Impact of Mergers on Post Merger Economic Value
Addition
1
Impact of Mergers on Post Merger Economic Value Addition
By Dr. Anil Gor, Professor-Finance,
.!.Dalmia Institute of Management "tudies # $esearc%.
Impact of Mergers on Post Merger Economic Value
Addition
2
A&stract'
The research was undertaken to examine 41 cases of domestic mergers in India during the
period between 1999-2009 to ascertain whether post merger Economic Vaue !ddition
" EV!# impro$ed or not when compared with pre merger EV! of both target and
ac%uiring companies& EV! put together' In 2( cases out of 41 mergers examined)
"forming ** +# it was found that EV! impro$ed whereas in 14 cases forming ,4 +) post
merger EV! did not impro$e'
It was found that there was no statistica- significant correation between efficienc-
ratios and impro$ement of EV!' .owe$er there was substantia e$idence that growth in
EV! was strong- associated with growth in net saes and growth in tota assets'
(ey )ords' Economic Vaue !ddition " EV!#) /ergers and !c%uisitions) Efficienc-
0atios) 1rowth parameters'
---------
*. Introduction'
The primar- ob2ecti$e of an- corporate house is to grow with profitabiit-'
The brand creation) market share) functiona speciai3ation) beating the competition etc
are the ob2ecti$es which the companies pursue' 4o e$er- compan- pans its business and
operates with these ob2ecti$es in mind' It takes different routes such as expansion and
di$ersification' 5ut these organic routes ha$e time eement as we as eement of scae of
operation which ser$e as imiting factors' Inorganic growth through the route of /ergers
and !c%uisitions is the fastest and %uickest mode of growth and /odern /antra of
corporate 6E7 who is in a hurr- to show case his 8 her performance'
In the modern times) /ergers and !c%uisition ha$e become a ma2or force in the financia
and economic en$ironment a o$er the word' Essentia- an !merican phenomenon
ti19(0) /9!s ha$e now become goba business theme'
Impact of Mergers on Post Merger Economic Value
Addition
3
+. $esearc% Pro&lem '
"tudy &y (PMG'
In a stud- conducted b- :;/1 in <une 1999) taking sampe of (00 /9! deas their
findings about the deas which succeeded in unocking sharehoder $aue are as under =
>eas which added $aue = 1( +
>eas which produced no discernibe $aue = ,0 +
>eas which destro-ed $aue = ?,+
In other words deas which faied = @,+
+.* ,%e -uestion t%erefore, .as' .%at is t%e statistics of successful M#A deals in
India /
This research therefore) was conducted to answer this %uestion'
+.+ Main 0ypot%esis .%ic% .as tested in t%is researc%'
Mergers and Ac-uisitions as a corporate strategy impro1e Gro.t% and Profita&ility
of t%e com&ined corporate entity .%en compared to its pre M#A independent
1alues, using Economic Value Addition 2EVA3 as .ell as ratio analysis as yardstic4
of measuring post merger performance.
+.5 6t%er 0ypot%esis tested .ere'
a# ;ost merger EV! impro$es on account of efficienc- achie$ed b- economies of scae
measured b- reduction in foowing expense ratios =
1' 6ost of 0aw materias consumed to Aet 4aes as +
2' 6ost of Empo-ees to Aet 4aes as +
,' 6ost of ;ower to Aet 4aes as +
4' 6ost of 4eing 9 !dministrati$e expenses to Aet 4aes as +
?' 6ost of Interest to Aet 4aes as +
*' 7ther /anufacturing 9 misceaneous expenses to Aet 4aes as +
b# ;ost merger EV! impro$es as it is a function of 1rowth indicated b-=
1' 1rowth in Aet 4aes
2' 1rowth in Aet Borth
,' 1rowth in Tota !ssets
4' 1rowth in 6apita empo-ed
c# !nd these impro$ements were measured b-
profitabiit- ratios'
+.7 ' "ource of Data 8 "ample si9e '
The data about the isted companies were obtained from= 6orporate database of 6apita
ine) particuar- ;rofit and Coss accounts of 41 merger cases in$o$ing @2 companies for
three -ears ;rior to merger as we as three -ears after the merger " Tota six -ear period#)
Impact of Mergers on Post Merger Economic Value
Addition
4
5aance sheets of these companies for three -ears ;rior to merger as we as three -ears
after the mergers'"Tota six -ears# were obtained'
+.: Met%odology'
Drom these data) foowing parameters were cacuated for six -ears= , -ears pre merger
and , -ears post merger=
• Economic Vaue !ddition "EV!#
• 6ost of 0aw materias consumed to Aet 4aes as +
• 6ost of Empo-ees to Aet 4aes as +
• 6ost of ;ower to Aet 4aes as +
• 6ost of 4eing 9 !dministrati$e expenses to Aet 4aes as +
• 6ost of Interest to Aet 4aes as +
• 7ther /anufacturing 9 misceaneous expenses to Aet 4aes as +
• 1rowth in Aet 4aes
• 1rowth in Aet Borth
• 1rowth in Tota !ssets
• 1rowth in 6apita empo-ed
• 0eturn on Aet 4aes ie) ;rofit after Tax" ;!T# to Aet 4aes as +
• 0eturn on Aet Borth ie) ;rofit after Tax " ;!T# to Aet Borth as+
• 0eturn on Tota assets ie) ;rofit after Tax " ;!T # to Aet Borth as +
• 0eturn on 6apita empo-ed ie) ";!T# to 6apita empo-ed as +
• >ebt E%uit- 0atio'
• 6urrent 0atio'
The parameters) mentioned abo$e) were cacuated for six -ears on the basis of historica
data obtained from ;rofit and Coss as we as 5aance sheets for both pre merger as we
as post merger period' Bhie this data of six -ears did indicate trend but e$auation of
performance re%uired two comparabe figures'
The research process therefore) reduced six -ears data into two comparabe figures=
• !$erage of three -ear ;remerger data and
• !$erage of three -ear post merger data'
Digures of these two a$erages presented comparabe data amenabe for 4tatistica
software "P"".
5. $esearc% Gap' 0a1ing considered t%e analysis of researc% studies, .e %a1e
arri1ed at t%e researc% gap as under'
Impact of Mergers on Post Merger Economic Value
Addition
5
There is a cear research gap as none of these studies ha$e examined EV! E economic
$aue addition as a parameter of success of /9! deas' The focus of this stud- has been
to examine EV! as a parameter of success of /9! dea' ;re merger combined EV! of
target as we as ac%uiring compan- is compared to post merger EV! of combined entit-)
with a guideine that if post merger EV! impro$es) /9! dea is successfu' Durther) ratio
ana-sis has been made to understand what are the factors contributing to impro$ement or
destruction of EV! so as to pro$ide broad guideines to the managers organi3ing /9!
deas to effecti$e impement the /9! process to endure its success b- keeping ob2ecti$e
of impro$ing post /9! economic $aue addition'
5.* ,%e a&o1e researc% gap .as &een identified on t%e &asis of literature re1ie. t%e
gist of .%ic% is as under'
Basically, there are two approaches that dea with returns to sharehoder on account of
/9! deas=
• E$ent 4tud-
• Dinancia ;erformance 4tudies of /9!
