Mergers Creating Value to Shareholders Wealth

8/7/2019 Mergers Creating Value to Shareholders Wealth

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Mergers Creating Value To Shareholders Wealth

M.P BIRLA INSTITUTE OF MANAGEMENT, BANGALORE 1

ADissertationReportOn

MERSGERSCREATINGVALUETO

SHAREHOLDERS

WEALTH

Submittedinpartialfulfillmentofrequirementfortheawardof

thedegreeofMasterofBusinessAdministrationofBangalore

University

ByHARSHITHAJILAK

Reg.No:05XQCM6029

UndertheGuidanceandSupervisionOf

Dr.NAGESH.SMALAVALLI

M.P.BIRLAINSTITUTEOFMANAGEMENTAssociateBharathiyaVidyaBhavan

#43,RaceCourseRoad,BANGALORE560001

2005-2007


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DECLARATION

I hereby declare that this dissertation entitled

MERGERS CREATING VALUE TO THE SHAREHOLDERS

WEALTHis the result of my own research work carried

out under the guidance and supervision ofDr. Nagesh S

Malavalli, Principal M P Birla Institute of Management

Bangalore.

I also declare that this dissertation has not been

submitted earlier to any Institute/ organization for the

award of any degree or diploma.

Place: Bangalore

Date: Harshith Ajila K


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CERTIFICATE

I hereby certify that this dissertation entitled


WEALTH is the research carried out by MR. HARSHITH

AJILA K bearing the registration No 05XQCM6029 under

the guidance of Dr. Nagesh S Malavalli, Principal M P

Birla Institute of Management Bangalore.

Place: Bangalore

Date:

Dr N.S.MALAVALLI

Principal


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GUIDE CERTIFICATE

I hereby certify that this dissertation entitled


WEALTH is the result of research work carried out by

MR. HARSHITH AJILA K bearing the registration No.

05XQCM6029under my guidance and supervision.

Place: Bangalore

Date: Dr N.S. MALAVALLI

Principal


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ACKNOWLEDGEMENT

I whole-heartedly extend my deep and sincere

gratitude to Dr. Nagesh S Malavalli, Principal M.P.Birla

Institute of Management, Bangalore for his constant

encouragement and guidance during the course of the

research Study.

I would like to thank Dr. T.V. Narasimha Rao

Faculty for Finance, M. P. Birla Institute of

Management for his full support and timely guidance

while conducting the research.

I am also thankful to Prof. S. Santhanam, M. P.

Birla Institute of Management for sharing his

expertise in the field of statistics and guiding me in

completing the research.

I w ould also like to thank my Parents and all my

Friends who have helped me in completing this

project without any hassles and hiccups.

HARSHITH AJILA K


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Chapter ParticularsPageNo

1 Abstract 1

2 Introduction2.1 Background o f the

study 2

2.2 Introduction 6

2.3 Varieties of merger 9

2.4 Acquisitions 10

2.5 Valuation matter 11

2.6 Statement of the

problem 16

2.7 Objective of thestudy 16

3 Review of literature

3.1 L iterature review 17

4 Methodology

4.1 Methodology 20

4.2 Scope 20

4.3 Actual collection o f

data 20

4.4 Statistical toolsused 20

4.5 limitations 21

4.6 T test 21

5

Data analysis andinterpretation

5.1 Hypothesis 24

5.2 Presentation ofData 24

5.3 Interpretation 26

6 Conclusion

6.1 Conclusion 27

6.2 Suggestions for

further research 27

7 Annexure 28

8 8.1 Bibliography 45

8.2 References 46


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CHAPTER 1

1. ABSTRACT:

Theories hold that mergers and amalgamations have potential social benefits. They

generally involve improving the performance of incumbent management or achieving a

form of synergy. The apparent reason for companies to merge is to make profits larger

than the joint profits of the merging companies. This is an attempt to evaluate the impact

of Mergers on companies through a database of 32 Companies selected from Capitaline.

Companies during the year 2003-04 where selected for the study. Study was conducted

by collecting the monthly stock prices of the companies prior to merger and monthly

stock prices of the company post merger.

The study shows that companies can use merger as a tool not only to grow but also to

thwart competition. This study has shown that the synergy has worked in case of the

sample selected. Companies can use merger as a tool to grow, increase their market

share, to ward off competition, improve their performance etc.

Following study proves that the mergers have added value to the company and the

shareholders. Market capitalisation of the companies has increased after the merger,

which implies that shareholders have gained after the merger. The study has helped to

conclude that mergers can be used as an effective tool to improve the performance of the

company.


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CHAPTER 2

2.1 Background Of The Study

The (Indian) Companies Act, 1956 ("Companies Act") deals with mergers under the headof"amalgamations" and sets out the procedure and requirements for the same, which

have been dealt with in greater detail below. Apart from an amalgamation of Indian

companies, the Companies Act also envisages an amalgamation between an Indian

company and an "unregistered company" which may include a foreign company or a

branch of a foreign company. Mergers between branches of foreign companies in India

with Indian companies have been sanctioned in the past, pursuant to the Companies Act.

Mergers have to be sanctioned by the High Courts of the respective States in which the

companies being amalgamated are registered. The procedure for amalgamation has been

set out in a separate paragraph in this report.

Amalgamating two companies ordinarily requires around 6 months.

Amalgamations are also dealt with under the Income Tax Act, 1961 (the "Tax Act"),

which allows for certain exemptions and benefits, including waiver of capital gains tax.

To avail of these benefits however it is important that the said amalgamation satisfy the

preconditions laid down in the Tax Act, such as the condition that, shareholders of the

transferor company, who hold at least three-fourth of its paid up share capital must

become shareholders of the transferee company i.e., the surviving entity.

The Tax Act also defines a demerger, as a transfer pursuant to a scheme of arrangement

under the Companies Act (which involves shareholder / creditor consent and Court

sanction) by one company (the "Demerged Company") of one or more undertakings to

another company (the "Resulting Company") such that:

(i) All the property and liabilities of the undertaking/s in question are transferred to the

Resulting Company at the values appearing in the books of accounts of the Demerged

Company;


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(ii) The Resulting Company issues shares in itself to the shareholders of the de-merged

Company in consideration for the above transfer;

(iii) Shareholders holding not less than three-fourths in value of the shares in the de-

merged company become shareholders of the Resulting Company; and

(iv) The transfer of the undertaking/s is on a "going concern basis".

