Conventional wisdom holds that large mergers have destroyed value in the pharmaceutical industry. Market commentators insist that these deals don’t work, that the challenges of large-scale integration unnecessarily disrupt the organization and critical programs, and that research and development productivity suffers. These critiques have some merit but ignore larger points: megamergers have created significant value for shareholders, and some of these deals have been critical for the longer-term sustainability of acquirers. In short, we believe that the benefits often warrant the disruption that these deals entail.

Perhaps that explains their popularity. Megamergers have played a key role in shaping the global pharmaceutical landscape. Indeed, most of the pharmaceutical companies that stayed among the world’s 20 largest between 1995 and 2005 were involved in “megamergers,” which we define as deals larger than $10 billion in which the target company boasts at least 10 percent of the acquirer’s sales and 20 percent of the acquirer’s market capitalization.