Case study 4

Should we buy an existing European business with good cashflow?

Pharmaceutical Company D was keen to build a competitive European presence. It bought a small European pharmaceutical company (the Acquired Company) with some cashflow, hoping that it would become their European vehicle. However, the Acquired Company was a generics company and its capabilities were not compatible with the innovative medicines business that Company was planning to build in Europe. Over a period of 6 years, Company D invested in stabilising the acquired company; in the end, however, it has taken a decision to keep the acquired company as a stand-alone business. There will be a separate innovative medicine business in due course.