Acquisition of shares

An acquisition of shares could take place either by way of:

a) Subscription to fresh equity in a company; i.e de novo allotment, or

b) Purchase of existing equity in a company from another shareholder, i.e. a transfer

Under the Companies Act, companies have been classified into two main categories,

namely:

(i) Private companies - which enjoy a more "relaxed regime" and

(ii) Public companies - which are subject to greater controls.

The Companies Act was amended in December 2000 to include a private company which

is a subsidiary of a company which is not a private company, under the definition of a

public company. As a result even if a company has been duly incorporated as a private

company, it will lose its private company status if it were to become a subsidiary of a

public company at any subsequent point of time.

Pursuant to the Companies Act, a private company is required to have provisions in its

charter documents restricting transfers of its shares and restricting invitations to the

public for accepting deposits. It is common to find blanket provisions in the charter

documents of private companies giving its board of directors the power to refuse any

transfer of shares, if it deems fit, in its sole discretion.


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M.P BIRLA INSTITUTE OF MANAGEMENT, BANGALORE10

Shares in a public company, on the other hand, are freely transferable. The board of

directors of a public company can reject transfers only on limited grounds of "sufficient

cause" which has often been interpreted by the Courts to mean failure to comply with

legal requirements.

Acquisition of Assets

Acquisitions of movables are governed by the Sale of Goods Act, 1972 ("SGA"). The

Companies Act defines shares and debentures as movable property and lays down the

mechanism for their transfer. Acquisitions of immovable properties on the other hand, are

governed by the Transfer of Property Act, 1882.

These statutes deal with the numerous aspects of a transfer, such as pre-requisites for

valid transfers, rights and obligations of the seller and the acquirer, implied conditions

and warranties, point of transfer of title and risk in the assets.

Acquisitions of intangible property such as copyrights, patents and trademarks are

governed by the specific statutes dealing with these intellectual property rights.

Acquisition of the same has to take place pursuant to a written document, and in respect

of registered trademarks and patents, the transfer is effective only upon registration with

the concerned registration authority.

Pursuant to the Trademarks Act, 1999, the person entered in the Register of Trademarks

as the proprietor of a registered trademark has the right to assign the trademark. Both

registered and unregistered trademarks can be assigned with or without the goodwill of

the business concerned. However where the transfer of a trademark is without goodwill,

certain additional advertising requirements have to be complied with, in accordance with

the directions of the Registrar of Trademarks. The Trademarks Act, 1999 also restricts

certain assignments which may result in the creation of multiple exclusive rights in

respect of the use of the trademarks in relation to the same (or same description of) goods

and services or in relation to goods or services or description of goods and services,

which are associated with each other.

Transaction costs play an important role in the structuring of the mode of acquisition of

assets and documentation of asset transfers. These costs include stamp duty and taxes


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such as capital gains and sales tax etc. These have been dealt with in greater detail, under

the head of "Taxation Issues".

Joint Ventures

Where a wholly owned entity is not the preferred option for an investor, a business may

be undertaken as a joint venture. From the perspective of a foreign entity, in certain

sectors where there are foreign equity ceilings, a joint venture with an Indian entity often

becomes necessary so as to satisfy the conditions of balance shareholding over and above

the foreign investment ceiling. In other sectors, from a new entrant's perspective, factors

such as the local partner's pre-established marketing and distribution chain, human

resource availability, etc play an important role in opting for a joint venture. In large

projects involving a prolonged and often arduous developmental phase, the acquisition of

a stake after the commissioning of the project helps avoid numerous development related

problems and risks.

However, before considering this route it is advisable to examine whether the foreign

participant intends to set up an independent entity in India engaged in a similar or allied

field at any point in the future. The reason being that, once a foreign entity enters into a

joint venture, technical collaboration or a trademark licensing with an Indian party, then

any subsequent venture (wholly owned / joint venture or collaboration) by the foreign

entity in the same or allied field requires a no-objection from such Indian party. Such a

subsequent venture also requires prior consent from the Government of India, through the

Foreign Investment Promotion Board ("FIPB"), even if foreign investment were

otherwise permitted in the sector in question under the "Automatic Route".2

This often

leads to Indian joint venture partners creating impediments. Investments in the

information technology sector, investments by multilaterals such as IFC and ADB and

venture funds (registered with the Securities and Exchange Board of India) and certain

investments in the mining sector (subject to certain conditions) are exempt from these

restrictions.


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2.2 Mergers and Acquisitions: Introduction

Mergers and acquisitions (M&A) and corporate restructuring are a big part of the

corporate finance world. Every day, investment bankers arrange M&A

transactions, which bring separate companies together to form larger ones. When they're

not creating big companies from smaller ones, corporate finance deals do the reverse and

break up companies through spin-offs, carve-outs or tracking stocks.

Not surprisingly, these actions often make the news. Deals can be worth hundreds of

millions, or even billions, of dollars. They can dictate the fortunes of the companies

involved for years to come. For a CEO, leading an M&A can represent the highlight of a

whole career. And it is no wonder we hear about so many of these transactions; they

happen all the time. Next time you flip open the newspapers business section, odds are

good that at least one headline will announce some kind of M&A transaction.

Sure, M&A deals grab headlines, but what does this all mean to investors? To answer this

question, this tutorial discusses the forces that drive companies to buy or merge with

others, or to split-off or sell parts of their own businesses. Once you know the different

ways in which these deals are executed, you'll have a better idea of whether you should

cheer or weep when a company you own buys another company - or is bought by one.You will also be aware of the tax consequences for companies and for investors.

Mergers and Acquisitions: Definition

The Main Idea

One plus one makes three: this equation is the special alchemy of a merger or an

acquisition. The key principle behind buying a company is to create shareholder value

over and above that of the sum of the two companies. Two companies together are more

valuable than two separate companies - at least, that's the reasoning behind M&A.


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This rationale is particularly alluring to companies when times are tough. Strong

companies will act to buy other companies to create a more competitive, cost-efficient

company. The companies will come together hoping to gain a greater market share or to

achieve greater efficiency. Because of these potential benefits, target companies will

often agree to be purchased when they know they cannot survive alone.

Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were

synonymous, the terms merger and acquisition mean slightly different things.

When one company takes over another and clearly established itself as the new owner,

the purchase is called an acquisition. From a legal point of view, the target company

ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be

traded.

In the pure sense of the term, a merger happens when two firms, often of about the same

size, agree to go forward as a single new company rather than remain separately owned

and operated. This kind of action is more precisely referred to as a "merger of equals."

