Financial Growth Indicator of Merger and Acquisition in Indian Corporate Sector

Topics: Mergers and acquisitions, Merger integration, Demerger Pages: 21 (3202 words) Published: November 7, 2012

1.1 Introduction

1.2 Title of the Problem

1.3 Review of literature

1.4 Objectives of the Study
1.5 Data Collection

1.6 Selection of Samples

1.7 Period of the Study

1.8 Hypothesis of the Study

1.9 Tools of Analysis

(A) Ratio Analysis

(B) Statistical Techniques
• Average

• Index Number

• The Standard Deviation
• Student – T – Test

1.10 Significance of the Study

1.11 Outline of Chapter Plan

1.12 Limitations of the Study


1. INTRODUCTION :financial

Corporate restructuring has become a major component in the

and economic



over the world.


restructurings have raised important issues for business decisions as well as for

public formulation policy. Since 1991, Indian industries have been increasingly exposed to both domestic and international competition and competitiveness.

Hence, in recent times companies have started restructuring their operations around their core business activities through mergers and acquisitions.



It is true that dramatic events like mergers, acquisitions,

takeovers, restructuring and corporate controls occupy the Indian business

news papers almost daily. Further they have become central focus of public and corporate policy issues. Some assert that the activities of mergers and

acquisitions represent a new force in creativity and productivity. Some other

view it is blight in our economy. Regardless of these views, they do represent a

major trend in the economical environment. This is an area of potential good

as well as potential harm in corporate strategy including manufacturing

industry. Mergers take place due to various motives. There for an analysis has

to be made to compare the financial performance of pre and post merger of the firms. The title of the problem is as under:

“Financial Growth Indicator of Merger and Acquisition in
Indian Corporate Sector”



In this study an attempt has been made to briefly review the work

already undertaken and methodology employed. A brief review of selected studies has been presented as below:

(1) David C. Cheng (1989), in their paper ‘Financial determinants of Bank Takeovers’ found that several studies have examined the determinants of bank merger pricing. Those studies focus on the characteristics of the target and downplay the characteristics of acquirer. Their study found

that the purchase price is a negative function of the target’s capital to asset ratio. The only variable used in their model is the ratio of acquirer to target assets.

(2) An empirical study entitled ‘Takeovers as a strategy of turnaround’ by Ravi Sanker and Rao K.V. (1998) analysis the implications of takeovers from the financial point of view with the help of certain parameters like liquidity, leverage, profitability etc. They observed that a sick company is


takeover by a good management and makes serious attempts; it is possible to turnaround successfully.

Ruhani Ali and Gupta G S (1999) in their paper entitled ‘Motivation

examine the potential motives and effects of corporate takeovers in

and Outcomes of Malaysian takeovers: An international perspective’ Malaysia. The Mullar’s methodology, which involves the use accounting

measures like size, growth, profitability, risk and leverage is employed for the study to analyze the performance characteristics of takeover firms in the pre and post takeovers periods.

(4) Jay Kumar S. (1999) in his dissertation entitled, ‘Mergers and Acquisitions: An Evaluation Study’ examines the relative benefits expected by a corporate enterprise when they adopts mergers and


acquisitions as a strategy. The author studies the extent to which the security prices reacted to the announcement of merger.

(5) The working paper entitled, ‘An analysis...
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