Capital Allocation: Principles, Strategies, and Processes for Creating Long-Term Shareholder Value

CHAPTER 22

Short-Term Plug Deal

In some cases, it can be problematic to fully ascertain a management team’s motivation for making an acquisition. Perrigo’s acquisition of Entocort is one such case in point.

In April 2015, Perrigo, a manufacturer of generic drugs and over-the-counter private label medicines, was the subject of an aggressive hostile takeover attempt by Mylan. To understand the nature of the bid, one must first understand the environment in which the bid was made.

This was a period of rapid consolidation within the pharmaceutical industry. Valeant Pharmaceuticals had pioneered the strategy of acquiring drug companies; slashing costs, including R&D; raising prices; and operating as a non-US company to minimize taxes. This strategy ...