Both companies' stocks are surrendered and new company stock is issued in its place.

In practice, however, actual mergers of equals don't happen very often. Usually, one

company will buy another and, as part of the deal's terms, simply allow the acquired firm

to proclaim that the action is a merger of equals, even if it's technically an acquisition.

Being bought out often carries negative connotations, therefore, by describing the deal as

a merger, deal makers and top managers try to make the takeover more palatable.

A purchase deal will also be called a merger when both CEOs agree that joining together

is in the best interest of both of their companies. But when the deal is unfriendly - that is,

when the target company does not want to be purchased - it is always regarded as an

acquisition.


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Whether a purchase is considered a merger or an acquisition really depends on whether

the purchase is friendly or hostile and how it is announced. In other words, the real

difference lies in how the purchase is communicated to and received by the target

company's board of directors, employees and shareholders.

Synergy

Synergy is the magic force that allows for enhanced cost efficiencies of the new business.

Synergy takes the form of revenue enhancement and cost savings. By merging, the

companies hope to benefit from the following:

Staff reductions - As every employee knows, mergers tend to mean job losses. Consider

all the money saved from reducing the number of staff members from accounting,

marketing and other departments. Job cuts will also include the former CEO, who

typically leaves with a compensation package.

Economies of scale - Yes, size matters. Whether it's purchasing stationery or a new

corporate IT system, a bigger company placing the orders can save more on costs.

Mergers also translate into improved purchasing power to buy equipment or office

supplies - when placing larger orders, companies have a greater ability to negotiate prices

with their suppliers.

Acquiring new technology - To stay competitive, companies need to stay on top of

technological developments and their business applications. By buying a smaller

company with unique technologies, a large company can maintain or develop a

competitive edge.

Improved market reach and industry visibility - Companies buy companies to reach

new markets and grow revenues and earnings. A merge may expand two companies'

marketing and distribution, giving them new sales opportunities. A merger can also

improve a company's standing in the investment community: bigger firms often have an

easier time raising capital than smaller ones.


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That said, achieving synergy is easier said than done - it is not automatically realized

once two companies merge. Sure, there ought to be economies of scale when two

businesses are combined, but sometimes a merger does just the opposite. In many cases,

one and one add up to less than two.

Sadly, synergy opportunities may exist only in the minds of the corporate leaders and the

deal makers. Where there is no value to be created, the CEO and investment bankers -

who have much to gain from a successful M&A deal - will try to create an image of

enhanced value. The market, however, eventually sees through this and penalizes the

company by assigning it a discounted share price. We'll talk more about why M&A may

fail in a later section of this tutorial.

2.3Varieties of Mergers

From the perspective of business structures, there is a whole host of different mergers.

Here are a few types, distinguished by the relationship between the two companies that

are merging:

Horizontal merger - Two companies that are in direct competition and share the same

product lines and markets.

Vertical merger - A customer and company or a supplier and company. Think of a cone

supplier merging with an ice cream maker.

Market-extension merger - Two companies that sell the same products in different

markets.

Product-extension merger - Two companies selling different but related products in the

same market.

Conglomeration - Two companies that have no common business areas.

There are two types of mergers that are distinguished by how the merger is financed.

Each has certain implications for the companies involved and for investors:


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Purchase Mergers - As the name suggests, this kind of merger occurs when one

company purchases another. The purchase is made with cash or through the issue of some

kind of debt instrument; the sale is taxable.

Acquiring companies often prefer this type of merger because it can provide them with a

tax benefit. Acquired assets can be written-up to the actual purchase price, and the

difference between the book value and the purchase price of the assets can depreciate

annually, reducing taxes payable by the acquiring company. We will discuss this further

in part four of this tutorial.

Consolidation Mergers - With this merger, a brand new company is formed and both

companies are bought and combined under the new entity. The tax terms are the same as

those of a purchase merger.

2.4Acquisitions

As you can see, an acquisition may be only slightly different from a merger. In fact, it

may be different in name only. Like mergers, acquisitions are actions through which

companies seek economies of scale, efficiencies and enhanced market visibility. Unlike

all mergers, all acquisitions involve one firm purchasing another - there is no exchange of

stock or consolidation as a new company. Acquisitions are often congenial, and all

parties feel satisfied with the deal. Other times, acquisitions are more hostile.

In an acquisition, as in some of the merger deals we discuss above, a company can buy

another company with cash, stock or a combination of the two. Another possibility,

which is common in smaller deals, is for one company to acquire all the assets of another

company. Company X buys all of Company Y's assets for cash, which means that

Company Y will have only cash (and debt, if they had debt before). Of course, Company

Y becomes merely a shell and will eventually liquidate or enter another area of business.

Another type of acquisition is a reverse merger, a deal that enables a private company to

get publicly-listed in a relatively short time period. A reverse merger occurs when a


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private company that has strong prospects and is eager to raise financing buys a publicly-

listed shell company, usually one with no business and limited assets. The private

company reverse merges into the public company, and together they become an entirely

new public corporation with tradable shares.

Regardless of their category or structure, all mergers and acquisitions have one common

goal: they are all meant to create synergy that makes the value of the combined

companies greater than the sum of the two parts. The success of a merger or acquisition

depends on whether this synergy is achieved.

2.5 Mergers and Acquisitions: Valuation Matters

Investors in a company that are aiming to take over another one must determine whether

the purchase will be beneficial to them. In order to do so, they must ask themselves how

much the company being acquired is really worth.

Naturally, both sides of an M&A deal will have different ideas about the worth of a target

company: its seller will tend to value the company at as high of a price as possible, while

the buyer will try to get the lowest price that he can.

There are, however, many legitimate ways to value companies. The most common

method is to look at comparable companies in an industry, but deal makers employ a

variety of other methods and tools when assessing a target company. Here are just a few

of them:

Comparative Ratios - The following are two examples of the many comparative metrics

on which acquiring companies may base their offers:

Price-Earnings Ratio (P/E Ratio) - With the use of this ratio, an acquiring

company makes an offer that is a multiple of the earnings of the target company. Looking

at the P/E for all the stocks within the same industry group will give the acquiring

company good guidance for what the target's P/E multiple should be.


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Enterprise-Value-to-Sales Ratio (EV/Sales) - With this ratio, the acquiring company

makes an offer as a multiple of the revenues, again, while being aware of the price-to-

sales ratio of other companies in the industry.

