CROSS BORDER ACQUISITION OF JLR: A BOON OR PAIN FOR TATA MOTORS

Abstract

ABSTRACT The trend of mergers and acquisitions (M&A) has seen a surge during the past decades. Indian companies have also adopted the strategy of mergers and acquisitions for their expansion & growth. It facilitates the corporations in gaining competitive advantages and increase in their shareholder’s wealth. The study till date analysed both inbound and outbound deals and M&A’s positive or adverse impact on a company. Studies conducted in the past showed that the rate of unsuccessful mergers and acquisitions were more in number than the successful ones. This paper attempts to evaluate the effect of Earnings before Interest and Tax (EBIT) of Jaguar & Land Rover (JLR) on share prices of Tata Motors. Tata Motors is an Indian conglomerate automotive company of Tata Sons based in India and also the parent of JLR. Tata Motors has acquired JLR, a British multinational automotive company, in 2008 for $2.3bn. This study has taken price movement of a share of Tata Motors on NSE for the year 2008 to 2018 and correlated it with the corresponding years’ EBIT of JLR which significantly contributes to profits of Tata Motors in the form of dividends. Thirteen weeks price moving an average of Tata Motors on NSE is taken as one set of variable, and quarterly EBIT of JLR is taken on another. The study has also taken into consideration various macroeconomic factors that would have had an impact on the performance of JLR and in turn on the prices of Tata motors. This study found that the EBIT of JLR is positively correlated with the share price of Tata Motors. Keywords Acquisition, Earning Before Interest and Tax, Share Price, Correlation