Pfizer Allergan Merger

Pfizer Allergan Merger. Large companies merging are strategic moves to create competitive advantages. Oligopoly theory provides the framework that firms in oligopoly industry must adopt in order to establish sustainable mergers. Oligopoly theory lies in the hearts of industrial organizations as it provides information about firms’ interdependence. Thus, oligopoly theory allows companies to model their products and market competition using price (Bertrand) and quantity (Cournot) competition. Pfizer-Allergan merger provides a perfect scenario that companies in an oligopoly market can easily fail and result to termination of the merger agreement.

Pfizer Allergan Merger, a biopharmaceutical leader

Pfizer and Allergan came up to create a new worldwide biopharmaceutical leader with a best-in-class development and innovative businesses (Jopson, Crow, Fontanella-Khan & Massoudi, 2015). The merger was to create enhanced earnings and revenue growth. However, the provided a preserve chance for a possible future termination or separation of mergers of established and innovative businesses. According to oligopoly theory, the companies come to an end the merger through mutual consent due to the qualification of an “Adverse Tax Law Change” under the agreement (Kmietowicz, 2016). The collapse of the Pfizer-Allergan merger brought shock waves in the US corporate business.

Pfizer Allergan Merger Biopharmaceutical leader.

For companies to successfully merge in the oligopoly market common agreement should be established, and if one party breaches the terms, the merger can be terminated under an agreement. According to Jopson, et al. (2016), Pfizer withdrew from the merger due to the unveiling of a proposal that was designed to take away its lucrative advantages. Besides, Pfizer was strategically looking to escape the high corporate rates of taxes by transferring the address to a low rate of tax in Ireland, a country dominated by Allergan (Kmietowicz, 2016). This provided imperfect merging of the two companies where Pfizer was taking advantages of tax differences. Therefore, using quantity merging or pricing merging provides the basis of business collapse if the terms favor one company.

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Pfizer Allergan Merger References

Jopson, B., Crow, D., Fontanella-Khan, J., & Massoudi, A. (2015). Collapse of $160 bn Pfizer and Allergan merger shocks corporate US. Financial Times.

Kmietowicz, Z. (2016). Pfizer and Allergan abandon merger after US tax loophole is closed.