M&A and its Impact on Shareholder wealth and Business Valuation (Indian Perspective)

A Dissertation Proposal for

Executive Management Programme

by

Shronik Soni
09EMP1-55

Under the guidance of

Shri Ashwani Lal Designation: VP, Business Development Organization: Aricent Group

Dr. Ashutosh Dash Designation: Professor (Finance) MDI, Gurgaon

Management Development Institute

Gurgaon 122 007-02
Date: 29-Jun-11

Table of Contents

1.

Introduction.......................................................................................................................................... 3 1.1 Problem Statement .................................................................................................................... 3

2.

Research Problem ............................................................................................................................. 3 2.1 2.2 2.3 2.4 Aim of the Research .................................................................................................................. 3 Objective of the Research......................................................................................................... 3 Hypothesis of the Research...................................................................................................... 4 Motivation of the Research ....................................................................................................... 4

3. 4.

Research Design ................................................................................................................................ 4 Time frame .......................................................................................................................................... 4

1. Introduction
This dissertation is a study on objectives of Mergers and Acquisitions and why do organizations undertake the organic mode of expansion. The main focus is on studying the effects on share holders wealth and the total business valuation before and after the merger. M&As are strategically planned transactions between two or more companies in which the target and the acquiring firm jointly create a new entity to gain competitive advantage, broadening the portfolio to reduce business risk, for entering new markets and capitalizing on economies of scale. This report reviews existing theoretical and empirical literature on the pre and post merger performance in terms of productivity, shareholder wealth creation and analysis of financial data for business valuation.

1.1 Problem Statement

Mergers and Acquisitions as an external growth strategy has gained spurt because of increased deregulation, privatization, globalization and liberalization adopted by several countries including India. M&A have become an important medium to expand portfolios, enter new markets, and acquire technology, gain access to achieve research and development and enable the organization to compete at a global scale. This dissertation report evaluates the performance of mergers and acquisitions in terms of creating share holders wealth and improving business valuation in Indian perspective and evaluates the success rate based on financial analysis pre and post merger or acquisition.

2. Research Problem
2.1 Aim of the Research
The main aim of the research is to analyze the impact of mergers and acquisitions on the operating performance and the business valuation of the firm in an Indian perspective.

2.2 Objective of the Research

a.) To critically analyze the impact of mergers and acquisitions on the operating performance of a firm in terms of business valuation in Indian context. b.) To strategically evaluate the impact of M&A on shareholders wealth post merger and acquisition.

2.3 Hypothesis of the Research

H1: Mergers and acquisitions increase the shareholders wealth by improving the operating performance of the firm in terms of business valuation.

2.4 Motivation of the Research

The researcher originally belongs to an IT background but possesses keen interest in finance. While taking a stride in finance and strategy, as a student I have learnt about various acquisitions and mergers taking place around the world using Mergers & Acquisitions and Strategic Alliances and Joint Ventures as subject medium. Even my own organization was acquired twice, leading to a change in working culture and environment led to an increased curiosity about mergers and acquisitions and its post effects on the stakeholders of the resultant entity.

3. Research Design
The study examines the impact of M&A on Corporate performance and Shareholders wealth. Several acquiring companies from India are taken as sample for the period 2000 to 2011 and source of data is CMIE Prowess used from MDI library. The literature sources used and cited are primarily academic articles published in journals. This choice has been made to ensure the use of well-documented theories and frameworks that have been through a critical review process before being release to the public. Also, if the study is carried out in the line with prior empirical investigation in the field of event studies of M&A announcements, it would make comparison more reliable and valid. It is the ambition to select and use a variety of sources in the analysis as we proceed to obtain different perspectives on the relevant issues discussed in the thesis. Various Financial and statistical techniques are used to evaluate the firms performance post merger or acquisition.

4. Time frame
The dissertation report will constitute the following sections with the given timelines Date (Start) 1-Jul-11 8-Jul-11 15-Jul-11 15-Aug-11 1-Sep-11 15-Sep-11 23-Sep-11 24-Sep-11

Sr#. 1 2 3 4 5 6 7 8

Item Introduction Literature Survey Research Methodology Financial Analysis Pre-Post M&A Comparison Conclusion References Appendix

Duration 1-week 2-weeks 6-weeks 4-weeks 2 weeks 1-week 1-week 1-week