5.+ E1ent "tudies'
E$ent studies examine the abnorma returns to the sharehoders in the period surrounding
the announcement of a transaction' The return on stock is the change in share price
di$ided b- the cosing share price on the da- before' The abnorma or excess return is the
actua return ess a benchmark return Ewhat the in$estors woud expect that da- which
t-pica- woud be the return on a market index) or bench mark specified b- the capita
asset pricing mode' The difference between return on a particuar stock and return on
market index is caed abnorma gain or oss' !nd this method of ana-sis is known as
/arket 0eturn /ethod'
5.5 Financial Performance "tudies of M# A'
The accounting studies examined the reported financia resuts of ac%uirers before and
after the ac%uisition to see how financia performance changed' The focus of these studies
has been on $ariabes such as net income) return on e%uit- or assets) E;4) e$erage or
i%uidit-' 1ist of these studies is gi$en beow=
B.!e1 and G. Mandle4ar 2 *;<=3 examined the profitabiit- of mergers aong with such
aspects as risk) growth) capita structure) income tax sa$ings) earnings per share) etc' and
concuded that ong term profitabiit- of ac%uiring companies is somewhat higher than
that of non merging firms'
(ris%na Palepu 2*;>:3 found that there is no significant cross sectiona difference
between the profitabiit- of firms with predominant- reated and unreated
di$ersification and profitabiit- of firms with high and ow tota di$ersification'
Impact of Mergers on Post Merger Economic Value
Addition
6
/oreo$er) the stud- found that the superior profitabiit- growth was significant- greater
than that of unreated di$ersifiers'
! 19@( stud- of 4(1 ac%uirers between 19?0 and 19(() b- $a1enscraft concuded that
bu-ers& profitabiit- was one or two percentage ower than that for a group of contro
firms'
The stud- b- Paul M. 0ealy and (ris%na Palepu 2*;;+3 examined the post merger cash
fow performance of ac%uiring and target firms and examined the sources of cash fow
performance based on ?0 target companies in F4 mergers between 19(9 and mid 19@4'
The stud- found that merged firms show significant impro$ement in asset producti$it-
reati$e to their industries) eading to higer operating cash fow returns' The stud- further
suggested that post merger cash fow impro$ements did not come at the expense of ong
term performance ' The sampe firms maintained their capita expenditure and 09>
rates reati$e to their industries after the merger' The stud- aso found strong positi$e
reation between post merger increases in operating cash fows and abnorma stock stock
returns at merger announcements) indicating that expectations of economic impro$ements
expained a significant portion of the e%uit- re$auations of the merging firms'
?ornett and ,e%ranian 2 *;;+3 examined the post ac%uisition performance of arge
bank mergers between 19@2 1nd 19@(' The resuts of their stud- indicated better
performance of merged banks due to impro$ements in their abiit- to attract oans and
deposits) in empo-ee producti$it- and in profitabe assets growth' Durther the stud-
found a significant correation between announcement period abnorma returns and
$arious performance measures) indicating that market participants were abe to identif- in
ad$ance impro$ed performance associated with bank ac%uisitions'
".it9er 2*;;@3 examined the change in operating performance of merged firms using a
sampe of ,24 transactions between 19*( and19@(' The resuts were not sensiti$e to
factors such as offer si3e) industr- reatedness) bidders and targets& businesses or bidders&
e$erages' The stud-) howe$er) found positi$e association between the abnorma
re$auation of the firms in$o$ed in the merger and changes in operating performance'
The stud- b- 0ealy 2*;;<3 found that strategic takeo$ers which are genera- friend-
transactions in$o$ing stock and firms in o$erapping businesses) are more profitabe
than financia deas which are usua- hostie transactions in$o$ing cash and unreated
businesses' The resuts of this stud- aso showed that the ac%uiring companies did not
generate an- additiona cash fows be-ond those needed to reco$er the premium paid'
Alo4 G%os% 2+==*3 compared the post and pre ac%uisition performance of merging firms
reati$e to matched firms to determine whether operating cash fow impro$ed foowing
ac%uisitions' The stud- indicated that cash fows increased significant- foowing
ac%uisitions that were made with cash ) but decined for stock ac%uisitions'
Impact of Mergers on Post Merger Economic Value
Addition
7
$o1it and !emire 2+==53 examined the performance "actua minus cost of e%uit-# of
(42 arge F4 companies that made (?(? ac%uisitions between 19@* to 2001' The- found
that ac%uirers carr-ing out more than 20 deas in 1? -ears outperformed the firms that had
made 1 to4 deas b- a factor of 1'( and non bu-ers b- a factor of 2'
The stud- b- Pa.as4ar 2+==*3 compared the pre merger and post merger operating
performance of Indian companies in$o$ed in merger b- identif-ing their financia
characteristics ' Bith a sampe of ,* cases of merger s between 1991nd 199?) the stud-
found that mergers seem to ead to financia s-nergies and a one time growth'
The stud- b- B. $aAes% (umar 2+==<3 examined the post merger operating performance
of merged firms using a sampe of ?( arge mergers during 199?-2002' The pre and post
ac%uisition operating cash fow performance of merging firms reati$e to matched firms)
compared to determine whether operating performance impro$ed foowing mergers' The
merging firms were matched on the basis of pre ac%uisition performance and si3e' Three
aternate methodoogies were utii3ed for the stud- in which cash fow was defated b-
market $aue of assets) book $aue of assets and the saes $aue' The resuts based on
book $aue of assets and saes $aue mode pro$ided some e$idence to suggest that
corporate performance impro$ed due to mergers' The mode based on market $aue of
assets did not support the the h-pothesis that operating performance impro$ed after
mergers'
In another stud- b- B.$aAes% (umar 2+==<3 focused on the characteristics that make the
firm ac%uirer and on identif-ing those characteristics of a firm) which coud ha$e
significant impact on the probabiit- that the firm woud be ac%uired' The ratios in$o$ed
in the stud- were refecti$e of the financia and product market characteristics' The
sampe firms comprising of 22( ac%uirers and 21? targets were used to examine the
ikeihood that a gi$en firm woud be target of an ac%uisition attempt' The si3e of target
firms was much smaer) compared to the ac%uiring firms' The ac%uirer firms had higher
cash fows) higher ;E ratios) higher book $aue) higher i%uid assets and ower debt to
tota assets ratio) which were statistica- significant when compared to the target firms'
4ome e$idence pointed out higher e$erage of target firms' The esser the i%uidit-
position of a firm) greater the probabiit- of a firm becoming a taget' The arger firms
were ess ike- to become ac%uisition target'
In -et another stud-, B.$aAes% (umar 2+==<3 examined the financia characteristics of
firms that ha$e engaged in mutipe mergers' In this context mutipe firms were defined
as mergers of three or more mergers in which ac%uiring firms were engaged' The stud-
attempted to determine the characteristics of ac%uiring firms and obser$e whether
mutipe merger firms showed superior corporate performance as compared to matched
contro group' The resuts ha$e shown that for ac%uirer firms) which had undergone
mutipe mergers) the a$erage saes) profit and cash fows for a period of ten -ears were
higher as compared to a contro group matched b- industr- and si3e' The mean of
a$erage of the saes of contro firms was on- 40'?+ of the saes a$erage for the merger
Impact of Mergers on Post Merger Economic Value
Addition
8
firms' !so) the mutipe merger firms& mean of profits was about 200+ higher than that
of contro firms' The stud- aso found e$idence consistent with the market power and si3e
h-potheses of merger theories' The negati$e reationship between so$enc- and interest
co$erage ratio) found b- the stud-) suggested that firms with the capacit- to increase
debt) or ser$ice debt) were more ike- to engage in mutipe mergers' !so) the higher the
ratio of saes to assets) the ower is the probabiit- of ac%uisition' In other words) an
important factor affecting the firm&s probabiit- of gong for mutipe mergers was the
inabiit- of the incumbent management to generate more saes per unit of assets' The
resuts of regression aso indicated that the main sharehoder power $ariabe was
negati$e- reated to the probabiit- of mutipe mergers' The resuts indicated that ower
financia e$erage and unused debt capacit- woud be a moti$e for firms to use mutipe
mergers as a strategic business too' Thus) a firm&s capita structure appeared as an
especia- important $ariabe in the decision to go in for mutipe mergers'
(. $ama4ris%an 2+==>3 ana-sed cash fow accounting measures to stud- whether firm
performance impro$ed in the ong term post merger'.is research on @( domestic merger
indicated that in the ong term) mergers appear to ha$e been financia- beneficia for the
firms in the Indian industr-'" Vikapa !pri-<une200@ Voume ,, Issue Ao-2#
$aA (umar 2+==;3 in his stud- of ,0 domestic mergers) found that the post merger
profitabiit-) assets turno$er and so$enc- of ac%uiring companies) on a$erage)did not
show an- impro$ement when compared with pre merger $aues' "/anagement 0esearch
Aews) Vo ,2) Ao=2) 2009 Emrad#'
:. Analysis of data and Findings'
Taking EV! and ratio ana-sis as -ard stick) the data was ana-sed and it was found as
under =
:.* $esults of $esearc% study as regards successful and unsuccessful cases'
Economic Value Addition' EVA'
It has been the centra theme of the research stud- that the management of the companies
takes up /9! transactions for growth and profitabiit- resuting in impro$ement of EV!' Be
ha$e found the change in EV! for post merger period when compared to EV! in pre merger
period as under=
:.* ,a&le s%o.ing c%ange in EVA'
Dre%uenc- ;ercent Vaid ;ercent
6umuati$e
;ercent
Vaid 0 Fnfa$orabe 14 ,4'1? ,4'1? ,4'1?
1 Da$orabe 2( *?'@? *?'@? *?'@?
Tota 41 100'0 100'0
Impact of Mergers on Post Merger Economic Value
Addition
9
It was obser$ed that out of 41 cases under examination) EV! impro$ed in 2( cases constituting
**'@?+ of the tota sampe si3e) whereas it decined in 14 cases constituting ,4'1?+ of the
sampe si3e'
Impro$ement in EV! refers to post merger EV! when compared to its premerger EV!) cacuated
on the basis of a$erage , -ear EV! of post merger period and compared with a$erage of , -ears
of pre merger period'
:..+ ,%e impro1ement in EVA .as c%ec4ed .it% its relations%ip of ratio analysis. ,%e
findings'
Impact of Mergers on Post Merger Economic Value
Addition
10
• 6&ser1ations on $atio analysis and EVA'
• Impro1ement in $atio of Po.er ?ost to et "ales .as associated .it% %ig%est
num&er post merger entities .%ere EVA impro1ed' <@.+B.
• Impro1ement in $atio of Employees cost .as associated .it% @@.<B of cases
of post merger entities .%ere EVA impro1ed.
• Impro1ement in $atio of ot%er manufacturing cost to sales .as associated
.it% @5.@B of post merger entities in .%ic% EVA impro1ed.
• Impro1ement in Interest cost .as associated .it% @+.:B of post merger
entities .it% impro1ement in EVA.
• Impro1ement in $a. material cost .as ran4ed fift% in association .it%
@*.*B of post merger entities .%ere EVA impro1ed.
• "elling and administration cost .as ran4ed last and .as associated .it% 77B
of post merger entities .%ere EVA %as impro1ed.
:.5,%ereafter t%e correlation of $atio analysis and impro1ement of EVA .as
.or4ed out and ?%i "-uare test conducted'
Post Merger Performance ?orrelation of $atios .it% EVA and ?%i "-uare ,est
Sr.
No.
Ratios Correlation
with EVA
Pearson Chi
Square est
Impact of Mergers on Post Merger Economic Value
Addition
11
! Raw Material Cost " .#$% .!&'
# Emplo(ee Cost ".!)& .)*+
) Power Cost " .#%! ,))$
$ Selling - Admin Cost ,.%.. .''&
+ Interest Cost ,.%.$ .+&!
' /ther Mfg. Cost ".%.. .'!$
• It .as o&ser1ed t%at'
• ?%ange in EVA .as positi1ely correlated .it% $a. Material, Po.er,
Employee as .ell as ot%er manufacturing cost &ut negati1ely correlated .it%
Interest ?ost.