Replacement Cost - In a few cases, acquisitions are based on the cost of replacing the

target company. For simplicity's sake, suppose the value of a company is simply the sum

of all its equipment and staffing costs. The acquiring company can literally order the

target to sell at that price, or it will create a competitor for the same cost. Naturally, it

takes a long time to assemble good management, acquire property and get the right

equipment. This method of establishing a price certainly wouldn't make much sense in a

service industry where the key assets - people and ideas - are hard to value and develop.

Discounted Cash Flow (DCF) - A key valuation tool in M&A, discounted cash flow

analysis determines a company's current value according to its estimated future cash

flows. Forecasted free cash flows (net income + depreciation/amortization - capital

expenditures - change in working capital) are discounted to a present value using the

company's weighted average costs of capital (WACC). Admittedly, DCF is tricky to get

right, but few tools can rival this valuation method.

Restructuring Methods

There are several restructuring methods: doing an outright sell-off, doing an equity carve-

out, spinning off a unit to existing shareholders or issuing tracking stock. Each has

advantages and disadvantages for companies and investors. All of these deals are quite

complex.

Sell-Offs

A sell-off, also known as a divestiture, is the outright sale of a company subsidiary.

Normally, sell-offs are done because the subsidiary doesn't fit into the parent company's

core strategy. The market may be undervaluing the combined businesses due to a lack of


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synergy between the parent and subsidiary. As a result, management and the board decide

that the subsidiary is better off under different ownership.

Besides getting rid of an unwanted subsidiary, sell-offs also raise cash, which can be used

to pay off debt. In the late 1980s and early 1990s, corporate raiders would use debt to

finance acquisitions. Then, after making a purchase they would sell-off its subsidiaries to

raise cash to service the debt. The raiders' method certainly makes sense if the sum of the

parts is greater than the whole. When it isn't, deals are unsuccessful

.

Equity Carve-Outs

More and more companies are using equity carve-outs to boost shareholder value. A

parent firm makes a subsidiary public through an initial public offering (IPO) of shares,

amounting to a partial sell-off. A new publicly-listed company is created, but the parent

keeps a controlling stake in the newly traded subsidiary.

A carve-out is a strategic avenue a parent firm may take when one of its subsidiaries is

growing faster and carrying higher valuations than other businesses owned by the parent.

A carve-out generates cash because shares in the subsidiary are sold to the public, but the

issue also unlocks the value of the subsidiary unit and enhances the parent's shareholder

value.

The new legal entity of a carve-out has a separate board, but in most carve-outs, the

parent retains some control. In these cases, some portion of the parent firm's board of

directors may be shared. Since the parent has a controlling stake, meaning both firms

have common shareholders, the connection between the two will likely be strong.

That said, sometimes companies carve-out a subsidiary not because it's doing well, but

because it is a burden. Such an intention won't lead to a successful result, especially if a

carved-out subsidiary is too loaded with debt, or had trouble even when it was a part of

the parent and is lacking an established track record for growing revenues and profits.


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Carve-outs can also create unexpected friction between the parent and subsidiary.

Problems can arise as managers of the carved-out company must be accountable to their

public shareholders as well as the owners of the parent company. This can create divided

loyalties.

Spin-offs

A spin-off occurs when a subsidiary becomes an independent entity. The parent firm

distributes shares of the subsidiary to its shareholders through a stock dividend. Since this

transaction is a dividend distribution, no cash is generated. Thus, spin-offs are unlikely to

be used when a firm needs to finance growth or deals. Like the carve-out, the subsidiary

becomes a separate legal entity with a distinct management and board.

Like carve-outs, spin-offs are usually about separating a healthy operation. In most cases,

spin-offs unlock hidden shareholder value. For the parent company, it sharpens

management focus. For the spin-off company, management doesn't have to compete for

the parent's attention and capital. Once they are set free, managers can explore new

opportunities.

Investors, however, should beware of throw-away subsidiaries the parent created to

separate legal liability or to off-load debt. Once spin-off shares are issued to parent

company shareholders, some shareholders may be tempted to quickly dump these shares

on the market, depressing the share valuation.

Tracking Stock

A tracking stock is a special type of stock issued by a publicly held company to track the

value of one segment of that company. The stock allows the different segments of the

company to be valued differently by investors.


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Let's say a slow-growth company trading at a low price-earnings ratio (P/E ratio) happens

to have a fast growing business unit. The company might issue a tracking stock so the

market can value the new business separately from the old one and at a significantly

higher P/E rating.

Why would a firm issue a tracking stock rather than spinning-off or carving-out its fast

growth business for shareholders? The company retains control over the subsidiary; the

two businesses can continue to enjoy synergies and share marketing, administrative

support functions, a headquarters and so on. Finally, and most importantly, if the tracking

stock climbs in value, the parent company can use the tracking stock it owns to make

acquisitions.

Still, shareholders need to remember that tracking stocks are class B, meaning they don't

grant shareholders the same voting rights as those of the main stock. Each share of

tracking stock may have only a half or a quarter of a vote. In rare cases, holders of

tracking stock have no vote at all.


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2.6 Statement of the problem:

The study finds the benefits the firm would be gaining from the merger and the value

addition to the shareholders.

2.7 Objective of the study:

To find

Whether gains accrue to shareholders as a consequence of merger Whether gains from the merger persist after the event Whether merger will improve the performance of the company


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Chapter 3

3.1 REVIEW OF LITERATURE

Factors Influencing Wealth Creation From Mergers And Acquisition: A

Meta Analysis

Deepak K Dutta & George E. Pinches

V.K Narayanan

This study analyses the empirical literature concerning the influence of various factors on

shareholders wealth creation in mergers and acquisition using a multivariate framework.

Overall, results indicate that while the target firms shareholders gain significantly from

use of stock financing has a significant impact on the wealth of both the target and

bidding firms shareholders. The presence of multiple bidders and the type of acquisition

influence the bidders return, while regulatory changes and tender offers influence the

targets returns. The paper also provides a comparison of our findings with that of

previous narrative reviews and discusses their implications from the viewpoint of

managers and researchers.

The performance implications of m&a have been of considerable interest to researchers

over the last couple of decades. In this paper we provide a meta analytic synthesis of the

findings of studies on wealth creation or the market performance of m&a where market

performance or shareholder wealth gains refers to the stock market appraisal of specific

merger transactions. Unlike traditional literature reviews it employs a multivariate

framework and regression analysis using observations from 41 studies. The results

indicate that a select set of factors explain a substantial proportion of wealth gains to both

bidding and target firm shareholders.

