Growth through merger: a case study of Glaxosmithkline PLC

Abstract

Organizations today are faced with a lot of challenges. Globalization and liberalisation of economies has put pressure on businesses, not to mention increased demand from investors for higher productivity, greater efficiencies, higher quality of goods and services and higher levels of innovation. As a result, managers need to develop strategies that should gain them competition advantage over their competition and possibly eliminate competition all together. This is a case study about the merger process and objectives of GlaxoSmithKline (GSK) Plc whose aim is to provide an in-depth understanding of how Glaxo Welcome and Smith Kline Beecham merged to form GlaxoSmithKline Plc in 2001. The objectives of the study are to document the process of the Glaxo Wellcome and Smith Kline Beecham merger and to establish whether the merger objectives were met. Data for this study was collected through interviews of Senior Managers at GSK and also by use of a non-structured questionnaire. Given the qualitative nature of the data obtained, the mode of analysis used was content analysis. The study findings indicate that the objectives of the merger were to take advantage of rapid advances in scientific discoveries and technology and increased consumer knowledge. The increased competition m the pharmaceutical industry meant that it made economic sense for these two powerhouses to merge and to combine skills and resources. The study managed to document the process of the merger and also established that the merger was a success and the objectives of the merger were met. The study found that this was a merger where neither set of shareholders receives a premium over the market value of their shares before the transaction is announced and was termed as transaction of equals. On completion, GW shareholders held approximately 58.75% of the issued ordinary share capital of GlaxoSmithKline and SB shareholders held approximately 41.25%. The study concluded that despite the fact that mergers have their own pitfalls, certainly some mergers are a perfect fit of two companies which complement each other's strengths, have obvious benefits and enable the companies to make massive economies of scale. This enables them to win customers and new business while keeping costs down and still fund the billions necessary for research and development. This study recommends that further research be undertaken to determine the survival of mega mergers and establish the reasons for their post merger survival or death. Several limitations were encountered during this study. The merger process was controlled from the United Kingdom and the people directly involved in the merger are located there. However, it would have been very costly to travel to the United Kingdom to obtain my interviews, not to mention that getting appointments for interviews would have been very challenging. Also, many people who were with the company then have since left to pursue other interests elsewhere. I therefore had to contend with interviewing local current management who helped piece together relevant merger information verbally and from data published in the internal employee magazines.