• ,%e correlation .as not statistically significant as o&ser1ed &y ?%i "-uare
,est.
:.7eCt .e studied relations%ip of Gro.t% parameters and EVA .$esults are as
under'
Post Merger Performance of Gro.t% Parameters
Sr.N
o.
0rowth Parameters 1a2ora3le 4nfa2ora3le otal
! 0rowth in Net Sales ). %) $!
5 &#.*67 5*.)67
# 0rowth in Net
8orth
)+ %' $!
5.+.$67 5!$.'67
) 0rowth in otal
Assets
)+ %' $!
5.+.$67 5!$.'67
$ 0rowth in Capital
Emplo(ed
)+ %' $!
5.+.$67 5!$.67
:.
ost Merger Performance $elations%ip of Gro.t% parameters .it% EVA
Sr.N
o
0rowth
Parameter
1a2. EVA 1a2 EVA 4nfa2
EVA
4nfa2
EVA
otal
1a2
0rowth
4nfa2
0rowth
1a2
0rowth
4nfa2
0rowth
! 0rowth in
Net Sales
#' ! !# # $!
5&'.)67 5).*67 5.+.*67 5!$.)67
# 0rowth in
Net worth
#) $ !# # $!
5.+.#67 5!$..67 5.+..67 5!$.#67
) 0rowth in
otal Assets
#$ ) !! ) $!
5.&67 5!!67 5*..'67 5#!.$67
Impact of Mergers on Post Merger Economic Value
Addition
12
$ 0rowth in
Capital
Emplo(ed
## + !) ! $!
5.!.+67 5!..+67 5&)67 5*67
:.@ Post Merger Performance' ?orrelation of Gro.t% Parameters .it% EVA # ?%i
"-uare ,est
Sr.N
o.
0rowth Parameter Correlation with
EVA
Chi Square est
! 0rowth in Net Sales ".!$$ .)+*
# 0rowth in Net 8orth ,.%'. .''#
) 0rowth in otal Assets ".%*# .'$'
$ 0rowth in Capital
Emplo(ed
,.#%. .!.#
• It .as o&ser1ed t%at'
• ?%ange in EVA .as positi1ely correlated to Gro.t% in et "ales and ,otal
Assets &ut it .as negati1ely correlated .it% ot%er gro.t% parameters suc% as
et .ort% and capital employed.
• In ot%er .ords, for impro1ing EVA, one must impro1e et "ales and
In1estment in ,otal assets.
:.<eCt, .e studied Profita&ility parameters and t%eir relations%ip .it% EVA'
Post Merger Performance' Profita&ility Parameters
Sr.N
o.
Pro9ta3ilit(
Parameters
1a2ora3le 4nfa2ora3le otal
! PA to Net Sales )% !! $!
5*).#67 5#'..67
# PA to Net 8orth #* !$ $!
5'+.&67 5)$.!67
) PA to otal Assets #' !+ $!
5').$67 5)'.'67
$ PA to Capital
Emplo(ed
)+ %' $!
5.+.$67 5!).'67
Impact of Mergers on Post Merger Economic Value
Addition
13
:.> Post Merger Performance' $elations%ip of Profita&ility Parameters .it% EVA
Sr.N
o
Pro9ta3ilit(
Parameter
1a2 EVA 1a2 EVA 4nfa2
EVA
4nfa2
EVA
otal
1a2
Return
4n 1a2
Return
1a2
Return
4nfa2
Return
! PA to Net
Sales
!& %. !! ) $!
5*%.$67 5#&.'67 5*..'67 5#!.$67
# PA to Net
8orth
!* !% !% $ $!
5'#.&67 5)*.)67 5*!.+67 5#..+67
) PA to otal
Assets
!. & . ' $!
5''.*67 5)).)67 5+*.#7 5$#..67
$ PA to
Capital
Emplo(ed
#) $ !# # $!
5.+.#67 5!$..67 5.+.*67 5!$.)67
:.; Post Merger Performance' Profita&ility Parameters and ?orrelation .it% EVA8
?%i "-uare ,est
Sr.N
o.
Pro9ta3ilit(
Parameter
Correlation
with EVA
Chi Square
est
! PA to Net Sales ,.%') .'..
# PA to Net 8orth ,.!.. .##.
) PA to otal Assets ,.%#) ...+
$ PA to Capital
Emplo(ed
,.%'. .''#
• It .as o&ser1ed t%at'
• ?%ange in EVA .as negati1ely correlated .it% all t%e return parameters, ie,
PA, to et "ales, PA, to et )ort%, PA, to ,otal Assets and PA, to ?apital
Employed.
• )%ile eac% of t%ese return parameters .ere positi1ely correlated .it% eac%
ot%er &ut .%en it came to EVA, all t%ese parameters 2 PA, to et "ales , PA,
Impact of Mergers on Post Merger Economic Value
Addition
14
to et )ort%, PA, to ,otal assets and PA, to on ?apital employed3 were
negati$e- correated to change in EV!'
• .ence) to impro$e EV!) it woud be appropriate to concentrate on growth
parameters particularly, et "ales and ,otal Assets &ut not on parameters of
returns .
:.*= o. out of +< cases in .%ic% EVA %as impro1ed association of cases .%ere et
"ales and ,otal Assets %a1e increased in num&er of cases as under '
4r' Ao ;articuars Ao of fa$orabe
cases
Tota Ao of
6ases Bhere
EV! impro$ed
+
1' Increase in Aet
4aes
associated with
increase in
EV!
2* 2( 9*
2' Increase in
Tota !ssets
associated with
Increase in
EV!
24 2( @9
• It was therefore) estabished that impro$ement in EV! was a function of growth in
4aes and growth in Tota !ssets' This pro$ed 1rowth aspect of our main
h-pothesis that /ergers and !c%uisitions as corporate strateg- impro$e growth'
5ut our h-pothesis that post merger EV! impro$ed profitabiit- was not
estabished) when compared to its pre /9! independent $aues) using EV! as
we as ratio ana-sis as -ard stick of measuring post merger performance'
• 4econd h-pothesis that ;ost /erger EV! impro$ed on account of efficienc-
achie$ed b- economies of scae measured b- $arious expense ratios was not
estabished'
• The cause and effect reationship between EV! and $arious expenses were
statistica- not significant'
Impact of Mergers on Post Merger Economic Value
Addition
15
• Third h-potheses that ;ost /erger EV! impro$ed as a function of growth
indicated b- 1rowth in Aet 4aes) 1rowth in Aet Borth ) 1rowth in Tota !ssets
and 1rowth in 6apita empo-ed was part- estabished '
• There was positi$e correation between 1rowth in EV! and 1rowth in Aet 4aes
as we as Tota !ssets'
• 5ut 1rowth in EV! was negati$e- correated with 1rowth in Aet worth as we
as 1rowth in capita empo-ed'
@. ,%e researc% findings also 1alidated t%e findings of Mc(insey.
• In /c:inse- Guarter- 2001) Aumber 4 Issue) "/c:inse-%uarter-'com# !uthors
/athias /' 5ekier) !nna <'5ogardius and Tim 7dham) in their !rtice) H Bh-
mergers fai I point out that re$enue deser$es more attention in mergersJ indeed)
a faiure to focus on this important factor ma- expain wh- so man- mergers don&t
pa- off' Too man- companies ose their re$enue momentum as the- concentrate
on cost s-nergies or fai to focus on post merger growth in a s-stematic manner'
Ket in the end) hated growth hurts the market performance of a compan- far more
than does a faiure to nai costs' 4ome baance ma- ha$e to be restored' The-
examined more than 1*0 ac%uisitions b- 1?( pubic isted companies across 11
industr- sectors in 199? and 199* ) on- 12 percent of these companies managed
to acceerate their growth significant- o$er the next three -earsL' 4uccess is
determined abo$e a b- the abiit- to protect re$enue and to generate growth 2ust
after a merger' Those ac%uirers that get this baance wrong) punging headong
into cost sa$ings- ma- soon see their peers outstrip them in growth'
*'1 ,%eoretical support in fa1or of t%e researc% findings ' "ales MaCimisation
model of )illiam Boumol '
• The assumption that that the firm woud maximise profits or $aue of the firm b-
mergers and ac%uisitions b- controing or reducing expenses' This assumption
was critici3ed as being too narrow and unreaistic' In its pace) broader theories of
the firm were proposed'
• The most prominent among these was the saes maximi3ation mode proposed
b-Biiam 5aumo) which postuated that managers of /odern 6orporation seek
to maximi3e saes' 5aumo argued that a arger firms fet more secure) and were
abe to get better deas in the purchase of inputs ) ower rates in borrowing mone-)
and better image with consumers) empo-ees) and suppiers'
• Durthermore) some ear- empirica studies found that a strong correation existed
between executi$es& saaries and saes) but not between saes and profits' The
saes maximi3ation mode was particuar- ree$ant to this research findings that
EV! of combined firms impro$ed with increase in saes as we as tota assets'
.owe$er) increase profitabiit- was not at the same rate' .ence) 5aumo&s saes
maximi3ation mode supported research findings that /ergers and ac%uisitions
resut in growth of EV!) Aet 4aes and tota assets but did not resut in increase in
profitabiit-'
Impact of Mergers on Post Merger Economic Value
Addition
16
@.*.+ )illiam BaumolDs "ales MaCimi9ation Model'
Impact of Mergers on Post Merger Economic Value
Addition
17
In the figure gi$en abo$e ) T0 refers to the tota re$enue) T6 to the tota costs) and M to
the tota profits of the firm' M NT0 ET6 and is maximi3ed at O90 at G N 40 units where
the positi$e difference between T0 and T6 is greatest "i'e') where the T0 and T6 cur$es
are parae#' 7n the other hand) T0 is maximum at O2?0 where GN?0) at which the sope
of the T0 cur$e or /0 is 3ero and MNO(0 "see the figure#' If the firm had to earn a profit
of at east O(0 to satisf- the minimum profit constraint) the firm woud produce ?0 units
of output and maximi3e T0 at O2?0 with MN(0' The same woud be true as ong as the
minimum profit re%uirement of the firm was e%ua to or smaer than O(0'
Bith a minimum profit re%uirement between O(0 and O90) howe$er) the profit constraint
woud be binding' Dor exampe) to earn a profit of at east O@0) the firm woud ha$e to
produce an output of about 4('?0 units "see figure#' Dina-) if the minimum profit
re%uirement were higher than O90) a that the firm coud do woud be to produce GN40
and maximi3e M at O90 with T0 NO240' In other words firm woud go for increase the
re$enue e$en at ess than maximum profit'
@.5 ?ontri&ution of t%e $esearc%'
*','1 The research cear- estabished that impro$ement in EV! was function of growth
in 4aes and growth in Tota !ssets as we found positi$e correation between 1rowth in
EV! and 1rowth in Aet 4aes as we as Tota !ssets'
*','2 It was further emphasi3ed that as expained 5aumo&s 4aes maximi3ation mode)
/9! ha$e resuted into growth in the form of EV!) Tota 4aes and Tota !ssets
but not in increase in profitabiit-'
*'2', The research findings were supported b- research stud- b- /c:inse- 9 6o as we
as 4aes maximi3ation mode of Biiam 5oumo as expained earier'
*','4 The research aid down the foowing guideines for those managing /9!