The paper is structured as follows. First, it provides an overview of the literature an

wealth creation in m&a , discussing five key factors which have been hypothesized to


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influence shareholder wealth. Next it describes the method employed in this study, the

studies used in analysis and the way the variables are coded from the studies. Third, it

presents the result of regression analysis assessing the influence of various factors on

shareholder gains. Finally in the concluding section it discusses the findings and compare

them with those identified in two prior narrative reviews of the literature. It also raises the

important theoretical questions and issues for future research, and discuss their

implications for both practice and research in strategic management.

Strategic Management Journal

Volume (Year): 13 (1992) Pages: 67-84

Do Long Term Shareholders Benefit From Corporate Acquisitions?

Tim Loughran and Anand M Vijh

Using 947 acquisitions during 1970 1989, this article finds a relationship between the

post acquisition returns and the mode of acquisition and the form of payment.

Corporate acquisitions are imp events. An examination of delistings from the center for

research in security prices(CRSP) tapes show that over half a trillion dollars worth of

equity in publicly traded companies was acquired by other publicly- traded firms during

1970-1989. many researchers have addressed the questions of wealth gains from

acquisitions . they typically find three patterns :

Target shareholders earn significantly positive abnormal returns from all the

acquisitions

Acquiring shareholders earn a little or no abnormal returns from tender offers,

and

Acquiring shareholders earn negative abnormal returns from mergers.

The evidence is usually based on returns computed over a pre acquisition period

starting immediately before the announcement date and ending on or before the


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effective date. This assumes that prices fully adjust to the likely efficiency gains from

acquisitions.

A few studies also examine the assumption of market efficiency by measuring

abnormal returns after the acquisition effective date. These findings are mixed. Frank,

Harris and others find no evidence of significant abnormal returns over a 3 year

period after the lst bid date. However, Agarwal, Jaffe and Mandelkar (1992) find that

tender offers are followed by insignificant abnormal returns, but mergers are followed

by significant abnormal returns of -10 percent over a 5 year period after the effective

date.

The Journal of Finance, Vol.52, No. 5 (Dec 1997)

Merger Types & Shareholders Returns: Additional Evidence

Pieter T. Elgers & john J. Clark

From a shareholders standpoint, business combinations are justified when the market

value of the equity shares of buyer and seller firms increases as a result of their intention

to merge. The incremental value might accrue from expectations of the replacement ofincompetent mgt, scale of economies, extension of the product line, improved market

control, reduction of business risk, or changes in the final structure.

There potential benefits notwithstanding, a recent comprehensive evidence on the wealth

effects of corporate mergers come to the conclusion that a laissez faire policy toward

mergers has been successful, since managers continue to engage in enterprises that seem

to provide little if any benefit to the buyers shareholders. To be sure, some studies show

gains to merging firms. But these are attributed to causes other than the merger event: the

gains may predate and actually cause the merger, or may instead be the result of general

stock market buoyancy. Accordingly, new legislation has been suggested to ban all

mergers unless managers can prove in advance that a given merger will create economic

efficiencies.

Financial Management, Vol.9, No.2 (Summer 1980), pp. 66 72


26/52



Chapter 4

4.1 METHODOLOGY:

First step was to identify the Companies merged during the year 2003-

2004.

Monthly stock prices of the companies two years prior to merger and

two years post merger was collected.

I identified the high and low price of the stock for the company during

the month and it was repeated for 24 months prior merger and post

merger.

Average stock price computed was multiplied with the number of shares

outstanding every month for the company. This gave the market

capitalization for the particular month for the respective company.

Procedure was repeated for all the 16 companies.

Computation of mean of the market capitalization for the respective

companies was done, which gave the mean of market capitalization.

T test was done for the computed mean.

4.2 SCOPE

The scope of the study is limited to the 32 Indian companies which are merged

during the year 2003-2004.

.

4.3 Actual collection of data: The data includes the following:

1. Two years prior to merger

2. Two years post merger

4.4 Statistical tool used:

T Test

Null hypothesis is accepted if the T test value is less than 1.746 otherwise null hypothesis

is rejected


27/52



4.5 LIMITATIONS

Although the results obtained through this study are acceptable in light of the previous

study, yet there are few limitations of this study. These limitations include:

First, the study included results of only two years prior to merger and two years post

merger.

Second, there are various other variable that should have been included in the study

which couldnt be included because the data wasnt accessible

Third, data prior to year 2002 couldnt be used because it wasnt accessible.

4.6 T-Test

The t-test assesses whether the means of two groups are statistically different from each

other. This analysis is appropriate whenever you want to compare the means of two

groups, and especially appropriate as the analysis for the posttest-only two-group

randomized experimental design.

Statistical Analysis of the t-test

The formula for the t-test is a ratio. The top part of the ratio is just the difference between

the two means or averages. The bottom part is a measure of the variability or dispersion

of the scores. This formula is essentially another example of the signal-to-noise metaphor

in research: the difference between the means is the signal that, in this case, we think our

program or treatment introduced into the data; the bottom part of the formula is a

measure of variability that is essentially noise that may make it harder to see the group

difference. Figure 1 shows the formula for the t-test and how the numerator and

denominator are related to the distributions.


28/52



Figure 1: Formula for the t-test.

The top part of the formula is easy to compute -- just find the difference between the

means. The bottom part is called the standard error of the difference. To compute it, we

take the variance for each group and divide it by the number of people in that group. We

add these two values and then take their square root. The specific formula is given in

Figure 2

Figure 2. Formula for the Standard error of the difference between the means.

Remember, that the variance is simply the square of the standard deviation.

The final formula for the t-test is shown in Figure 3:


29/52



Figure 5. Formula for the t-test.

The t-value will be positive if the first mean is larger than the second and negative if it is

smaller. Once you compute the t-value you have to look it up in a table of significance to

test whether the ratio is large enough to say that the difference between the groups is not

likely to have been a chance finding. To test the significance, you need to set a risk level

(called the alpha level. In most social research, the "rule of thumb" is to set the alpha

level at .05. This means that five times out of a hundred you would find a statistically

significant difference between the means even if there was none (i.e., by "chance"). You

also need to determine the degrees of freedom (df) for the test. In the t-test, the degrees of

freedom is the sum of the persons in both groups minus 2. Given the alpha level, the df,

and the t-value,you can look the t-value up in a standard table of significance(available

as an appendix in the back of most statistics texts) to determine whether the t-value is

large enough to be significant. If it is, you can conclude that the difference between the

means for the two groups is different (even given the variability). Fortunately, statistical

computer programs routinely print the significance test results and save you the trouble of

looking them up in a table.

