Posterior Evaluation of Cross-Border Mergers & Acquisitions: Financial Review of Three Select Cases from Automobile, Energy & IT Sectors

Abstract:     
The recent growth of Cross-Border Mergers and Acquisitions in the international spectrum is phenomenal. Evidence from UNCTAD on cross-border M&As corroborates the above fact. There are multiple reasons that motivate corporations to engage in cross-border M&As. The reasons vary from resorting to M&As as means for survival to viewing it as potent tool to enter new geographical markets. Whatever be the reason, M&As require careful study to gauge their role in the overall dynamics of the world economy. While the magnitude of M&As is undoubtedly high in developed economies, even emerging economies like India and China have witnessed an unprecedented leap in M&A activity in terms of volume and number of deals in recent years. This has partly to do with the new wave of economic liberalization and more friendly approach towards foreign corporations exhibited by the governments of these nations. The present paper seeks to analyze three interesting recent cases of cross-border mergers and acquisitions involving threelarge Indian corporations and recording differing impacts on shareholder wealth. Here, the authors use a new approach proposed by them to capture the financial impacts of M&As on shareholder wealth, instead of event-study methodology, due to its limitations discussed in this paper.

The paper has been divided into seven sections. Section I contains Introduction while Section II highlights the Motivation for Merger. Section III introduces the Objective of the study. Section IV briefly introduces a new methodology proposed by the authors in an earlier paper and being used in this paper to study distinct impacts of merger process on shareholder wealth of three major Indian corporations. Section V presents the Analysis of Data of three major corporations and the interpretation of the results. Sections VI and VII briefly acknowledge the limitations of the study and Conclude the findings in the paper respectively.

Number of Pages in PDF File: 24

Keywords: Mergers & Acquisitions, Shareholder Wealth, Econometric Approach for Posterior Evaluation

JEL Classification: C01, C12, G34

working papers series