Understanding the Strategy of M&As in the Globalized Perspective: Experiences from Indian IT Industry

Abstract

Liberalization with globalization process in India and specific policies adopted by Indian and state governments for information technology (IT) sector have led to substantial growth in this sector. On the one hand, foreign companies invested hugely in India for setting up their subsidiaries, joint ventures and acquisitions; on the other, Indian firms also aggressively went for organic and inorganic growth within and outside India. IT sector having some unique characteristics experienced one of the topmost volume of mergers and acquisitions (M&As) deals among all sectors. This study attempts to explore the trend in M&As undertaken by the companies of IT sector headquartered in India for 2000–2015 in rapidly globalized world. The study found there were more international deals than the domestic deals with the USA alone accounting for 56% of international deals. The results show that trend across the time is not unidirectional. Recession (2008–2009) significantly affected the number of deals and companies involved in M&As. The impact on international deals found to be more severe than on domestic deals reflecting the resilience of the Indian economy vis-a-vis international market. We also analysed trend and pattern of motives of M&As in 2000–2015 by Indian IT firms using content analysis. We found that the most dominating motive for both domestic and cross-border M&As was ‘efficiency seeking’ followed by ‘market seeking’. However, trend was not consistent over the period of time and varied drastically for global market vis-a-vis domestic market.