Cross border Mergers and Acquisitions originating from India: An evaluation of long term post-merger performance of acquiring firms.

Title

Cross border Mergers and Acquisitions originating from India: An evaluation of long term post-merger performance of acquiring firms.

Creator

Singh Siddhartha

Description

This research follows the enhanced M&A activity in the Indian market to trace the impact of outbound international Mergers and Acquisitions (M&A) by Indian firms on the acquiring firm??s shareholders. The research makes a unique contribution in evaluating the long-term financial performance of acquiring firms in cross-border M&As and to detecting the strategic factors of their long-term success. The research used a sample of 91 events covering the period of deals occurring from 2004 to 2009 inclusively. The research used the Buy and Hold Abnormal Returns (BHAR) control firm method to evaluate the performance of firms. The research evaluated BHARs for 1-month, 3-months, 6-months and 12-months post the announcement of the acquisitions. The results obtained for the analysis showed significant negative returns for firms performing a cross border acquisition over a period of 12-months post the acquisition announcement. Hence the research concluded that cross-border acquisitions by firms from India generate negative effects on shareholder value for the acquiring firm??s shareholder, as on 12 months post the acquisition announcement. The above conclusion implies that the firms that perform cross border acquisitions actually perform worse than their counterparts that did not perform a cross border acquisition in the same period The research identified factors of long-term success for cross-border M&As. The results obtained suggest that acquiring firms engaged in cross-border M&As are able to realize efficiency gains and create value for their shareholders, under certain conditions: one when they possess high levels of R&D and secondly when the firm makes an acquisition in a related industry. These results were in accordance with the internalization theory of Buckley and Casson (1976) and Rugman (1981), which state that cross-border M&As help create value for acquiring firms by tapping into their expertise and know-how on international markets. While, Buy and Hold Returns were found to be substantially negative for the subgroup of firms that were larger in size as compared to firms that were relatively smaller in size. The size of the firm was negatively associated with performance of firms post an acquisition announcement and hence larger firms were more likely to fail in an acquisition as compared to smaller firms. Dissertation Layout: The first chapter of the dissertation titled ??Introduction?? primarily covered the conceptual framework, statement of problem and the objectives of the research. The second chapter ??Review of Literature?? covered the review of earlier literature on M&A performance and conclusions and gaps observed in the literature. The third chapter titled??Research Methodology?? covered the hypothesis, data collection and sample description and the methodology for data analysis. The fourth chapter ??Results and Findings?? covering results of the data analysis for the long term returns, strategic factors of M&A success, correlation analysis and regression analysis. The last chapter of the research ??Summary and Conclusions?? covered the summary of all the chapters, major findings of the study, the implications, limitations of the study and the conclusions drawn from the research. Keywords: Mergers and Acquisitions (M&A), cross border acquisitions, post-merger, Abnormal returns and Buy and Hold Abnormal Returns (BHAR),

Source

Management Studies

Date

2012