McKesson Corp. Acquisition

Target Acquisition
Team 3 – The “A” Team
Sarah Henshaw, William Howell, Katrina Jones-Warren
Park University

Executive Summary

The McKesson Corporation is a healthcare information technology company providing technology and services for healthcare to yield better results for the patient and the providers (McKesson Website).  Their mission is to better connect patient and healthcare professionals to provide better care (McKesson website).   With 2016 revenue of $190.8 billion and net income of $2.25 billion, McKesson has enjoyed strong stock performance (Morningstar, 2018).
The McKesson Corporation is looking to make a friendly acquisition to expand its market share.  The board has asked the corporate mergers and acquisitions team to find and evaluate two companies to meet that goal.  Through searches of other healthcare companies entertaining offers for merger, the team has identified two promising companies for evaluation:  Express Scripts and Humana.  Both companies have been shedding non-core business to improve their bottom line to look better to prospective buyers (Japsen, 2017).

Initial review of Express Scripts’ financial performance shows a drop in revenue between 2017 and 2016 of $30 million (Morningstar, 2018).  Despite the drop in revenue, Express Scripts showed an increase in net income of $1.12 billion (2017-2016 data) (Morningstar, 2018).  Total assets equal $51.7 billion and total equity sits at $16.2 billion (Morningstar, 2018).  Another indicator Express Scripts may be a beneficial acquisition is the downward trend of their stocks; seeing a 10% loss since January, 2018 (Morningstar, 2018).  This trend would be favorable for a stock acquisition.  

Initial review of Humana’s financial performance shows a drop in revenue between 2017 and 2016 of $610 million (Morningstar, 2018).  Similar to Express Scripts, Humana had a $1.84 billion increase in net income from 2016 to 2017 (Morningstar, 2018).  Total assets equal $25.4 billion and total equity sits at $10.6 billion (Morningstar, 2018).  Humana also saw a 10% decrease in stock prices since January, 2018; continuing the downward trend of their stock prices (Morningstar, 2018).  

A further dive into Express Scripts’ financials yields a promising potential merger.  Headquartered in St. Louis, Express Scripts provides integrated pharmacy benefit management services, network-pharmacy claims processing, home delivery pharmacy care, specialty pharmacy care, specialty benefit management, benefit-design consultation, drug utilization review, formulary management, and medical and drug data analysis services (Express Scripts Holding Co, 2018).  It is the largest pharmacy benefit manager in the United States (Morningstar, 2018).  It processes approximately 1.3 billion adjusted prescriptions annually for its payer clients through mail-order pharmacy (Morningstar, 2018).