The (failed) Acquisition of Allergan by Pfizer. Multiples Valuation and Event Study Analysis

Bachelor Thesis from the year 2017 in the subject Economics - Finance, grade: 2,0, University of Mannheim, language: English, abstract: The thesis analyses the merger of Pfizer Inc. and Allergan in 2015. The goal of the thesis is to value Allergan using multiples at the time of a takeover announcement and to examine whether the offer price is fair. The thesis further examines the price reactions of Allergan, Pfizer, and optionally their competitors on the announcement date using event study analysis.

On November 23, 2015, Pfizer Inc. and Allergan, Plc publicly announced their intention to merge to form the world¿s largest drug maker. The boards of both companies had ratified the deal worth approximately $160 billion the day before. This sum would make it not only the largest pharmaceutical deal ever, but also the third largest corporate merger in history.

The takeover would also be the largest so-called ¿inversion¿ deal to date. These deals consist of a US company buying a foreign rival to adopt their lower tax jurisdictions. To achieve this goal, Dublin-based Allergan would buy the larger New-York based Pfizer in a reverse merger. Just days before the announcement of the merger, the Treasury Department released new rules aiming to curb tax-lowering inversion deals. On April 6, 2016, Pfizer and Allergan announced they would be calling off the merger.