Aswath Damodaran 22
Earnings and Revenues at Sterling Drugs
Sterling Drug under Eastman Kodak: Where is the synergy?
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1988 1989 1990 1991 1992
Revenue Operating Earnings
Where is the synergy?
Profits essentially stagnated at Sterling after the Kodak acquisition. The rest of
the drug industry reported an annual growth in earnings of 15% a year during
this period.
Why is synergy so hard to capture?
- Firms do not plan for it at the time of the acquisitions
- Culture shock
- Unrealistic assumptions (AT&T and NCR)
