Technical and performance analysis by revisiting Altman’s Z-score over Mindtree and L&T post-merger synergy predictions

Abstract

Mergers and acquisitions are an integral part of corporate finance and strategy. One of the most noteworthy mergers to have happened in recent times is the L&T Infotech Ltd. and Mindtree Ltd. merger. It was the first hostile takeover/acquisition of an IT company in Indian corporate history when Larsen & Toubro Limited, an engineering and construction conglomerate with a yearly turnover exceeding USD21 billion, completed the acquisition of Mindtree Limited by acquiring 60 percent of the stake in a phased manner until June 2019. In this research, the researcher have attempted to assess how successful this merger is, using technical analysis and Altman’s Z-score. In-depth analysis using the stock prices, and indicators such as relative strength index (RSI), moving average convergence/divergence (MACD), and Bollinger Bands have been deployed to get a better understanding of how both the companies reacted to certain market news throughout the past 5 years from 2017 to 2022. The Altman’s Z-score model application to test the financial distress of Indian companies reveals that comparatively healthy companies exhibit high Z-scores, indicating their financial soundness, while unhealthy firms exhibit low Z-scores, proving they are distressed (Korath & Nayak, 2022). The beta analysis for both companies has also been conducted to get a fair idea of how sensitive each company is to market volatility. The research has also attempted to gauge the various challenges that the newly merged company may face post the merger.