The t-test, one-way Analysis of Variance (ANOVA) and a form of regression analysis are

mathematically equivalent and would yield identical results.


30/52



Chapter 5

5.1 Hypothesis:

Ho:Mergers do not add value to shareholders

H1: Mergers add value to shareholders

5.2 Presentation of data

Table 1:

MEAN

PRIOR

MERGER MEAN

POST

MERGER

INDUS

_

X B 5648919443_

X A 15946969653

Oriental

_

X B 31100013550

_

X A 58082738866

SUPREME

_

X B 853881606.5_

X A 2978397246

TATA

_

X B 15798475778_

X A 38663241176

TVS

_

X B 14160712511_

X A 20814344510

AMB EX

_

X B 389494327.8_

X A 1262002509

PFIZER

_

X B 10426665586_

X A 13528986556

LAX MACWRK

_X B 1687544886

_X A 9751290545

ASAHI

_

X B 1230802040_

X A 10796973826

MATRIX

_

X B 1069785720_

X A 20261160315

CADILLA

_

X B 8455398220_

X A 29807373992

SUNDRAM

_

X B 4467104679_

X A 13466512985

JK TYRES

_

X B 838964155.7

_

X A 2708853710

WELSPN

_

X B 1139478577_

X A 4894656466

ISPAT

_

X B 5433786540_

X A 13000229230

GSK

_

X B 34531048710_

X A 76390590839


31/52



Table 2:

t-Test: Two-Sample Assuming Equal Variances

Variable 1 Variable 2

Mean 8577004771 20772145152Variance 1.13511E+20 4.3824E+20

Observations 16 16

Pooled Variance 2.75876E+20

Hypothesized Mean Difference 0

Df 30

t Stat -2.076705399

P(T


32/52



5.3 Interpretation:

From the above table it can be inferred that mergers create values to the company. From

the T test it can be concluded that companies have infact gained after the merger. All the

companies selected have shown positive results and there has been an increase in the

market capitalisation of the companies and they are performing exceedingly well post

merger. Since the t statistics value is significant the merger has created value to

shareholders and the company.

Based on the interpretation null hypothesis is rejected and the alternative hypothesis is

accepted.

Here T value is 2.076705399 which is greater than 1.746, so alternative hypothesis is

accepted


33/52



Chapter 6

6.1 Conclusion:

This study proves that Mergers have added sufficient value to the company as well as the

shareholders. The sample selected has shown that mergers do add value to the acquiring

company, which can be seen through the performance of the companies. The stock prices

of the companies have increased post merger and the market capitalisation of the

company has also increased.

The study shows that companies can use merger as a tool not only to grow but also to

thwart competition. This study has shown that the synergy has worked in case of thesample selected. Companies can use merger as a tool to grow, increase their market

share, to ward off competition, improve their performance etc. Probably this is the reason

why the companies make a beeline to acquire another company and go on a buying spree.

This study has proved that mergers have created value to shareholders as well as the

company. But we cant conclude by saying that all mergers add value to the company,

there are lots of mergers wherein the companies have failed to reap the benefits of

merger. Even though this study might have proven that mergers create value to the

company as well as the shareholders, it might not be true all the time.

6.2 Suggestions for further research

In the research study done only few companies where selected. To have a perfect picture

about the impact of merger more companies can be selected and also more than 5 years

data can be used to study the effects of merger.


34/52



7. Annexure

Companies selected for the study

COMPANY TARGET COMPANYMERGED

COMPANY

1 Ashok Leyland Finance Ltd IndusInd Bank Ltd

2 Global Trust Bank Ltd

Oriental Bank of

Commerce

3 Siltap Chemicals Ltd

Supreme Industries

Ltd

4 Hind Lever Chemicals Ltd - Tata Chemicals Ltd

5 Lakshmi Auto Components Ltd

TVS Motor Company

Ltd

6 Jupiter Biotech Ltd

Gujarat Ambuja

Exports Ltd

7 Parke Davis (India) Ltd Pfizer Ltd

8 Textool Company Ltd

Lakshmi Machine

Works Ltd

9 Float Glass India Ltd Asahi India Glass Ltd

10 Vorin Laboratories Ltd

Matrix Laboratories

Ltd

11 German Remedies Ltd

Cadila Healthcare

Ltd

12 TVS Autolec Ltd

Sundram Fasteners

Ltd

13 Vikrant Tyres Ltd

JK Tyre & Industries

Ltd

14

Eupec-Welspun Pipe Coatings (India)

Ltd

Welspun Gujarat

Stahl Rohren Ltd

15 Ispat Metallics India Ltd Ispat Industries Ltd

16 Burroughs Wellcome (India) Ltd

Glaxosmithkline

Pharma Ltd


35/52



Table showing calculation of Mean of Market Capitalization:

IndusInd Bank Ltd

Prior Merger Post MergerAvg

Prices Share o/s Market cap Avg Share o/s Market cap

17.28 160000000 2764000000 37.6 290701836 10930389034

16.05 160000000 2568000000 52.13 290701836 15154286711

16.25 160000000 2600000000 53.6 290701836 1558161841014.28 160000000 2284000000 47 290701836 13662986292

15.00 160000000 2400000000 51.53 290701836 14979865609

15.88 160000000 2540000000 56.9 290701836 1654093446816.85 160000000 2696000000 57.53 290701836 16724076625

16.73 160000000 2676000000 55.13 290701836 16026392219

16.85 160000000 2696000000 61.7 290318736 1791266601118.68 160000000 2988000000 74.5 290318736 21628745832

20.05 160000000 3208000000 78.43 290318736 22769698464

20.13 160000000 3220000000 72.18 290317636 20955126966

23.23 220226983 5114771680 68.23 290317636 1980837230426.75 220226983 5891071795 57.48 290317636 16687457717

25.15 220226983 5538708622 54.4 290317636 15793279398

24.05 220226983 5296458941 54.4 290317636 1579327939833.00 220226983 7267490439 57.73 290317636 16760037126

41.83 220226983 9210993564 58.48 290317636 16977775353

43.95 220226983 9678975903 54.43 290317636 15801988927

39.75 220226983 8754022574 43.5 290317636 1262881716638.03 220226983 8374131029 39.45 290317636 11453030740

