When a company is already doing billions of dollars of business in a mature industry, achieving growth organically can be much more difficult than through acquisitions. Examples of corporations reaching for size abound. The strong results from BP Amoco's merger have no doubt been a spur to others in seeking efficiency and global scope through size. In an environment where pricing power cannot be counted upon, cost efficiency becomes critical. In the recent spate of proposed and completed drug company mergers, much of the motivation is driven by the increasing cost of drug discovery and marketing.
Pharmaceuticals are also a global industry.
Because of the cost and duration of research projects, developing new drugs is often compared to drilling oil wells, but with a much more profitable payoff. What merging drug firms hope is that by uniting with another drug company, they will be able to support larger drug discovery programs, at less risk to shareholders. Other drivers of acquisition activity have been to increase a company's penetration in a market sector, a new geographic region, or a new technology. General Electric is one of the most consistently active acquirers. Recently it has turned its focus towards Asia, where it has been buying up the same sorts of finance oriented companies at depressed prices due to the Asian financial crisis.