Principles and Practices of Mergers and Acquisitions - Accounting and Finance Assignment Help

Assignment Task

Question

US pharmaceutical company AbbVie announced the acquisition of Allergan on 25th June 2019 for $63 billion. The deal was completed on 8th May 2020.

Further details

1) Provide background information for AbbVie and Allergan prior to the acquisition announcement year. You may provide various information, but focus should be given on the financial background of the two firms.

2) Discuss potential reasons that led the management of AbbVie to take the decision to acquire Allergan. Support your arguments with appropriate evidence from published sources or information provided by the two firms.

3) Estimate the market reaction for AbbVie around the acquisition announcement date. From the shareholders’ perspective of the two firms, can the deal be considered successful? Also, estimate the share price reaction of Allergan prior to and around the acquisition announcement. Discuss your findings.

4) If you were the financial advisor for AbbVie, how much would you advise the management of AbbVie to pay for the acquisition? Estimate the value of Allergan in the year prior to the acquisition announcement using at least two valuation methods, one of which should be the DCF method. Clearly demonstrate assumptions, calculations, scenarios and data sources.

5) Compare the estimated value of Allergan as estimated in the previous sub-section with the DCF method with its market value on the announcement date. Discuss potential reasons and explanations for the actual payment by AbbVie.

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