50.40 220226983 11099439943 40.5 290317636 11757864258

51.30 220226983 11297644228 42.8 290317636 1242559482152.73 220226983 11611467679 48.13 290317636 13972987821

32.50 290701836 9447809670

INDUS

_

X B 5648919443 _

X A 15946969653


36/52



Oriental Bank of Commerce

Prior Merger Post Merger

Avg Share market cap Avg Share Market cap

41.7 192539700 8028905490 242.9 192539700 46767893130

42.48 192539700 8179086456 245.93 192539700 47351288421

41.33 192539700 7957665801 270 192539700 51985719000

42.18 192539700 8121324546 323.08 192539700 62205726276

48.25 192539700 9290040525 316.13 192539700 60867575361

58.28 192539700 11221213716 312.63 192539700 60193686411

57.45 192539700 11061405765 337.33 192539700 64949417001

61.58 192539700 11856594726 295.33 192539700 56862749601

76.28 192539700 14686928316 266.38 192539700 51288725286

120.65 192539700 23229914805 264.88 250539700 66362955736

131.13 192539700 25247730861 269 250539700 67395179300169.75 192539700 32683614075 267.43 250539700 67001831971

171.55 192539700 33030185535 268.2 250539700 67194747540

182.85 192539700 35205884145 263.5 250539700 66017210950

234.58 192539700 45165962826 250.75 250539700 62822829775

234.13 192539700 45079319961 254.43 250539700 63744815871

243.73 192539700 46927701081 260 250539700 65140322000

262.6 192539700 50560925220 241.1 250539700 60405121670

255.75 192539700 49242028275 241 250539700 60380067700

287.25 192539700 55307028825 237.2 250539700 59428016840

334.6 192539700 64423783620 217.9 250539700 54592600630

234.75 192539700 45198694575 177.58 250539700 44490839926228.95 192539700 44081964315 162.9 250539700 40812917130

245.5 192539700 47268496350 182.5 250539700 45723495250

230.83 192539700 44443938951

Oriental_

X B 31100013550 _

X A 58082738866


37/52



Supreme Industries Ltd


Avg Shares market cap Avg Shares market cap

40.95 9714910 397825565 197.24 13057837 2575527770

42.00 9714910 408026220 200.02 13057837 2611828557

43.33 9714910 420947050 222.74 13057837 2908502613

48.25 9714910 468744408 214.55 13057837 2801493639

45.90 9714910 445914369 183.65 13057837 2398071765

57.25 9714910 556178598 175.00 13057837 2285056186

54.04 9714910 524993736 217.05 13390837 2906414217

67.88 9714910 659448091 184.12 13390837 2465520908

95.08 9714910 923693643 170.50 13390837 2283070754

92.38 9714910 897463386 176.55 13390837 2364152272

96.83 9714910 940694735 187.58 13390837 251178625092.58 9714910 899406368 199.50 13390837 2671471982

93.50 10012261 936146404 178.00 13390837 2383568986

86.40 10012261 865059350 183.80 13390837 2461168886

84.25 10012261 843532989 223.00 13390837 2986089697

96.53 10012261 966483554 226.80 13390837 3036974877

107.35 10012261 1074816218 249.00 13390837 3334251459

98.05 10012261 981702191 269.05 13390837 3602804695

84.73 10012261 848338875 265.37 13390837 3553526415

79.82 10012261 799178673 249.54 13390837 3341549465

99.00 10012261 991213839 262.31 13390837 3512550453

125.25 10012261 1254035690 274.48 13390837 3675449986129.55 10012261 1297088413 318.39 13390837 4263508592

139.50 10012261 1396710410 339.58 13390837 4547193474

154.75 10012261 1549397390

SUPREME

_

X B 853881607

_

X A 2978397246


38/52



Tata Chemicals Ltd


Avg Share mak cap Avg share mak cap

55.20 180638651 9971253535 119.43 180638651 21572770896

60.58 180638651 10942186284 123.68 180638651 2234048516258.30 180638651 10531233353 126.30 180638651 22814661621

54.65 180638651 9871902277 132.18 180638651 23875913696

50.98 180638651 9208055235 138.08 215102651 29700298537

49.90 180638651 9013868685 159.10 215102651 34222831774

56.05 180638651 10124796389 156.75 215102651 33717340544

62.20 180638651 11235724092 164.93 215102651 35475804716

62.73 180638651 11330559384 154.48 215102651 33227982013

61.98 180638651 11195080396 153.23 215102651 32959103699

66.98 180638651 12098273651 167.63 215102651 36056581874

73.68 180638651 13308552612 175.15 215102651 37675229323

71.78 180638651 12965339176 183.45 215102651 39460581326

77.23 180638651 13949819823 185.15 215102651 39826255833

88.75 180638651 16031680276 196.78 215102651 42326824151

91.40 180638651 16510372701 190.45 215102651 40966299883

109.23 180638651 19730256655 204.85 215102651 44063778057

127.58 180638651 23044975901 223.50 215102651 48075442499

145.43 180638651 26269375822 242.35 215102651 52130127470

144.00 180638651 26011965744 245.95 215102651 52904497013

121.63 180638651 21970175928 249.50 215102651 53668111425

113.13 180638651 20434747394 260.95 215102651 56131036778

136.68 180638651 24688787625 228.95 215102651 49247751946120.28 180638651 21726313749 211.43 215102651 45478077988

126.20 180638651 22796597756

TATA

_

X B 15798475778 _

X A 38663241176


39/52



TVS Motor Company Ltd


Avg Share mkt cap Avg share mkt cap

425.05 23100070 9818684754 75.75 231000700 17498303025

442.45 23100070 10220625972 65.53 231000700 15137475871429.36 23100070 9918246055 61.63 237543557 14639809418478.78 23100070 11059851515 73.4 237543557 17435697084

431.98 23100070 9978768239 78.03 237543557 18535523753

384 23100070 8870426880 78.75 237543557 18706555114405 23100070 9355528350 84.75 237543557 20131816456

434.38 23100070 10034208407 86.3 237543557 20500008969

489.95 23100070 11317879297 80.83 237543557 19200645712495.5 23100070 11446084685 74.4 237543557 17673240641

510.95 23100070 11802980767 72.88 237543557 17312174434

459 23100070 10602932130 70.65 237543557 16782452302

403.7 23100070 9325498259 73 237543557 17340679661492.73 23100070 11382097491 74.9 237543557 17792012419

