ABSTRACT
The aim here is to identify whether mergers and acquisitions in the pharmaceutical industry in any way produce results mimicking those of monopoly or collusion. Evidence from previous chapters suggests that this is not likely to be the case. On the contrary, it supports the likelihood that mergers and acquisitions indicate not the decline of competition but its undoubted vigor. Here it will be recalled that a number of reasons were offered for firms merging or acquiring one another, which, broadly speaking, fell into two categories: for efficiency and for avoiding business failures. An instance involving the merger or acquisition for efficiency would see the announcement of a merger or takeover at one firm in an industry accompanied by a positive revaluation of other industry members. This stems from the production technologies of close competitors being by definition closely related. Thus, the news of a proposed efficient merger can also signal opportunities for the rivals to increase their productivity. For example, the proposal announcement may disseminate information that enables the rivals to imitate the technological innovation motivating the acquisition. If such innovation activity requires merger, then the stock prices of the rivals will be bid up in anticipation of the expected gains from the future merger activity. The proposal announcement by the merging firms or the firm doing the acquiring is not the only channel of information spillover.
