Bristol-Myers Squibb's Acquisition of Celgene

Alena Marie Abb & Janina Bartkewitz

Student thesis: Master thesis


In the pharmaceutical market successful acquisitions are necessary to compete with other companies in the industry. Those acquisitions should provide the acquiring company with new innovative drugs to strengthen the portfolio and enable growth opportunities. As a result, Bristol-Myers Squibb (BMS) announced the acquisition of Celgene on January 3, 2019. The deal was valued at approximately $74 billion and represents one of the largest acquisitions in the history of the pharmaceutical industry. Therefore, the aim of this thesis is to identify the intrinsic share price of Celgene on De-cember 28, 2018 and to evaluate the overall purpose of the acquisition. This also includes an analysis whether the premium of 53,7% offered by BMS is justified. In addition, drivers and obstacles of the acquisition are identified and an outlook for the combined company is given.
To achieve this aim, the thesis bridges academic research and stand-alone company analyses to evaluate the acquisition. Based on strategic and financial assessments, a cautiously determined share price of $108,71 is obtained for Celgene by applying the discounted cash flow model. The estimation exceeds the actual share price of the company on December 28, 2018 which amounted to $62,43. Therefore, it seems that Celgene’s shares were rather undervalued on the chosen cut-off date. Confidence about the valuation is reached by conducting a sensitivity analysis and comparing the result to multiples of competitors.
The findings indicate that due to the competitive pressure in the pharmaceutical industry the acquisition of Celgene was necessary for BMS to keep pace with its competitors. The acquisition strengthens BMS’s portfolio of existing products and pipeline products. In addition, the valuation of Celgene shows that the offered acquisition price of $102,43 lies below the estimated market value of Celgene and thus, the offered premium of 53,7% was necessary to be closer to Celgene’s actual market value. It is expected that especially based on the strategic fit of the two companies and the newly gained pipeline products, the acquisition of Celgene leads to a positive outcome for the combined company. To conclude, BMS seems to become a future innovative biopharmaceutical leader which is able to oust a wide range of its competitors. Based on these findings, investing in BMS is projected to be profitable given that the assumptions made in the thesis hold true.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2020
Number of pages170