transactions =
a# ;ursue goas of growth in saes and in$estment to impro$e sharehoder $aue
or EV!
b# Too much concentration on cost reduction " efficienc- ratios#) ma- resut in
oss of re$enue and conse%uent- oss in EV!'
< ' Future scope for researc% '
/ergers and !c%uisitions as corporate strateg-) ha$e muti-dementiona aspects open for
research' e examined on- Economic $aue addition) cuase and effect reationship with
efficienc- ratios) profitabiit- and growth parameters' .owe$er) foowing areas can be
taken up for further research=
i# 6ases of cross border ac%uisitions=
Impact of Mergers on Post Merger Economic Value
Addition
18
a# Inbound= Bhere foreign companies take o$er Indian companies'
b# 7utbound= Bhere Indian companies ac%uire foreign companies'
ii# Impro$ement in $aue of companies undergoing /9! deas on the
basis of s-nerg- reai3ation using discounted cash fow techni%ues'
iii# 4ignificance of taxation benefits a$aiabe to companies incuding
transfer pricing issues in /9! transactions and conse%uent impact on
sharehoders& $aue'
i$# /arket Vaue !ddition "/V!# meaning increase in market
capitai3ation o$er book $aue of capita) on account of /9!
transactions as against EV! examined b- us'
$# 7rganisation structura issues and .uman resource issues in
companies under /9! transactions'
$i# Cega 6ompiance issues in domestic and cross border transactions'
The researchers wi awa-s find the sub2ect of /9! interesting enough) to examine the
abo$e topics and associated issues in future'
$E$E$E?E"'
)%ile .e %a1e gone t%roug% +*7 researc% articles, around 55 &oo4s and scaning of
1arious sites on t%e internet, .e %a1e presented &elo. select list of references'
Author itle of Research
Paper
Pu3lication details
1. K. Ramakrishnan
(2008)
Long Term Post erger
Per!orman"e o! #rms in
$n%ia
&ika'(a ) *(ri'+,-ne 2008
&o'.33 .o.2
#. Ra/ K-mar ( 2009) Post erger 0or(orate
Per!orman1e2 *n $n%ian
Pers(e1ti"e.
anagement Resear1h
.e3s &o'-me 32 .o.3
4mera'%
). 5. Ra/esh K-mar
an% Pra6ina Ra/i6
(2007)
0hara1teristi1s o!
erging 7irms in $n%ia 2
*n 4m(iri1a'
48amination
&ika'(a &o'.32 ,an-ar9 :
ar1h 2007
$. ano/ *nan% an%
,agan%ee( ;ingh
(2008)
$m(a1t o! erger
*nno-n1ements on
;hareho'%ers< =ea'th 2
4"i%en1e !rom $n%ian
Pri"ate ;40T>R 6anks
&ika'(a &o'. 33 ,an-ar9
ar1h 2008
5. R. ;rini"asan an%
5i6ek Prasa%
?o3 %o #rms
merge@a1A-ire 2 *n
$$5 anagement
Re"ie3 2 Be1em6er
Impact of Mergers on Post Merger Economic Value
Addition
19
ishra (2007) *na'9sis o! strategi1
$ntent in re1ent a1ti"it9
among $n%ian 7irms
2007
6. ;atish R. an% Ra-
;.;. (2009)
*3areness an%
*%a(ta6i'it9 o!
41omomi1 &a'-e *%%ition
$0; ,o-rna' o! $n%ian
anagement Be1em6er
2009
7. ,ansen .0. an%
Ri1har% R-6a1k
(1983)
The arket !o 0or(orate
0ontro'
,o-rna' o! 7inan1ia'
41onomi1s) &o'. 11) 5+50
8. R. 5r-ner (2004) =here C* Pa9s an%
3here it stra9s
,o-rna' o! *(('ie%
0or(orate 7inan1e 2004
&o'. 16 .o.4.
9. *sA-ith Pa-')
Ro6ert 7
5r-ner an% Ba"i%
= -''ins ,r) 1983)
The Dains to 5i%%ing
7irms !rom ergerE
,o-rna' o! 7inan1ia'
41onomi1s) &o' 11) ((
121+139.
10. 5'a1k 7) 0
,ensen an%
;1ho'es) 1972
The 0a(ita' *sset Pri1ing
o%e'2 ;ome 4m(iri1a'
TestsE)
;t-%ies in the Theor9 o!
0a(ita' arkets)
Praeger) .e3 Fork) &o'.
7) (( 79+124.
11. an%e'ker D)
1974)
ERisk an% Ret-rn2 The
0ase o! erging 7irms
,o-rna' o! 7inan1ia'
41onomi1s) &o' 1) ((
303+335.
12. Langeteig
Teren1e 0) 1978
*n *(('i1ation o! a Three
7a1tor Per!orman1e
$n%e8 to eas-re
;to1kho'%er Dains !rom
erger
,o-rna' o! 7inan1ia'
41onomi1s) &o' 6) ((
365+383.
13. oe''er ;ara
5) 7re%erik P
;1h'ingemann an%
Rene ;t-'G) 2004
7irm ;iGe an% The Dains
!rom *1A-isitions
,o-rna' o! 7inan1ia'
41onomi1s) &o' 73) ((
201+228
14. */a9 Pan%e9)
2001)
Takeo"er *nno-n1ement)
>(en >Hers an%
;hareho'%erEs Ret-rns in
Target 7irms
&ika'(a) &o' 26+3) (( 19+
29.
B. B66("
"r. o. Aut%or ,itle Pu&lis%er
1' 4udi 4udarssanam 6reating Vaue from
/ergers and !c%uisitions =
;rentice .a of India "199(#
Impact of Mergers on Post Merger Economic Value
Addition
20
The 6haenges
2' 4hi$a 0amu 4' 6orporate 1rowth through
/ergers 9 !c%uisitions
0esponse 5ooks
,' <'Dred Beston)
:wang 4'6hung
4usan .oag
/ergers) 0estructuring and
6orporate 6ontro
;rentice .a of India'"200@#
4' /ohan 0ao ;' /ergers 9!c%uisitions of
6ompanies
>eep 9>eep ;ubications
?' Verma <'6' 6orporate /ergers)
!magamations
9Takeo$ers
5harat ;ubishing .ouse
*' 0amanu2am 4' /ergers et ! 4' 6hand 9 6o'
(' /arren <oseph .' /ergers 9 !c%uisitions Tata /cgraw .i "199,#
@' .a3e <ohnson /ergers 9 !c%uisitions Tata /cgraw .i "2009#
9' .itt /ichae !' /ergers 9 !c%uisitions Fni$ersit- ;ress
10' Beston Dred /ergers 9!c%uisitions /cgraw .i "2001#
11' 6o-e 5rian /ergers 9 !c%uisitions 6I5 ;ubications "2000#
12' 0a2eshwar /ergers 9 !c%uisitions =
Aew ;erspecti$es
I6D!I "2001#
1,'5omba- 6hartered
!ccountants 4ociet-
/ergers 9 Takeo$ers - !
