If it turns out that pharmaceutical giant Pfizer buys its rival, Wyeth, Pfizer could profit in a big way from an expanded lineup of products that could help offset expiring patents and diversify its offerings.
But the deal might not be so great for shareholders. According to Harvard Business School professor Gary Pisano (via the WSJ): “The record of big mergers and acquisitions in Big Pharma has just not been good. There’s just been an enormous amount of shareholder wealth destroyed.”
However, the Journal notes that shareholders "haven’t exactly prospered in the absence of deals."
But according to this Boston Consulting Group study of acquisitions completed between 1992 and 2006, nearly 60 percent of the acquisitions reduced shareholder returns. The average deal produced a net gain to shareholders of 1.8 percent.
So far today, Wyeth shares are trading up 8 percent, and Pfizer's stock is down 2 percent.