Background: US pharmaceutical company Gilead Sciences announced the acquisition of Forty Seven on 2nd Marchm2020 for $4.9 billion. The deal was completed on 7th April 2020.
Answer:
1. Provide background information for Gilead and Forty Seven prior to the acquisition announcement year. You may provide various information, but focus should be given on the
financial background of the two firms
2. Discuss potential reasons that led the management of Gilead to take the decision to acquire
Forty Seven. Support your arguments with appropriate evidence from published sources or information provided by the two firms
3. Estimate the market reaction for Gilead around the acquisition announcement date. From the shareholders perspective of the two firms, can the deal be considered successful? Also, estimate
the share price reaction of Forty Seven prior to and around the acquisition announcement. Discuss your findings.
4. If you were the financial advisor for Gilead, how much would you advise the management of Gilead to pay for the acquisition? Estimate the value of Forty Seven in the year prior to the acquisition announcement using at least two valuation methods, one of which should be the DCF method. Clearly demonstrate assumptions, calculations, scenarios and data sources.
5. Compare the estimated value of Forty Seven as estimated in the previous sub-section with the DCF method with its market value on the announcement date. Discuss potential reasons and
explanations for the actual payment by Gilead.
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