6ompendium
5omba- 6hartered !ccountants 4ociet-
14' ;atrick 1aghan /ergers) !c%uisitions 9
6orporate 0estructuring
<ohn Bie- 94ons "2002#
1?' /achira2u .'0' /ergers ) !c%uisitions and
Takeo$ers
Aew !ge ;ubications
1*' Institute of 6ompan-
4ecretaries of India
.andbook of /ergers)
!magamations and
Takeo$ers- Caw and
;ractice
I64I
1('I6D!I 6ase 4tudies on /ergers
and !c%uisitions Vo'I)II)III
I6D!I "200,#
1@' Ernst 9 Koung /ergers 9 !c%uisitions <ohn Bie- 9 4ons "2004#
19'>ominick 4a$atore and
0a$ikesh 4ri$asta$a
/nageria Economics 7xford Fni$ersit- ;ress 200@
20' <'Dred Beston) :wang
4' 6hung) 4usan .oag
21' ;rasad 1' 1odboe
22' 5' 0a2esh :umar
2,':ar 0abi Aara-an
/ergers) 0estructuring and
6orporate 6ontro
/ergers) !c%uisions and
6orporate 0estructuring
/ergers and !c%uisitions E
text and 6ases
/ergers ) !c%uisitions and
6orporate 0estructuring
;rentice .a of India -200,
Vikas ;ubishing .ouse 2011
/c1raw .i ;ubication 2011
Iternationa 5ook .ouse 2011
Bie- pubication "200?#
<ohn Bie- 94ons Ctd "2004#
Impact of Mergers on Post Merger Economic Value
Addition
21
24'Cucks :ai
2?'Ver- ;hiips
2*' 4herman !ndrew
2(' V' 0a$indhar
2@'5ragg 4te$en /'
29' :rishnamurth-
6handrashekhar
,0'.50
,1' 0ais <' 1arrett
,2' 5runer 0obert D'
,,' 1rund- Ton-
Transatantic /ergers ad
!c%uisitions
/ergers and !c%uisitios
/ergers and !c%uisitions
/ergers !c%usitions and
5usiness Vauation
/ergers 9!c%uisitions
/ergers ) !c%uisitions and
6orporate restructuring
.50 on /ergers and
!cuisitions
/atering 6haos of /ergers
and !cuisitions
!ppied /ergers and
!c%uisitions
4mart Thinking about
/ergers and !c%uisitions
<aico ;ubishing .ouse "2009#
Exce 5ooks "200(#
<ohn Bie- 9 4ons "2009#
0esponse 5ooks "200@#
.ar$ard 5usiness 4choo ;ress "2001#
6ushman and >ude- "1999#
<ohn Bie- and 4ons "2004#
6apstone ;ubishing Ctd "200,#
? Maga9ines8 Dailies '
P
1' /9! 6riti%ue ;ubishers = .F 6onsutanc- ;te' Ctd
2' 6hartered 4ecretar- Institute of 6ompan- 4ecretaries of India'
,' Economic Times
4' 5usiness 4tandard
?' 5usiness Toda-
*' 5usinees Bord
D. Internet "ites
1' ....mc4insey.com
2'www'mergersindia'com
,'www'rbi'org
4'www'icsi'edu
?'www'e$anomics'com
*'www'sebi'go$'in
('www'peope'stern'n-u'ed
u8adamodar'com
@'www'nithithdesai'in
9'www'egaera'in'
10'www'egaundits'com
doc_541835629.docx
Addition
1
Impact of Mergers on Post Merger Economic Value Addition
By Dr. Anil Gor, Professor-Finance,
.!.Dalmia Institute of Management "tudies # $esearc%.
Impact of Mergers on Post Merger Economic Value
Addition
2
A&stract'
The research was undertaken to examine 41 cases of domestic mergers in India during the
period between 1999-2009 to ascertain whether post merger Economic Vaue !ddition
" EV!# impro$ed or not when compared with pre merger EV! of both target and
ac%uiring companies& EV! put together' In 2( cases out of 41 mergers examined)
"forming ** +# it was found that EV! impro$ed whereas in 14 cases forming ,4 +) post
merger EV! did not impro$e'
It was found that there was no statistica- significant correation between efficienc-
ratios and impro$ement of EV!' .owe$er there was substantia e$idence that growth in
EV! was strong- associated with growth in net saes and growth in tota assets'
(ey )ords' Economic Vaue !ddition " EV!#) /ergers and !c%uisitions) Efficienc-
0atios) 1rowth parameters'
---------
*. Introduction'
The primar- ob2ecti$e of an- corporate house is to grow with profitabiit-'
The brand creation) market share) functiona speciai3ation) beating the competition etc
are the ob2ecti$es which the companies pursue' 4o e$er- compan- pans its business and
operates with these ob2ecti$es in mind' It takes different routes such as expansion and
di$ersification' 5ut these organic routes ha$e time eement as we as eement of scae of
operation which ser$e as imiting factors' Inorganic growth through the route of /ergers
and !c%uisitions is the fastest and %uickest mode of growth and /odern /antra of
corporate 6E7 who is in a hurr- to show case his 8 her performance'
In the modern times) /ergers and !c%uisition ha$e become a ma2or force in the financia
and economic en$ironment a o$er the word' Essentia- an !merican phenomenon
ti19(0) /9!s ha$e now become goba business theme'
Impact of Mergers on Post Merger Economic Value
Addition
3
+. $esearc% Pro&lem '
"tudy &y (PMG'
In a stud- conducted b- :;/1 in <une 1999) taking sampe of (00 /9! deas their
findings about the deas which succeeded in unocking sharehoder $aue are as under =
>eas which added $aue = 1( +
>eas which produced no discernibe $aue = ,0 +
>eas which destro-ed $aue = ?,+
In other words deas which faied = @,+
+.* ,%e -uestion t%erefore, .as' .%at is t%e statistics of successful M#A deals in
India /
This research therefore) was conducted to answer this %uestion'
+.+ Main 0ypot%esis .%ic% .as tested in t%is researc%'
Mergers and Ac-uisitions as a corporate strategy impro1e Gro.t% and Profita&ility
of t%e com&ined corporate entity .%en compared to its pre M#A independent
1alues, using Economic Value Addition 2EVA3 as .ell as ratio analysis as yardstic4
of measuring post merger performance.
+.5 6t%er 0ypot%esis tested .ere'
a# ;ost merger EV! impro$es on account of efficienc- achie$ed b- economies of scae
measured b- reduction in foowing expense ratios =
1' 6ost of 0aw materias consumed to Aet 4aes as +
2' 6ost of Empo-ees to Aet 4aes as +
,' 6ost of ;ower to Aet 4aes as +
4' 6ost of 4eing 9 !dministrati$e expenses to Aet 4aes as +
?' 6ost of Interest to Aet 4aes as +
*' 7ther /anufacturing 9 misceaneous expenses to Aet 4aes as +
b# ;ost merger EV! impro$es as it is a function of 1rowth indicated b-=
1' 1rowth in Aet 4aes
2' 1rowth in Aet Borth
,' 1rowth in Tota !ssets
4' 1rowth in 6apita empo-ed
c# !nd these impro$ements were measured b-
profitabiit- ratios'
+.7 ' "ource of Data 8 "ample si9e '
The data about the isted companies were obtained from= 6orporate database of 6apita
ine) particuar- ;rofit and Coss accounts of 41 merger cases in$o$ing @2 companies for
three -ears ;rior to merger as we as three -ears after the merger " Tota six -ear period#)
Impact of Mergers on Post Merger Economic Value
Addition
4
5aance sheets of these companies for three -ears ;rior to merger as we as three -ears
after the mergers'"Tota six -ears# were obtained'
+.: Met%odology'
Drom these data) foowing parameters were cacuated for six -ears= , -ears pre merger
and , -ears post merger=
• Economic Vaue !ddition "EV!#
• 6ost of 0aw materias consumed to Aet 4aes as +
• 6ost of Empo-ees to Aet 4aes as +
• 6ost of ;ower to Aet 4aes as +
• 6ost of 4eing 9 !dministrati$e expenses to Aet 4aes as +
• 6ost of Interest to Aet 4aes as +
• 7ther /anufacturing 9 misceaneous expenses to Aet 4aes as +
• 1rowth in Aet 4aes
• 1rowth in Aet Borth
• 1rowth in Tota !ssets
• 1rowth in 6apita empo-ed
• 0eturn on Aet 4aes ie) ;rofit after Tax" ;!T# to Aet 4aes as +
• 0eturn on Aet Borth ie) ;rofit after Tax " ;!T# to Aet Borth as+
• 0eturn on Tota assets ie) ;rofit after Tax " ;!T # to Aet Borth as +
• 0eturn on 6apita empo-ed ie) ";!T# to 6apita empo-ed as +
• >ebt E%uit- 0atio'
• 6urrent 0atio'
The parameters) mentioned abo$e) were cacuated for six -ears on the basis of historica
data obtained from ;rofit and Coss as we as 5aance sheets for both pre merger as we
as post merger period' Bhie this data of six -ears did indicate trend but e$auation of
performance re%uired two comparabe figures'
The research process therefore) reduced six -ears data into two comparabe figures=
• !$erage of three -ear ;remerger data and
• !$erage of three -ear post merger data'
Digures of these two a$erages presented comparabe data amenabe for 4tatistica
software "P"".
5. $esearc% Gap' 0a1ing considered t%e analysis of researc% studies, .e %a1e
arri1ed at t%e researc% gap as under'
Impact of Mergers on Post Merger Economic Value
Addition
5
There is a cear research gap as none of these studies ha$e examined EV! E economic
$aue addition as a parameter of success of /9! deas' The focus of this stud- has been
to examine EV! as a parameter of success of /9! dea' ;re merger combined EV! of
target as we as ac%uiring compan- is compared to post merger EV! of combined entit-)
with a guideine that if post merger EV! impro$es) /9! dea is successfu' Durther) ratio
ana-sis has been made to understand what are the factors contributing to impro$ement or
destruction of EV! so as to pro$ide broad guideines to the managers organi3ing /9!
deas to effecti$e impement the /9! process to endure its success b- keeping ob2ecti$e
of impro$ing post /9! economic $aue addition'
5.* ,%e a&o1e researc% gap .as &een identified on t%e &asis of literature re1ie. t%e
gist of .%ic% is as under'
Basically, there are two approaches that dea with returns to sharehoder on account of
/9! deas=
• E$ent 4tud-
• Dinancia ;erformance 4tudies of /9!
