The paper 'Vibrant Ltd Acquisition of Galaxy Pharma" is a good example of a finance and accounting case study. The pharmaceutical industry in Japan has been experiencing constant growth, which has been attributed to a rise in the ageing population and increased government expenditure on health care. In addition, the regulatory environment has been relaxed in favor of pharmaceutical drug makers to ensure that it takes less time and few approvals to launch new drugs into the market. This is likely to drive the growth of the Japanese pharmaceutical market-making Galaxy Pharma a viable venture.
Furthermore, the purchase price for Galaxy would be cheaper for Vibrant Ltd given that the Japanese yen has been devalued meaning that it would be cheaper for the Canadian company to purchase the company. The major risks are the foreign currency fluctuation and the macroeconomic factors affecting Japan. Letter of Transmittal Dear sir/ Madam, Enclosed is the report commissioned by Vibrant Ltd on the potential risks and returns of the proposed acquisition of Galaxy Pharma. The main findings of this report include: Japan’ s pharmaceutical industry has experienced a CAGR of 10% over a period of seven years majorly due to simplification of the approval process for drugs. That the government has been encouraging the use of generic drugs as a cost-cutting measure and has seen an increase in the use of generic drugs. That Galaxy Pharma is a viable venture given that it has been returning profits and has sufficient cash flows to finance its short term obligations. The macroeconomic environment poses a risk of reducing the earnings for Vibrant Ltd due to foreign currency fluctuation. Finally, I thank you for the opportunity to make this report as it has widened my understanding of international trade as well as international mergers and acquisitions. Introduction Globalization has been instrumental in relation to increasing international trade gave that it has allowed businesses to expand outside their geographic boundaries.
This is majorly due to the ease of movement of factors of production, mostly labor, which has led to cultural transfer. The majority of the companies that expand into the international market seek to increase their market base as well as seek out new business opportunities. This may be the case with the Vibrant Ltd decision to acquire Galaxy Pharma that is based in Japan.
The acquisition is one of the most common forms of entry into the international market through businesses have to have a full overview of the company they intend to acquire before making such a decision. Most importantly, Vibrant has to ensure that they have identified the risks involved with operating in Japan and the financial performance of Galaxy over a period of time usually five years. Therefore, this report intends to provide an overview of the types of potential risks and returns that were associated with the potential acquisition. Findings Operating Environment in Japan The most important factor that Vibrant has to consider before going on with the acquisition is the operating environment in Japan in comparison to Canada where they have experience with the Canadian market.
The Japanese market is different from the Canadian market first due to the fact that they use a different currency that is the Japanese Yen compared to the Canadian dollar a factor that may have a critical impact on the financial reporting for Vibrant.
In addition, the majority of the population in Japan speak Japanese meaning that Vibrant’ s products will need to be branded in Japanese so as to fit with the local’ s culture. Most importantly, there is a need to identify the reputation of Galaxy Pharma in Japan and the market share they currently occupy as this would ensure that the company invests into a viable venture. If the acquisition goes through Vibrant would ride on the Galaxy’ s reputation to concur the Japanese market. The pharmaceutical market found in Japan had been valued at $54.8 billion the year 2007 and has moved to approximately $89.1 billion in the year 2012 with a compound yearly growth rate (CAGR) of a percentage of 10.2 (Bio Spectrum, 2013, p.
15). In addition, a recent survey has projected that in the period between 2013 and 2020 the pharmaceutical sell or market in Japan that would grow at a CAGR of 2 percent, meaning it would reach $104.5 billion by 2020 (Bio Spectrum, 2013, p. 15). This is a positive trend in terms of how risk-averse the Japanese pharmaceutical market is as it shows that it would be a profitable venture for Vibrant Ltd as the market is currently on an upward trajectory.
List of References
Vaidya, A 2013, Overview of the Japanese Pharma and Healthcare market. JETRO Seminar. Accessed from http://www.jetro.go.jp/uk/Invest_in_Japan/Event_Reports/healthcareseminar/index.html/Mr_Anil_Vaidya.pdf
Bio Spectrum 2013, Japan pharma to grow at 2% CAGR from 2013-20. Accessed from http://www.biospectrumasia.com/biospectrum/analysis/191505/japan-pharma-grow-cagr-2013/page/2