Pharmaceutical companies have spurred a merger mini-boom over the past couple weeks. Led by Merck (MRK), which agreed earlier this week to buy Schering-Plough (SGP) for $45.9 billion, and Pfizer (PFE), which announced it would purchase Wyeth (WYE) for $64.5 billion last month, drug makers are the only bright spot in the otherwise dark world of corporate deal-making.

M&A activity is far below its peak in 2007 -- and still falling, thanks to the souring economy and turbulent markets. There have been $350.5 billion worth of M&A transactions worldwide so far this year, according to data compiled by Thompson Reuters. It's a staggering sum, to be sure, but it marks a decline of 10 percent from last year and a huge 50 percent dropoff since 2007. Meanwhile, mergers between drug companies have seen a nearly five-fold increase.

Among the reasons: Pharmaceutical companies tend to pile up massive amounts of cash. Pfizer does particularly well on that front. The maker of blockbuster anti-cholesterol drug Lipitor boasted $21.6 billion in cash and equivalents on its balance sheet at the end of last year, according to filings with the Securities and Exchange Commission. Merck's cash stash came to $4.4 billion in 2008. Both companies are using a mix of cash and stock to finance their big acquisitions.

Cash is particularly important to pulling off mergers and acquisitions these days because it's still difficult to arrange financing for deals that involve borrowing a lot of money. And though it's possible for companies to use their own stock as the sole currency in paying for a deal, the recent tumult in the markets makes that a riskier and more expensive proposition.

Pharmaceuticals also sometimes find it cheaper and easier to replenish their pipeline of new drugs through acquisitions rather than research and development. With the patents on many major drugs to expire in the next few years, and several big players in the industry sitting on big stockpiles of cash, expect consolidation to continue. Just don't look for a big turnaround in M&A in other sectors yet.

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