5.+ E1ent "tudies'
E$ent studies examine the abnorma returns to the sharehoders in the period surrounding
the announcement of a transaction' The return on stock is the change in share price
di$ided b- the cosing share price on the da- before' The abnorma or excess return is the
actua return ess a benchmark return Ewhat the in$estors woud expect that da- which
t-pica- woud be the return on a market index) or bench mark specified b- the capita
asset pricing mode' The difference between return on a particuar stock and return on
market index is caed abnorma gain or oss' !nd this method of ana-sis is known as
/arket 0eturn /ethod'
5.5 Financial Performance "tudies of M# A'
The accounting studies examined the reported financia resuts of ac%uirers before and
after the ac%uisition to see how financia performance changed' The focus of these studies
has been on $ariabes such as net income) return on e%uit- or assets) E;4) e$erage or
i%uidit-' 1ist of these studies is gi$en beow=
B.!e1 and G. Mandle4ar 2 *;<=3 examined the profitabiit- of mergers aong with such
aspects as risk) growth) capita structure) income tax sa$ings) earnings per share) etc' and
concuded that ong term profitabiit- of ac%uiring companies is somewhat higher than
that of non merging firms'
(ris%na Palepu 2*;>:3 found that there is no significant cross sectiona difference
between the profitabiit- of firms with predominant- reated and unreated
di$ersification and profitabiit- of firms with high and ow tota di$ersification'
Impact of Mergers on Post Merger Economic Value
Addition
6
/oreo$er) the stud- found that the superior profitabiit- growth was significant- greater
than that of unreated di$ersifiers'
! 19@( stud- of 4(1 ac%uirers between 19?0 and 19(() b- $a1enscraft concuded that
bu-ers& profitabiit- was one or two percentage ower than that for a group of contro
firms'
The stud- b- Paul M. 0ealy and (ris%na Palepu 2*;;+3 examined the post merger cash
fow performance of ac%uiring and target firms and examined the sources of cash fow
performance based on ?0 target companies in F4 mergers between 19(9 and mid 19@4'
The stud- found that merged firms show significant impro$ement in asset producti$it-
reati$e to their industries) eading to higer operating cash fow returns' The stud- further
suggested that post merger cash fow impro$ements did not come at the expense of ong
term performance ' The sampe firms maintained their capita expenditure and 09>
rates reati$e to their industries after the merger' The stud- aso found strong positi$e
reation between post merger increases in operating cash fows and abnorma stock stock
returns at merger announcements) indicating that expectations of economic impro$ements
expained a significant portion of the e%uit- re$auations of the merging firms'
?ornett and ,e%ranian 2 *;;+3 examined the post ac%uisition performance of arge
bank mergers between 19@2 1nd 19@(' The resuts of their stud- indicated better
performance of merged banks due to impro$ements in their abiit- to attract oans and
deposits) in empo-ee producti$it- and in profitabe assets growth' Durther the stud-
found a significant correation between announcement period abnorma returns and
$arious performance measures) indicating that market participants were abe to identif- in
ad$ance impro$ed performance associated with bank ac%uisitions'
".it9er 2*;;@3 examined the change in operating performance of merged firms using a
sampe of ,24 transactions between 19*( and19@(' The resuts were not sensiti$e to
factors such as offer si3e) industr- reatedness) bidders and targets& businesses or bidders&
e$erages' The stud-) howe$er) found positi$e association between the abnorma
re$auation of the firms in$o$ed in the merger and changes in operating performance'
The stud- b- 0ealy 2*;;<3 found that strategic takeo$ers which are genera- friend-
transactions in$o$ing stock and firms in o$erapping businesses) are more profitabe
than financia deas which are usua- hostie transactions in$o$ing cash and unreated
businesses' The resuts of this stud- aso showed that the ac%uiring companies did not
generate an- additiona cash fows be-ond those needed to reco$er the premium paid'
Alo4 G%os% 2+==*3 compared the post and pre ac%uisition performance of merging firms
reati$e to matched firms to determine whether operating cash fow impro$ed foowing
ac%uisitions' The stud- indicated that cash fows increased significant- foowing
ac%uisitions that were made with cash ) but decined for stock ac%uisitions'
Impact of Mergers on Post Merger Economic Value
Addition
7
$o1it and !emire 2+==53 examined the performance "actua minus cost of e%uit-# of
(42 arge F4 companies that made (?(? ac%uisitions between 19@* to 2001' The- found
that ac%uirers carr-ing out more than 20 deas in 1? -ears outperformed the firms that had
made 1 to4 deas b- a factor of 1'( and non bu-ers b- a factor of 2'
The stud- b- Pa.as4ar 2+==*3 compared the pre merger and post merger operating
performance of Indian companies in$o$ed in merger b- identif-ing their financia
characteristics ' Bith a sampe of ,* cases of merger s between 1991nd 199?) the stud-
found that mergers seem to ead to financia s-nergies and a one time growth'
The stud- b- B. $aAes% (umar 2+==<3 examined the post merger operating performance
of merged firms using a sampe of ?( arge mergers during 199?-2002' The pre and post
ac%uisition operating cash fow performance of merging firms reati$e to matched firms)
compared to determine whether operating performance impro$ed foowing mergers' The
merging firms were matched on the basis of pre ac%uisition performance and si3e' Three
aternate methodoogies were utii3ed for the stud- in which cash fow was defated b-
market $aue of assets) book $aue of assets and the saes $aue' The resuts based on
book $aue of assets and saes $aue mode pro$ided some e$idence to suggest that
corporate performance impro$ed due to mergers' The mode based on market $aue of
assets did not support the the h-pothesis that operating performance impro$ed after
mergers'
In another stud- b- B.$aAes% (umar 2+==<3 focused on the characteristics that make the
firm ac%uirer and on identif-ing those characteristics of a firm) which coud ha$e
significant impact on the probabiit- that the firm woud be ac%uired' The ratios in$o$ed
in the stud- were refecti$e of the financia and product market characteristics' The
sampe firms comprising of 22( ac%uirers and 21? targets were used to examine the
ikeihood that a gi$en firm woud be target of an ac%uisition attempt' The si3e of target
firms was much smaer) compared to the ac%uiring firms' The ac%uirer firms had higher
cash fows) higher ;E ratios) higher book $aue) higher i%uid assets and ower debt to
tota assets ratio) which were statistica- significant when compared to the target firms'
4ome e$idence pointed out higher e$erage of target firms' The esser the i%uidit-
position of a firm) greater the probabiit- of a firm becoming a taget' The arger firms
were ess ike- to become ac%uisition target'
In -et another stud-, B.$aAes% (umar 2+==<3 examined the financia characteristics of
firms that ha$e engaged in mutipe mergers' In this context mutipe firms were defined
as mergers of three or more mergers in which ac%uiring firms were engaged' The stud-
attempted to determine the characteristics of ac%uiring firms and obser$e whether
mutipe merger firms showed superior corporate performance as compared to matched
contro group' The resuts ha$e shown that for ac%uirer firms) which had undergone
mutipe mergers) the a$erage saes) profit and cash fows for a period of ten -ears were
higher as compared to a contro group matched b- industr- and si3e' The mean of
a$erage of the saes of contro firms was on- 40'?+ of the saes a$erage for the merger
Impact of Mergers on Post Merger Economic Value
Addition
8
firms' !so) the mutipe merger firms& mean of profits was about 200+ higher than that
of contro firms' The stud- aso found e$idence consistent with the market power and si3e
h-potheses of merger theories' The negati$e reationship between so$enc- and interest
co$erage ratio) found b- the stud-) suggested that firms with the capacit- to increase
debt) or ser$ice debt) were more ike- to engage in mutipe mergers' !so) the higher the
ratio of saes to assets) the ower is the probabiit- of ac%uisition' In other words) an
important factor affecting the firm&s probabiit- of gong for mutipe mergers was the
inabiit- of the incumbent management to generate more saes per unit of assets' The
resuts of regression aso indicated that the main sharehoder power $ariabe was
negati$e- reated to the probabiit- of mutipe mergers' The resuts indicated that ower
financia e$erage and unused debt capacit- woud be a moti$e for firms to use mutipe
mergers as a strategic business too' Thus) a firm&s capita structure appeared as an
especia- important $ariabe in the decision to go in for mutipe mergers'
(. $ama4ris%an 2+==>3 ana-sed cash fow accounting measures to stud- whether firm
performance impro$ed in the ong term post merger'.is research on @( domestic merger
indicated that in the ong term) mergers appear to ha$e been financia- beneficia for the
firms in the Indian industr-'" Vikapa !pri-<une200@ Voume ,, Issue Ao-2#
$aA (umar 2+==;3 in his stud- of ,0 domestic mergers) found that the post merger
profitabiit-) assets turno$er and so$enc- of ac%uiring companies) on a$erage)did not
show an- impro$ement when compared with pre merger $aues' "/anagement 0esearch
Aews) Vo ,2) Ao=2) 2009 Emrad#'
:. Analysis of data and Findings'
Taking EV! and ratio ana-sis as -ard stick) the data was ana-sed and it was found as
under =
:.* $esults of $esearc% study as regards successful and unsuccessful cases'
Economic Value Addition' EVA'
It has been the centra theme of the research stud- that the management of the companies
takes up /9! transactions for growth and profitabiit- resuting in impro$ement of EV!' Be
ha$e found the change in EV! for post merger period when compared to EV! in pre merger
period as under=
:.* ,a&le s%o.ing c%ange in EVA'
Dre%uenc- ;ercent Vaid ;ercent
6umuati$e
;ercent
Vaid 0 Fnfa$orabe 14 ,4'1? ,4'1? ,4'1?
