Acquirer Companies Research Articles

Impact of Mergers on Corporate Performance in India

Merger is one of the most common forms used in corporate restructuring across the globe. It is a strategy of inorganic growth. To obtain the optimum utilization of resources, it involves combination of all the competencies of two companies at a common platform. Even in India, thousands of companies follow this route for improving their organizational competitiveness. The present study deals in exploring the impact of domestic mergers on the financial performance of acquiring companies along with its impact on their shareholders’ wealth. When tested on the sample of 100 domestic mergers that took place from 1998–2008 in the Indian corporate sector we find no significant change in the post merger solvency and liquidity position of the acquirer companies from their pre merger position; however we observed a significant decline in the post merger profitability position of the acquirer companies from the pre merger profitability position. Finally the results of 61 days event window reveal the neutral overall market reaction to the merger activity.

Impact of Domestic and Cross-Border Acquisitions on Acquirer Shareholders’ Wealth: Empirical Evidence from Indian Corporate

The present paper compares the impact of domestic acquisitions and cross-border acquisitions on Indianacquirer shareholders’ wealth during 2003-2008. A segregated analysis has also been conducted to measure theimpact of stake/control acquired, based on a sample of acquisitions of 268 domestic and 255 target firms acrossborder. Further, this paper also analyses the short-run performance of percentage of stake/control acquired inboth type of acquisitions. The stake/control acquired is divided into two categories: (i) complete acquisition and(ii) partial/majority control acquisition. Event study methodology has been conducted to analyse the share priceperformance of Indian acquirers in short-term. The findings reveal that cross-border as well as domesticacquisitions enhance shareholders’ wealth of the acquirer company on the announcement. The results indicatethat cross-border acquisitions generate higher returns than domestic acquisitions. Nonetheless, the segregatedanalysis makes it evident that the shareholders of acquiring firms of complete cross-border acquisitions earnhigher abnormal returns (significant at 5 per cent). The abnormal returns are higher (though statisticallyinsignificant) for partial/majority control domestic acquisitions.

Revising Human Resource Strategy of Telsim after Have Been Acquired by Vodafone Group

When a local firm acquired by international company, the business, marketing, and human resource strategies will be revised accordingly to the company's global mission and goals. An acquisition is long term strategic process, so that it can be very costly and meantime a lots of difficulties are likely to appear. To overcome or minimize that difficulties and reduce the fix and labor cost, the companies in today, take advantages of the low cost hosting countries.In 2006, an acquisition of Telsim, who was number two mobile operator in Turkey, by Vodafone Group is a real example of history that approves the described statements above. As the structure of the company has changed, the strategies were revised relatively to the acquirer company. By expanding to the Turkey market, planning of human resource allocation was an extremely important to the Vodafone Group. Well known successor in the telecommunication industry ex-Vodafone Hungary boss, was appointed as first CEO of Vodafone Turkey. Afterwards, with wisely planning of the human resources, Vodafone Turkey was able to penetrate its global staffing strategy familiar with recruiting the right person, to right job in right place and time.As in this report, the traditional and modern methods of staffing will be explored beside expectations of international companies. Also, accordingly to the key findings, some critical suggestions will be given about revising the existing human resource strategy of firm after becoming an international brand. Roughly, the boundary of this assignment will be set as the process of staffing of the Vodafone Turkey via available tools of recruitment and selection, furthermore realistic examples of human capital plans and activities of the company.

Mergers and Acquisitions: A Strategic Tool for Restructuring in the Indian Telecom Sector

Reforms implemented by Telecom Regulatory Authority of India (TRAI) and Department of Telecommunications (DoT) post liberalization have drastically altered the business environment in the Indian telecom sector. This sector has emerged as a significant performer in the Indian services domain. The telecom companies have opted for Mergers and Acquisitions (M&A) as a strategic tool to enhance their performances. The objective of this study is to explore the overall strategic impact of M&A in the telecom industry. Previous research has shown that M&As in the telecom sectors of USA and Europe have not been fruitful. In this paper, we have concentrated on 10 M&A deals in the BSE-listed Indian telecom companies during a timeframe spanning from 2000 to 2010 to determine the effect of M&As in this sector and how they have brought about changes, if any, in the business performance of the acquirer companies. The focus of our study is to measure the change in performance levels of the companies, if any, in the post merger phase as compared to the pre merger ones through selected HR and financial parameters like HCROI (Human Capital Return on Investment), Compensation of employees to PAT ratio, EPS (Earnings Per Share) and market share. The findings indicate a mixed outcome.

New Challenges in Corporate Governance: Linking M&A and Social Responsibility

Answers to the questions of successful business models can be found in various strategies, amongst which mergers and acquisitions are considered as good growth strategies if implemented successfully. Corporate governance is seen as control mechanism dependent on the legal, regulatory, institutional and ethical environment of the community. Thus, authors emphasize that without considering the social aspects of business, leaders cannot lead the business in the right direction, but vice versa. Mergers and acquisitions (M&A’s), as one option for the company’s development could bring both positive, but as well as negative consequences for the target and the acquirer company. Corporate governance mechanisms, social responsibility and the importance of their adequate combination in the processes of merging and acquiring new company pervades in this paper. The paper brings insights on corporate social responsibility and the way its effective implementation supported by governance mechanisms can create a “snowball effect” of positive social changes. A special focus was put on M&A and its incremental value for the company’s development and growth. Important figures in the field of M&A are provided. A deep theoretical background is provided in the field arisen out of detailed literature review and practical experiences.

