Company valuation in mergers and acquisitions (m&a): empirical evidence from pharmaceutical companies listed on the New York Stock Exchange

The paper aims to investigate the relationship existing between, on the one hand, size, profitability, and research and development (R&D), on the other, the enterprise value (EV) of pharma companies. The objective of the research is to assess whether the classic value determinants exercise an explanatory power on the EV of pharmaceutical firms listed on the New York Stock Exchange (NYSE) and involved in Merger and Acquisition (M&A) transactions. The methodology is developed using a multiple linear regression model. More specifically, EV represents the dependent variable; size, profitability and R&D instead, represent the three independent variables. Results show that both size and R&D are positively related to the dependent variable; in particular, in our model, the relationship between EV and size, given the other variables, is piecewise linear, i.e. it is linear with different regression coefficients, depending on the values of size. The profitability variable, instead, is not statistically significant.