Merger of Cadila Healthcare and German Remedies: an insider's view

Abstract

‘Mergers and Acquisitions’ has always been an interesting topic because of its huge implications for the future of both the companies involved. Although almost all the deals are intended to create value for the shareholders, in practice very few deals are actually successful in terms of achieving the stated objectives, Very often the reason for failure is that the strategic aspect of the deal does not get as much importance as other aspects like financial valuation . Though a correct estimation of the synergies is important the real value of any merger is unfolded only when it has a strong strategic fit with the vision of the company. Unfortunately while there are a lot of methods to value a deal financially there is no standard framework available to value the strategic fit of a merger. This makes the task of analyzing any merger deal very exciting and challenging. This study deals with understanding and analyzing one such interesting merger from an insider`s perspective by collecting both the public and the private information related to the case. The case chosen is that of the recent merger of German Remedies into Cadila Healthcare. This merger presents some interesting aspects because of the phased manner in which it was carried out. It started out with the Zydus Cadila Group acquiring a majority stake in German Remedies, and culminated with its Number Four in the domestic formulations market, the Cadila management is convicted of the success of the merger. However, the other side of the story presents some major risks and opportunity costs that cannot be ignored.