Abstract
In September 2003, Jeffrey Immelt, CEO of General Electric, must evaluate a final proposal for GE to acquire Amersham plc, the leading producer of contrast agents used in medical diagnostics. This case permits valuation of Amersham based on peer firms, comparable transactions, and recent trading history. But the focus of analysis is on the robustness of Amersham's intellectual property (IP). On close examination, the company's IP position is weaker than it appears, given recent patents filed by competitors. The economic impact of these IP challenges may be tested in the case of the company's leading product, Visipaque, for which cash flows are given. Discounted-cash-flow analysis reveals great sensitivity to the remaining years of effective patent life. A key lesson regards the importance of due-diligence research on a firm's IP position. The teaching objectives of the case are to explore the impact of IP on corporate valuation, to consider the drivers of change in a company's IP position, and to survey some general measures of a company's IP position.
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