Mergers and Acquisitions in Tea Industry

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MERGERS AND ACQUISITIONS IN TEA INDUSTRY: A CASE STUDY
A Dissertation submitted in partial fulfillment of the requirements for the Degree of Masters in Finance and Investment at the University of Nottingham September 2007.

BY SHASHANK AGARWAL
STUDENT ID: 4055919

ACKNOWLEDGEMENT

I would like to thank everyone who helped me in the compiling of my dissertation, from initial research to final documentation. I specially want to thank Ms. Kuasirinikan Nongnooch who

supervised this study and gave valuable feedback and advice throughout. Her assistance is greatly appreciated.

Further thanks to my parents and my family for their unlimited support during my study in U.K.

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ABSTRACT

This dissertation is aimed at finding motives and assessing the consequences of mergers and acquisitions, taking Tata Tea’s acquisition of Tetley into consideration. It overviews a vast amount of theoretical literature on mergers and acquisitions and presents empirical literature findings on company’s post-merger financial performance. Case study section of the dissertation considers the history of Tata Tea Ltd. for engaging in M&A activities and measures the consequences of the activity by applying accounting and empirical financial approaches. Quantitative data is obtained from both online and published resources. The findings from the study are: Mergers and acquisitions contribute to increase in net sales revenue. Their impact on market share can either be neutral or positive. Quantitative data is taken from company’s annual reports, business research companies’ archives and financial websites. The findings from the study are mergers and acquisition’s can either have a positive or negative impact on financial performance.

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CONTENTS 1. INTRODUCTION .................................................................... 6 1.1 BACKGROUND ON MERGERS AND ACQUISITIONS ..................................... 7 1.1.1. Definition of Mergers and Acquisitions ........................................................... 7 1.1.2. Types of Mergers and Acquisitions .................................................................. 9

2. AIM OF THE STUDY ............................................................. 12 2.1. RESEARCH APPROACHES................................................................................ 12 2.2. PLAN ..................................................................................................................... 13

3. LITERATURE REVIEW ......................................................... 14 3.1. THEORETICAL LITERATURE: THE REASONS AND MOTIVES BEHIND MERGERS AND ACQUISITION ............................................................................... 14 3.2. THEORETICAL LITERATURE: SUCCESS AND FAILURES OF MERGERS AND ACQUISITION ................................................................................................... 20 3.3. THEORETICAL LITERATURE: CROSS-BORDER MERGERS & ACQUSITIONS ............................................................................................................ 25

4. EMPIRICAL EVIDENCE: CONSEQUENCES OF ENGAGING IN MERGER AND ACQUISITION ...................... 27 4.1. EVENT STUDY .................................................................................................... 27 4.2. ACCOUNTING STUDY ....................................................................................... 30 4.3. SURVEY OF EXECUTIVES ................................................................................ 34 4.4. CLINICAL STUDY............................................................................................... 36

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5. RESEARCH METHODOLOGY ............................................. 39 5.1. ACCOUNTING METHODOLOGY: THE BENCHMARK APPROACH .......... 39

6. CASE STUDY .......................................................................... 42 6.1. AN OVERVIEW OF TATA TEA LIMITED ....................................................... 42...
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