MERGERS AND ACQUISITIONS IN INDIA
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Abstract
From the past few decades, Mergers and Acquisitions (M&A) have dominated the
environment in which the companies operate. Whenever there is an announcement about
a merger, there is an excitement and expectation among the shareholders. This
expectation may or may not convert into an abnormal return. It is useful to have some
kind of research activity on the performance of M&A, as both bidders and target firms
will gain from it. The results have revealed that on average, the returns to the target
companies are positive and that they gain from mergers. However, the bidder returns may
be zero or negative, but it turns out be a different story in the long run.
My dissertation identifies the performance of 86 Mergers and Acquisitions in India and
the primary objective for this study will be to examine the change in firms share prices
and the impact of mergers and acquisition on the returns to the shareholders of both
bidder and target firms surrounding the announcement days. It then attempts to verify the
significance of the same in the short-term. Whether the abnormal returns are significant
to the announcement of the merger, determines the success of the merger in the shortterm.
The research also estimates the beta coefficient for 86 bidder and target firms,
during the announcement period (10 days before the announcement day and 19 days after
the announcement days) and before the announcement period (ranging from150 days to
11 days before announcement). I have also shown some statistical test to see if the
changes in the beta coefficient and required returns are significant or not Further, the
research is based on types of mergers factor (Horizontal and non-horizontal) which might
be closely related and give different returns to the target shareholders and bidder
shareholders on the days surrounding the announcement.
The event study methodology has been employed to assess the performance of both
bidder and target firms surrounding the announcement days. The results of the event
study reveal that on an average, the bidder companies experience a negative cumulative
average abnormal returns (CAAR) of -1.03% and the target companies experience a
positive CAAR of 12.074