1 Da$orabe 2( *?'@? *?'@? *?'@?
Tota 41 100'0 100'0
Impact of Mergers on Post Merger Economic Value
Addition
9
It was obser$ed that out of 41 cases under examination) EV! impro$ed in 2( cases constituting
**'@?+ of the tota sampe si3e) whereas it decined in 14 cases constituting ,4'1?+ of the
sampe si3e'
Impro$ement in EV! refers to post merger EV! when compared to its premerger EV!) cacuated
on the basis of a$erage , -ear EV! of post merger period and compared with a$erage of , -ears
of pre merger period'
:..+ ,%e impro1ement in EVA .as c%ec4ed .it% its relations%ip of ratio analysis. ,%e
findings'
Impact of Mergers on Post Merger Economic Value
Addition
10
• 6&ser1ations on $atio analysis and EVA'
• Impro1ement in $atio of Po.er ?ost to et "ales .as associated .it% %ig%est
num&er post merger entities .%ere EVA impro1ed' <@.+B.
• Impro1ement in $atio of Employees cost .as associated .it% @@.<B of cases
of post merger entities .%ere EVA impro1ed.
• Impro1ement in $atio of ot%er manufacturing cost to sales .as associated
.it% @5.@B of post merger entities in .%ic% EVA impro1ed.
• Impro1ement in Interest cost .as associated .it% @+.:B of post merger
entities .it% impro1ement in EVA.
• Impro1ement in $a. material cost .as ran4ed fift% in association .it%
@*.*B of post merger entities .%ere EVA impro1ed.
• "elling and administration cost .as ran4ed last and .as associated .it% 77B
of post merger entities .%ere EVA %as impro1ed.
:.5,%ereafter t%e correlation of $atio analysis and impro1ement of EVA .as
.or4ed out and ?%i "-uare test conducted'
Post Merger Performance ?orrelation of $atios .it% EVA and ?%i "-uare ,est
Sr.
No.
Ratios Correlation
with EVA
Pearson Chi
Square est
Impact of Mergers on Post Merger Economic Value
Addition
11
! Raw Material Cost " .#$% .!&'
# Emplo(ee Cost ".!)& .)*+
) Power Cost " .#%! ,))$
$ Selling - Admin Cost ,.%.. .''&
+ Interest Cost ,.%.$ .+&!
' /ther Mfg. Cost ".%.. .'!$
• It .as o&ser1ed t%at'
• ?%ange in EVA .as positi1ely correlated .it% $a. Material, Po.er,
Employee as .ell as ot%er manufacturing cost &ut negati1ely correlated .it%
Interest ?ost.
• ,%e correlation .as not statistically significant as o&ser1ed &y ?%i "-uare
,est.
:.7eCt .e studied relations%ip of Gro.t% parameters and EVA .$esults are as
under'
Post Merger Performance of Gro.t% Parameters
Sr.N
o.
0rowth Parameters 1a2ora3le 4nfa2ora3le otal
! 0rowth in Net Sales ). %) $!
5 &#.*67 5*.)67
# 0rowth in Net
8orth
)+ %' $!
5.+.$67 5!$.'67
) 0rowth in otal
Assets
)+ %' $!
5.+.$67 5!$.'67
$ 0rowth in Capital
Emplo(ed
)+ %' $!
5.+.$67 5!$.67
:.
ost Merger Performance $elations%ip of Gro.t% parameters .it% EVASr.N
o
0rowth
Parameter
1a2. EVA 1a2 EVA 4nfa2
EVA
4nfa2
EVA
otal
1a2
0rowth
4nfa2
0rowth
1a2
0rowth
4nfa2
0rowth
! 0rowth in
Net Sales
#' ! !# # $!
5&'.)67 5).*67 5.+.*67 5!$.)67
# 0rowth in
Net worth
#) $ !# # $!
5.+.#67 5!$..67 5.+..67 5!$.#67
) 0rowth in
otal Assets
#$ ) !! ) $!
5.&67 5!!67 5*..'67 5#!.$67
Impact of Mergers on Post Merger Economic Value
Addition
12
$ 0rowth in
Capital
Emplo(ed
## + !) ! $!
5.!.+67 5!..+67 5&)67 5*67
:.@ Post Merger Performance' ?orrelation of Gro.t% Parameters .it% EVA # ?%i
"-uare ,est
Sr.N
o.
0rowth Parameter Correlation with
EVA
Chi Square est
! 0rowth in Net Sales ".!$$ .)+*
# 0rowth in Net 8orth ,.%'. .''#
) 0rowth in otal Assets ".%*# .'$'
$ 0rowth in Capital
Emplo(ed
,.#%. .!.#
• It .as o&ser1ed t%at'
• ?%ange in EVA .as positi1ely correlated to Gro.t% in et "ales and ,otal
Assets &ut it .as negati1ely correlated .it% ot%er gro.t% parameters suc% as
et .ort% and capital employed.
• In ot%er .ords, for impro1ing EVA, one must impro1e et "ales and
In1estment in ,otal assets.
:.<eCt, .e studied Profita&ility parameters and t%eir relations%ip .it% EVA'
Post Merger Performance' Profita&ility Parameters
Sr.N
o.
Pro9ta3ilit(
Parameters
1a2ora3le 4nfa2ora3le otal
! PA to Net Sales )% !! $!
5*).#67 5#'..67
# PA to Net 8orth #* !$ $!
5'+.&67 5)$.!67
) PA to otal Assets #' !+ $!
5').$67 5)'.'67
$ PA to Capital
Emplo(ed
)+ %' $!
5.+.$67 5!).'67
Impact of Mergers on Post Merger Economic Value
Addition
13
:.> Post Merger Performance' $elations%ip of Profita&ility Parameters .it% EVA
Sr.N
o
Pro9ta3ilit(
Parameter
1a2 EVA 1a2 EVA 4nfa2
EVA
4nfa2
EVA
otal
1a2
Return
4n 1a2
Return
1a2
Return
4nfa2
Return
! PA to Net
Sales
!& %. !! ) $!
5*%.$67 5#&.'67 5*..'67 5#!.$67
# PA to Net
8orth
!* !% !% $ $!
5'#.&67 5)*.)67 5*!.+67 5#..+67
) PA to otal
Assets
!. & . ' $!
5''.*67 5)).)67 5+*.#7 5$#..67
$ PA to
Capital
Emplo(ed
#) $ !# # $!
5.+.#67 5!$..67 5.+.*67 5!$.)67
:.; Post Merger Performance' Profita&ility Parameters and ?orrelation .it% EVA8
?%i "-uare ,est
Sr.N
o.
Pro9ta3ilit(
Parameter
Correlation
with EVA
Chi Square
est
! PA to Net Sales ,.%') .'..
# PA to Net 8orth ,.!.. .##.
) PA to otal Assets ,.%#) ...+
$ PA to Capital
Emplo(ed
,.%'. .''#
• It .as o&ser1ed t%at'
• ?%ange in EVA .as negati1ely correlated .it% all t%e return parameters, ie,
PA, to et "ales, PA, to et )ort%, PA, to ,otal Assets and PA, to ?apital
Employed.
• )%ile eac% of t%ese return parameters .ere positi1ely correlated .it% eac%
ot%er &ut .%en it came to EVA, all t%ese parameters 2 PA, to et "ales , PA,
Impact of Mergers on Post Merger Economic Value
Addition
14
to et )ort%, PA, to ,otal assets and PA, to on ?apital employed3 were
negati$e- correated to change in EV!'
• .ence) to impro$e EV!) it woud be appropriate to concentrate on growth
parameters particularly, et "ales and ,otal Assets &ut not on parameters of
returns .
:.*= o. out of +< cases in .%ic% EVA %as impro1ed association of cases .%ere et
"ales and ,otal Assets %a1e increased in num&er of cases as under '
4r' Ao ;articuars Ao of fa$orabe
cases
Tota Ao of
6ases Bhere
EV! impro$ed
+
1' Increase in Aet
4aes
associated with
increase in
EV!
2* 2( 9*
2' Increase in
Tota !ssets
associated with
Increase in
EV!
24 2( @9
• It was therefore) estabished that impro$ement in EV! was a function of growth in
4aes and growth in Tota !ssets' This pro$ed 1rowth aspect of our main
h-pothesis that /ergers and !c%uisitions as corporate strateg- impro$e growth'
5ut our h-pothesis that post merger EV! impro$ed profitabiit- was not
estabished) when compared to its pre /9! independent $aues) using EV! as
we as ratio ana-sis as -ard stick of measuring post merger performance'
• 4econd h-pothesis that ;ost /erger EV! impro$ed on account of efficienc-
achie$ed b- economies of scae measured b- $arious expense ratios was not
estabished'
• The cause and effect reationship between EV! and $arious expenses were
statistica- not significant'
Impact of Mergers on Post Merger Economic Value
Addition
15
• Third h-potheses that ;ost /erger EV! impro$ed as a function of growth
indicated b- 1rowth in Aet 4aes) 1rowth in Aet Borth ) 1rowth in Tota !ssets
and 1rowth in 6apita empo-ed was part- estabished '
• There was positi$e correation between 1rowth in EV! and 1rowth in Aet 4aes
as we as Tota !ssets'
• 5ut 1rowth in EV! was negati$e- correated with 1rowth in Aet worth as we
as 1rowth in capita empo-ed'
@. ,%e researc% findings also 1alidated t%e findings of Mc(insey.
