Creating value through related and unrelated merger and acquisition: Empirical evidence

Abstract

The main objective of this paper is to examine the impact of related/unrelated merger and acquisition (M&A) on value creation and research and development (R&D) of Indian non-financial sector companies. This study focuses on whether related M&A outperforms unrelated M&A in the context of value creation and R&D. The sample of the study includes 64 companies to evaluate the significance of relatedness and unrelatedness between target and acquiring companies of the Indian non-financial sector using panel data from the period from 2015 to 2020. The study employs a logistic regression model, which is a predictive model employed wherein the response variable is categorical. The idea of logistic regression is to establish a relationship between variables and the probability of a given outcome. The results of our outcome reveal that partner familiarity affects the post-acquisition value creation and R&D. Further, the findings of the study acclaim that related M&A outperform unrelated M&A. The study indicates that related M&A create positive value but influence negatively to R&D. The findings of the study have several implications for the managers and policymakers who need to understand the dynamics of related/unrelated mergers to take a valid judgment before making merger and acquisition decisions