Cross-border Mergers and Acquisitions: A Performance Evaluation of Indian Acquiring Companies

In the past few years, Indian companies have participated in the worldwide trend of consolidation through cross-border mergers and acquisitions. This research study analyses the impact of such cross-border mergers and acquisitions on the financial performance of Indian acquiring companies. It also analyses, by applying a 29-day event window, the impact of the announcement of such decision on the acquiring companies’ shareholders’ wealth. By evaluating a sample of 15 firms in India that have experienced cross-border mergers and acquisitions from 2005 to 2008, we find that there has been no significant change in the financial position of these companies in the post-merger period as compared with the pre-merger period. Finally, results of the event window reveal that the shareholders of acquirer firms have witnessed a meagre positive cumulative average abnormal return during the post-merger announcement period.

Effect of Mergers on the Corporate Performance of Acquirer and Target Companies in India

Mergers and acquisition becomes the major force in the changing environment. The policy of liberalisation, decontrol and globalisation of the economy has exposed the corporate sector to domestic and global competition. To determine the success of a merger, it is to be ascertained if there is financial gain from mergers. The present study is limited to a sample of companies listed in BSE which underwent merger during the period of 2002-2005. It is proposed to compare the performance of the acquirer and target companies before and after the period of mergers by using ratio analysis and t-test during the study period of three years. The study found that the shareholders of the acquirer companies increased their financial performance after the merger event.

Impact of Mergers on Stock Return in Indian Stock Exchange with Reference to BSE

Mergers, acquisitions and corporate control have emerged as major forces in the modern financial and economic environment. The mergers and acquisitions in India have changed dramatically after the liberalization of Indian economy. To assess the impact of an “event” announcement of a tender offer, share repurchase, amalgamation, and so on, on the gains and stock value of the shareholders, it is necessary to measure the total holding period gains around the day of announcement of the transaction. Therefore, to determine the impact of a merger the share price, it is to be ascertained if there is a gain from mergers. The present study is limited to a sample of companies which underwent merger during the period of 2002-2005 in Indian stock exchange namely BSE. It is proposed to analyze the share price reaction of the acquirer and target companies from the same industry during 20 days before and after the day of merger by using CAR analysis and t-test. The study found that the shareholders of the acquirer companies reacted positively after the merger event.

Do acquirer company returns improve after a takeover? Empirical evidence for Australia

This article investigates the returns of acquirer companies in the wake of corporate takeovers. The study tests the post-takeover returns of Australian acquirer firms during the period 2001 to 2003, using two alternative benchmark models. We find evidence that acquirer companies outperform the market benchmark in the three years following the takeover. We also find that takeovers improve the share price performance of such companies relative to their pre-takeover history.

UK Takeovers and Acquiring Company Wealth Changes: The Impact of Survivorship and Other Potential Selection Biases on Post-Outcome Performance

A number of studies of takeover activity, both in the UK and elsewhere, have documented a pattern of long-run negative post-bid returns to shareholders of acquiring companies. One possible interpretation of the phenomena is that it represents a delayed market reaction to overpriced takeovers. An alternative explanation is that the phenomena is illusory and caused by methodological errors in the identification of long-run returns. These errors may arise through choice of inappropriate control models or through the introduction of some element of bias into the chosen sample, including the use of inappropriate tests of statistical significance. Potential sources of bias include survivorship and prior performance bias and the aggregation and testing of non-normal returns' distributions. In the current paper we demonstrate that the pattern of long-run negative returns to acquirers in UK acquisitions over the period 1977-1990 is not a function of survivorship bias. Nor do benchmark controls using both portfolios and matched pairs, with matching on book-to-market and size, provide results inconsistent with long-run negative wealth effects to shareholders of acquiring firms. However the application of test statistics that reflect the non-normal properties of distributions of long-run returns do reduce the significance of results based on parametric statistics. Our results also confirm that a number of characteristics of the acquiring firm can explain some of the cross-section distribution of wealth changes. In particular cash-financed acquisitions consistently outperform acquirers who rely on a method of financing based on equity. Cash-financed acquirers do not experience significant wealth changes when measured over a five-year post-acquisition period. We are unable to conclude that the negative wealth effects experienced by equity-financed acquirers is associated with long-run returns reversal, as tests that use benchmarks of companies matched on the basis of prior performance do not materially alter the pattern of negative long-run wealth losses. Large acquirers also suffer less-negative wealth effects than their smaller counterparts. In addition we also find that regular acquirers suffer no significant wealth losses, irrespective of the control model adopted, and consistently outperform single acquirers. This last finding does suggest that management do at least tend to learn from previous experience. In multiple regression tests, coefficients representing method of financing and experience of acquirers are the only variables that are significant. We find no evidence on any additional 'glamour versus value' effect after controlling for book-to-market and size.

The take-over objectives of South African acquiring companies

The take-over objectives of South African acquiring companies