• In /c:inse- Guarter- 2001) Aumber 4 Issue) "/c:inse-%uarter-'com# !uthors
/athias /' 5ekier) !nna <'5ogardius and Tim 7dham) in their !rtice) H Bh-
mergers fai I point out that re$enue deser$es more attention in mergersJ indeed)
a faiure to focus on this important factor ma- expain wh- so man- mergers don&t
pa- off' Too man- companies ose their re$enue momentum as the- concentrate
on cost s-nergies or fai to focus on post merger growth in a s-stematic manner'
Ket in the end) hated growth hurts the market performance of a compan- far more
than does a faiure to nai costs' 4ome baance ma- ha$e to be restored' The-
examined more than 1*0 ac%uisitions b- 1?( pubic isted companies across 11
industr- sectors in 199? and 199* ) on- 12 percent of these companies managed
to acceerate their growth significant- o$er the next three -earsL' 4uccess is
determined abo$e a b- the abiit- to protect re$enue and to generate growth 2ust
after a merger' Those ac%uirers that get this baance wrong) punging headong
into cost sa$ings- ma- soon see their peers outstrip them in growth'
*'1 ,%eoretical support in fa1or of t%e researc% findings ' "ales MaCimisation
model of )illiam Boumol '
• The assumption that that the firm woud maximise profits or $aue of the firm b-
mergers and ac%uisitions b- controing or reducing expenses' This assumption
was critici3ed as being too narrow and unreaistic' In its pace) broader theories of
the firm were proposed'
• The most prominent among these was the saes maximi3ation mode proposed
b-Biiam 5aumo) which postuated that managers of /odern 6orporation seek
to maximi3e saes' 5aumo argued that a arger firms fet more secure) and were
abe to get better deas in the purchase of inputs ) ower rates in borrowing mone-)
and better image with consumers) empo-ees) and suppiers'
• Durthermore) some ear- empirica studies found that a strong correation existed
between executi$es& saaries and saes) but not between saes and profits' The
saes maximi3ation mode was particuar- ree$ant to this research findings that
EV! of combined firms impro$ed with increase in saes as we as tota assets'
.owe$er) increase profitabiit- was not at the same rate' .ence) 5aumo&s saes
maximi3ation mode supported research findings that /ergers and ac%uisitions
resut in growth of EV!) Aet 4aes and tota assets but did not resut in increase in
profitabiit-'
Impact of Mergers on Post Merger Economic Value
Addition
16
@.*.+ )illiam BaumolDs "ales MaCimi9ation Model'
Impact of Mergers on Post Merger Economic Value
Addition
17
In the figure gi$en abo$e ) T0 refers to the tota re$enue) T6 to the tota costs) and M to
the tota profits of the firm' M NT0 ET6 and is maximi3ed at O90 at G N 40 units where
the positi$e difference between T0 and T6 is greatest "i'e') where the T0 and T6 cur$es
are parae#' 7n the other hand) T0 is maximum at O2?0 where GN?0) at which the sope
of the T0 cur$e or /0 is 3ero and MNO(0 "see the figure#' If the firm had to earn a profit
of at east O(0 to satisf- the minimum profit constraint) the firm woud produce ?0 units
of output and maximi3e T0 at O2?0 with MN(0' The same woud be true as ong as the
minimum profit re%uirement of the firm was e%ua to or smaer than O(0'
Bith a minimum profit re%uirement between O(0 and O90) howe$er) the profit constraint
woud be binding' Dor exampe) to earn a profit of at east O@0) the firm woud ha$e to
produce an output of about 4('?0 units "see figure#' Dina-) if the minimum profit
re%uirement were higher than O90) a that the firm coud do woud be to produce GN40
and maximi3e M at O90 with T0 NO240' In other words firm woud go for increase the
re$enue e$en at ess than maximum profit'
@.5 ?ontri&ution of t%e $esearc%'
*','1 The research cear- estabished that impro$ement in EV! was function of growth
in 4aes and growth in Tota !ssets as we found positi$e correation between 1rowth in
EV! and 1rowth in Aet 4aes as we as Tota !ssets'
*','2 It was further emphasi3ed that as expained 5aumo&s 4aes maximi3ation mode)
/9! ha$e resuted into growth in the form of EV!) Tota 4aes and Tota !ssets
but not in increase in profitabiit-'
*'2', The research findings were supported b- research stud- b- /c:inse- 9 6o as we
as 4aes maximi3ation mode of Biiam 5oumo as expained earier'
*','4 The research aid down the foowing guideines for those managing /9!
transactions =
a# ;ursue goas of growth in saes and in$estment to impro$e sharehoder $aue
or EV!
b# Too much concentration on cost reduction " efficienc- ratios#) ma- resut in
oss of re$enue and conse%uent- oss in EV!'
< ' Future scope for researc% '
/ergers and !c%uisitions as corporate strateg-) ha$e muti-dementiona aspects open for
research' e examined on- Economic $aue addition) cuase and effect reationship with
efficienc- ratios) profitabiit- and growth parameters' .owe$er) foowing areas can be
taken up for further research=
i# 6ases of cross border ac%uisitions=
Impact of Mergers on Post Merger Economic Value
Addition
18
a# Inbound= Bhere foreign companies take o$er Indian companies'
b# 7utbound= Bhere Indian companies ac%uire foreign companies'
ii# Impro$ement in $aue of companies undergoing /9! deas on the
basis of s-nerg- reai3ation using discounted cash fow techni%ues'
iii# 4ignificance of taxation benefits a$aiabe to companies incuding
transfer pricing issues in /9! transactions and conse%uent impact on
sharehoders& $aue'
i$# /arket Vaue !ddition "/V!# meaning increase in market
capitai3ation o$er book $aue of capita) on account of /9!
transactions as against EV! examined b- us'
$# 7rganisation structura issues and .uman resource issues in
companies under /9! transactions'
$i# Cega 6ompiance issues in domestic and cross border transactions'
The researchers wi awa-s find the sub2ect of /9! interesting enough) to examine the
abo$e topics and associated issues in future'
$E$E$E?E"'
)%ile .e %a1e gone t%roug% +*7 researc% articles, around 55 &oo4s and scaning of
1arious sites on t%e internet, .e %a1e presented &elo. select list of references'
Author itle of Research
Paper
Pu3lication details
1. K. Ramakrishnan
(2008)
Long Term Post erger
Per!orman"e o! #rms in
$n%ia
&ika'(a ) *(ri'+,-ne 2008
&o'.33 .o.2
#. Ra/ K-mar ( 2009) Post erger 0or(orate
Per!orman1e2 *n $n%ian
Pers(e1ti"e.
anagement Resear1h
.e3s &o'-me 32 .o.3
4mera'%
). 5. Ra/esh K-mar
an% Pra6ina Ra/i6
(2007)
0hara1teristi1s o!
erging 7irms in $n%ia 2
*n 4m(iri1a'
48amination
&ika'(a &o'.32 ,an-ar9 :
ar1h 2007
$. ano/ *nan% an%
,agan%ee( ;ingh
(2008)
$m(a1t o! erger
*nno-n1ements on
;hareho'%ers< =ea'th 2
4"i%en1e !rom $n%ian
Pri"ate ;40T>R 6anks
&ika'(a &o'. 33 ,an-ar9
ar1h 2008
5. R. ;rini"asan an%
5i6ek Prasa%
?o3 %o #rms
merge@a1A-ire 2 *n
$$5 anagement
Re"ie3 2 Be1em6er
Impact of Mergers on Post Merger Economic Value
Addition
19
ishra (2007) *na'9sis o! strategi1
$ntent in re1ent a1ti"it9
among $n%ian 7irms
2007
6. ;atish R. an% Ra-
;.;. (2009)
*3areness an%
*%a(ta6i'it9 o!
41omomi1 &a'-e *%%ition
$0; ,o-rna' o! $n%ian
anagement Be1em6er
2009
7. ,ansen .0. an%
Ri1har% R-6a1k
(1983)
The arket !o 0or(orate
0ontro'
,o-rna' o! 7inan1ia'
41onomi1s) &o'. 11) 5+50
8. R. 5r-ner (2004) =here C* Pa9s an%
3here it stra9s
,o-rna' o! *(('ie%
0or(orate 7inan1e 2004
&o'. 16 .o.4.
9. *sA-ith Pa-')
Ro6ert 7
5r-ner an% Ba"i%
= -''ins ,r) 1983)
The Dains to 5i%%ing
7irms !rom ergerE
,o-rna' o! 7inan1ia'
41onomi1s) &o' 11) ((
121+139.
10. 5'a1k 7) 0
,ensen an%
;1ho'es) 1972
The 0a(ita' *sset Pri1ing
o%e'2 ;ome 4m(iri1a'
TestsE)
;t-%ies in the Theor9 o!
0a(ita' arkets)
Praeger) .e3 Fork) &o'.
7) (( 79+124.
11. an%e'ker D)
1974)
ERisk an% Ret-rn2 The
0ase o! erging 7irms
,o-rna' o! 7inan1ia'
41onomi1s) &o' 1) ((
303+335.
12. Langeteig
Teren1e 0) 1978
*n *(('i1ation o! a Three
7a1tor Per!orman1e
$n%e8 to eas-re
;to1kho'%er Dains !rom
erger
,o-rna' o! 7inan1ia'
41onomi1s) &o' 6) ((
365+383.
13. oe''er ;ara
5) 7re%erik P
;1h'ingemann an%
Rene ;t-'G) 2004
7irm ;iGe an% The Dains
!rom *1A-isitions
,o-rna' o! 7inan1ia'
41onomi1s) &o' 73) ((
201+228
14. */a9 Pan%e9)
2001)
Takeo"er *nno-n1ement)
>(en >Hers an%
;hareho'%erEs Ret-rns in
Target 7irms
&ika'(a) &o' 26+3) (( 19+
29.
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20
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Impact of Mergers on Post Merger Economic Value
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? Maga9ines8 Dailies '
P
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2' 6hartered 4ecretar- Institute of 6ompan- 4ecretaries of India'
,' Economic Times
4' 5usiness 4tandard
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D. Internet "ites
1' ....mc4insey.com
2'www'mergersindia'com
,'www'rbi'org
4'www'icsi'edu
?'www'e$anomics'com
*'www'sebi'go$'in
('www'peope'stern'n-u'ed
u8adamodar'com
@'www'nithithdesai'in
9'www'egaera'in'
10'www'egaundits'com
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