Case ID: UV2528     Solution ID: 1452     Words: 1476 Price $ 75

General Electrics Acquisition of Amersham PLC Case Solution

Case Solution

In September 2003, Jeffrey Immelt, CEO of General Electric, must assess a final offer for GE to purchase Amershamplc, the primary manufacturer of contrast elements that are utilized in medical diagnostics. The case looks at the valuation of Amersham in view of comparable firms, similar exchanges, and currentbusinesshistory. However, the core emphasis is on the strength of Amersham's protected innovation (IP). On close assessment, the organization's IP standing  isfrailer that it seems, given the filing of patents by competition as of recently. The monetary effect of these IP difficulties may be tested on account of the organization's leading item, Visipaque, for which the case provides cash streams. Marked down cash flow assessment shows high sensitivity to the years left of an efficient life of a patent.A key learningundermines the significance of due-diligence study on a company’s IP standing.

Excel Calculations

FCF Valuation

Earnings before interest, taxes, and amortization (EBITA), Depreciation, EBITA, Net Working Capital, Incraese in Capital Expenditure, FreeValue of Visipaque, Value with Synergy Impact

Synergy Impact on Valuation

Revenue Synergy's, Cost Savings, Total After tax Synergy, Present Value, NPV

Questions Covered

What is Jeffrey Immelt’s problem? What do you recommend?

Please assess the reasonableness of the proposed terms by which GE would acquire Amersham. Prepare to discuss the adequacy of the 800-per-share price.

Given that patent protection supports up to 50% of the value for pharmaceutical manufacturers, how would successful patent circumvention by third parties quantitatively affect the value of Amersham?

How valuable is Visipaque? What is that value as a percentage of Amersham’s equity value?

How robust is Amersham’s patent position? How confident are we that Vispaque’s IP is enforceable and active? How sensitive is Visipaque’s value to shortened protection, say, from 2011 to 2004?

What is the possible impact of the lack of IP protection on the value of Amersham?

What questions, concerns, and recommendations would you bring to Jeffrey Immelt’s attention?

What should Jeffrey Immelt do? (Conclusion)