Creation of Shareholder Value in the Pfizer-AstraZeneca Deal

Essay from the year 2015 in the subject Business economics - Investment and Finance grade: 1.0 Northumbria University (Newcastle Business School) course: International Finance and Financial Management language: English abstract: The pharmaceutical sector has experienced a year of heavy consolidations with a record breaking M&A volume of $250bn in 2014. From a shareholder perspective this should however cause serious concern as the deals very rarely maximise the owner's wealth. An illustration of this is the failed acquisition of AstraZeneca by US pharmaceutical giant Pfizer in spring 2014 when the British despite strong strategic synergies decided to reject an $117bn takeover bid due to an insufficient price-offer. This essay is going to critically evaluate the concepts of shareholder wealth creation in light of appropriate evaluation methods for bids and the influence of capital structure. It will be concluded that information asymmetry was one of the core issues in the case as both parties ultimately misestimated potential synergies. Moreover it is argued that irrational decisions made by executive can significantly impact and eventually destroy shareholder value.