At the same time, the company itself is rather large.
a) Bring total assets and cash&cash equivalents data to excel from 2000, annually. Provide a graph of cash to assets ratio for the period (provide a printout of the graph in your handout, with axis showing variables, and state the original names of variables you have used).
b) Can we say it has too much cash that is not kept for operational purposes but is rather idle? How would you support your answer (3-4 lines). Pfizer Inc. (US) acquired Allergan, an Irish based Pharmaceutical, in 2015, since the latter has been a successful growing firm. In general acquisitions may have many sources to create value; due to synergies, economies of scales, reduction in administrative costs, etc.... Use the following links to get information on Pfizer and its recent activities (you may make further research if you’d like)
1. Based on information in the above sources, what is a main potential motive for the merger that is important for you as an accountant? (1-2 lines)
2. ( Suppose that you make an analysis of Pfizer using its ROIC for the last 10 years but also include the current year after the merger, and one or several (1-3) years forthcoming. What kind of ROIC measure would you use and why? (1-2 lines)
3. Would your answer change and how would it change if you are comparing Pfizer in 2016 with its competitors in the US in the same year? (1-2 lines)
Bloomberg has this variable.
a) Compare Pfizer with its industry peers based on the latest data available with respect to the variables below, using Global Large Pharma valuation peer group created by (Bloomberg Intelligence!) Market capitalization Asset turnover Profit margin Hint: use the “custom tab” Provide a screenshot of your Bloomberg screen (in your handout) based on which your analysis and comparisons are made (in case you are doing in excel, data with original variable names)
b) Add the previous two year values of profit margin and asset turnover into your current custom template. What can you say about Pfizer’s ROIC and its breakdown on average for the three years, in comparison to BAYER AG-REG? Provide a screenshot of your Bloomberg screen in your handout (in case you are doing in excel, provide data with original variable names to me electronically)
c) What can you say about ROIC and its breakdown for the Large Pharma industry in comparison to two other industries; “commercial vehicles” and “Food&Drug Stores” Provide a Bloomberg screenshot in your handout for each of the industry (in case you are doing in excel, provide data with original variable names to me electronically)
5. Pfizer is considered a cash rich company. At the same time, the company itself is rather large.
a) Bring total assets and cash&cash equivalents data to excel from 2000, annually. Provide a graph of cash to assets ratio for the period (provide a printout of the graph in your handout, with axis showing variables, and state the original names of variables you have used).
b) Can we say it has too much cash that is not kept for operational purposes but is rather idle? How would you support your answer (3-4 lines). 1. Based on information in the above sources, what is a main potential motive for the merger that is important for you as an accountant? (1-2 lines)
2. ( Suppose that you make an analysis of Pfizer using its ROIC for the last 10 years but also include the current year after the merger, and one or several (1-3) years forthcoming. What kind of ROIC measure would you use and why? (1-2 lines)
3. Would your answer change and how would it change if you are comparing Pfizer in 2016 with its competitors in the US in the same year? (1-2 lines)
Bloomberg has this variable.
a) Compare Pfizer with its industry peers based on the latest data available with respect to the variables below, using Global Large Pharma valuation peer group created by (Bloomberg Intelligence!) Market capitalization Asset turnover Profit margin Hint: use the “custom tab” Provide a screenshot of your Bloomberg screen (in your handout) based on which your analysis and comparisons are made (in case you are doing in excel, data with original variable names)
b) Add the previous two year values of profit margin and asset turnover into your current custom template. What can you say about Pfizer’s ROIC and its breakdown on average for the three years, in comparison to BAYER AG-REG? Provide a screenshot of your Bloomberg screen in your handout (in case you are doing in excel, provide data with original variable names to me electronically)
c) What can you say about ROIC and its breakdown for the Large Pharma industry in comparison to two other industries; “commercial vehicles” and “Food&Drug Stores” Provide a Bloomberg screenshot in your handout for each of the industry (in case you are doing in excel, provide data with original variable names to me electronically)
5. Pfizer is considered a cash rich company. At the same time, the company itself is rather large.
a) Bring total assets and cash&cash equivalents data to excel from 2000, annually. Provide a graph of cash to assets ratio for the period (provide a printout of the graph in your handout, with axis showing variables, and state the original names of variables you have used).
b) Can we say it has too much cash that is not kept for operational purposes but is rather idle? How would you support your answer (3-4 lines).

Explanation / Answer

1. Allergan, Inc aquired by Actavis, Plc, the new company made its first acquisition on July 6, when the company acquired start-up, Oculeve, for $125 million.In late October The Wall Street Journal reported that merger talks between Allergan and Pfizer were in early phases, with Pfizer approaching Allergan due to an industry-wide drop in share prices. Any merger with Allergan would then also give Pfizer the ability to re-domicile to Ireland, taking advantage of its lower tax rates.On 23 November, 2015, the two companies announced their intention to merge for an approximate sum of $160 billion making this the largest pharmaceutical deal ever and the third largest merger in history. As part of the deal, Pfizer CEOIan Read will remain CEO and Chairman of the combined company (to be called Pfizer Plc), with Allergan CEO, Brent Saunders, becoming President and Chief operating officer. As part of the deal Allergan shareholders will receive 11.3 shares of the company, with Pfizer shareholders receiving one.Pfizer discontinued the acquisition on 5th April 2016, after Obama administration announced its plan to move ahead with a resolution banning such malpractice to avoid taxation.

2.Return on invested capital gives a sense of how well a company is using its money to generate returns. Comparing a company's return on capital (ROIC) with its weighted average cost of capital (WACC) reveals whether invested capital is being used effectively.This measure is also known as "return on capital."ROIC is always calculated as a percentage and is usually expressed as an annualized or trailing twelve month value. It should be compared to a company's cost of capital to determine whether the company is creating value. If ROIC is greater than the weighted average cost of capital (WACC), the most common cost of capital metric, value is being created. If it is not, value is being destroyed.

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