Shareholder Wealth Effects from Mergers and Acquisitions in the Indian Industry

Abstract

In today’s globalised economy, mergers and acquisitions are being increasingly used all over the world for improving competitiveness of companies through gaining greater market share, broadening the portfolio to reduce business risk, for entering new markets and, and capitalising on economies of scale. The present paper examines the impact of mergers and acquisitions on the shareholders’ wealth of the various companies which have undergone merger or an acquisition across different sectors in India. The objective of the study is to investigate whether there is any significant difference in the performance of the firms premerger/acquisition and post-merger/acquisition periods. By using the ratio analysis approach, a change in the financial position of the companies during the period 2004-2009 has been calculated. The data has been collected from Centre for Monitoring Indian Economy. A paired sample t-test is adopted to check for any statistically significant difference between the means pre and post the deals. Besides, a regression analysis has been done to test the relationship between the dependent variable and the independent variable. The findings conclude that there are no significant differences between the premerger/acquisition and post-merger periods/acquisition and hence, on an average, total shareholder value is not really affected by the announcement of M&A.