• To analyze the effect of going global through merger and acquisition on investors and traders long term and short term earnings respectively • Impact on companies’ financials after acquisition or after being acquired • To find out enterprise value of the company by comparing it with the peer group and analyzing the value of the firm • To analyze the difference between prospected and actual returns in terms of % daily cumulative abnormal return of pre acquisition and post acquisition
Objective of the study
• To compare the closing price of 5 companies before and after post acquisition • To compare the key financial ratios of 5 companies before and after acquisition • To do valuation of one or two companies with the method enterprise value and compare the value with peer group and analyze in detail • To analyze detailed case study of 5 companies of Tata Group • To analyze percentage cumulative abnormal return of one month both before acquisition and after acquisition
• Exploratory Research
Scope of the study
• To do a relative analysis between BSE Sensex and the share price of the TATA Group of companies • Limited to 5 companies of TATA
• Limited to daily prices of stocks both before and after one month of acquisition
• Secondary Data
➢ Prowess software
➢ Internet sources
➢ Business Journals (ICFAI JOURNAL ON M & A)
Method of Analysis
➢ Regression Model
➢ Valuation (Enterprise value)
Limitations of the study
➢ The study is limited to five selected companies of TATA Group only ➢ The study is limited to analyze short term performance of the acquisition
To find the closing price of the company’s script on BSE and NSE and then calculate the percentage script return and to find the daily market return of SENSEX To find regression model between script return and market return by entering the excel formula. Once you enter the regression formula one chart is shown as above feed the data in the model we could find out the summary that we got, there are three things important for our research. They are shown here as, R Square, Alpha and beta. The explanation of the each of the terms and how to read that data is given below:
The R-squared value shows how reliable the dependent variable on independent variable is. It varies between 0 and 1. Generally R-square of more than 0.5 is considered to be good.
The ‘a’ is called the Y-intercept because its value is the point at which the regression line crosses the Y axis i.e. Vertical Axis. It is also called alpha.
Slope of the line (b):Beta
The ‘b’ is called the slope of the line. It represents how each unit change of the independent variable X changes the dependent variable Y. It is also known as Beta of script in comparison of market.
Steps to find out Abnormal Price Effect
The Expected return is calculated as follows:
The Expected Return is calculated by the formula (intercept + Slope of line X market return)
And from this find out cumulative abnormal return
The Enterprise Valuation is calculated as follows:
1. Total Shareholder’s Equity
We have calculated the Total Shareholder’s Equity by adding the Market Value of Equity, Preference Shares and the Minority Interest.
2. Net Debt
We have calculated the Net Debt by adding the Long Term Borrowing, Short Term Borrowing and Pension Provisions and then deducting the Excess Cash.
3. Enterprise Value
We have calculated the Enterprise Value by adding Net Debt and Total Shareholder’s Equity.
The Enterprise Value Multiples is calculated as follows:
1. Sales Multiple
The Sales Multiple is...