560.03 23100070 12936732202 79.83 237543557 18963102155

548.43 23100070 12668771390 80.03 237543557 19010610867669.95 23100070 15475891897 87.5 237543557 20785061238

789.63 23100070 18240508274 91.35 237543557 21699603932

879.63 23100070 20319514574 94.25 237543557 22388480247915 23100070 21136564050 101.38 237543557 24082165809

621.3 23100070 14352073491 108 237543557 25654704156

111.2 231000700 25687277840 118.48 237543557 28144160633

109.03 231000700 25186006321 131.88 237543557 31327244297

94 231000700 21714065800 163.35 237543557 3880274003691.63 231000700 21166594141

TVS

_

X B 14160712511 _

X A 20814344510


40/52



Gujarat Ambuja Exports Ltd


Avg Share mak cap Avg share mak cap

7.53 29982782 225620434.6 25.13 29982782 753317398

7.95 29982782 238363116.9 27.43 29982782 8222777967.80 29982782 233865699.6 34.25 23765698 813975157

7.90 29982782 236863977.8 35.75 23765698 849623704

8.73 29982782 261599773 34.00 23765698 808033732

10.50 29982782 314819211 36.30 23765698 862694837

9.53 29982782 285585998.6 34.38 23765698 816945869

10.13 29982782 303575667.8 36.50 23765698 867447977

10.13 29982782 303575667.8 37.05 23765698 880519111

9.75 29982782 292332124.5 40.88 23765698 971422906

9.58 29982782 287085137.7 40.50 23765698 962510769

9.75 29982782 292332124.5 38.73 23765698 920326655

9.25 29982782 277340733.5 36.75 23765698 8733894029.85 29982782 295330402.7 33.58 23765698 797933310

9.60 29982782 287834707.2 35.25 27863698 982195355

10.78 29982782 323064476.1 39.70 27863698 1106188811

13.50 29982782 404767557 49.78 27863698 1386915568

14.75 29982782 442246034.5 50.73 27863698 1413386081

17.74 29982782 531894552.7 62.10 27863698 1730335646

18.50 29982782 554681467 92.68 27863698 2582268212

19.00 29982782 569672858 91.90 27863698 2560673846

19.25 29982782 577168553.5 87.88 27863698 2448522462

22.83 29982782 684356999.2 85.10 27863698 237120070026.00 29982782 779552332 61.23 27863698 1705954910

24.48 29982782 733828589.5

AMB

EX

_

X B 389494327.8 _

X A 1262002509


41/52



Pfizer Ltd


Avg share mak cap Avg share mak cap

585.00 23440296 13712573160 312.53 23440296 7325678507533.50 23440296 12505397916 364.00 23440296 8532267744

501.03 23440296 11744174303 386.80 23440296 9066706493

482.28 23440296 11304668753 422.50 23440296 9903525060

467.00 23440296 10946618232 411.10 23440296 9636305686

425.90 23440296 9983222066 431.75 23440296 10120347798

406.50 23440296 9528480324 412.00 28797540 11864586480

401.00 23440296 9399558696 441.40 28797540 12711234156

430.23 23440296 10084601347 523.53 28797540 15076232129

471.28 23440296 11046825497 516.05 28797540 14860970517

449.00 23440296 10524692904 479.25 28797540 13801221045

453.00 23440296 10618454088 448.00 28797540 12901297920450.48 23440296 10559267341 469.43 28797540 13518285215

491.15 23440296 11512701380 418.25 28797540 12044571105

491.00 23440296 11509185336 422.58 28797540 12169120466

507.00 23440296 11884230072 454.40 28797540 13085602176

476.00 23440296 11157580896 446.60 28797540 12860981364

451.83 23440296 10590911740 495.95 28797540 14282139963

428.50 23440296 10044166836 511.63 28797540 14733541403

407.00 23440296 9540200472 564.00 28797540 16241812560

395.03 23440296 9259502927 647.83 28797540 18655766351

385.53 23440296 9036820115 709.70 28797540 20437614138

360.75 23440296 8456086782 704.08 28797540 20275627976

345.00 23440296 8086902120 715.00 28797540 20590241100

325.50 23440296 7629816348

PFIZER

_

X B 10426665586

_

X A 13528986556


42/52



Lakshmi Machine Works Ltd



680.53 1219173 829677706 4,548.00 1219173 5544798804

761.00 1219173 927790653 4,657.48 1219173 5678267768695.00 1219173 847325235 4,502.50 1219173 5489326433

661.00 1219173 805873353 4,554.50 1219173 5552723429

652.50 1219173 795510383 5,104.98 1219173 6223847686

757.47 1219173 923486972 4,575.48 1219173 5578295582

676.05 1219173 824221907 4,534.98 1219173 5528919076

847.50 1219173 1033249118 5,549.88 1219173 6766257753

1,065.00 1219173 1298419245 6,752.40 1219173 8232343765

1,060.50 1219173 1292932967 7,197.48 1219173 8774967188

989.45 1219173 1206310725 7,495.50 1219173 9138311222

965.48 1219173 1177081052 7,802.48 1219173 9512566853

972.50 1219173 1185645743 8,307.48 1219173 101282492181,025.00 1219173 1249652325 8,350.63 1219173 10180856533

1,148.48 1219173 1400189711 7,750.48 1219173 9449169857

1,162.50 1219173 1417288613 8,098.98 1219173 9874051648

1,012.50 1219173 1234412663 8,125.45 1219173 9906329253

938.38 1219173 1144041464 9,312.45 1236925 11518802216

1,266.05 1219173 1543533977 9,600.48 1236925 11875067539

1,837.85 1219173 2240657098 10,769.45 1236925 13321001941

2,382.40 1219173 2904557755 11,944.45 1236925 14774388816

2,731.48 1219173 3330140570 13,307.50 1236925 16460379438

3,004.58 1219173 3663096716 13,826.00 1236925 171017250503,571.15 1219173 4353849659 14,083.58 1236925 17420326007

3,739.98 1219173 4559676541

LAX MAC

WRK

_

X B 1687544886

_

X A 9751290545


43/52



Asahi India Glass Ltd



187.00 3700000 691900000 98.5 79963763 7876430656

212.50 3700000 786250000 111 79963763 8875977693225.05 3700000 832685000 132.63 79963763 10605593887

225.00 3700000 832500000 137.7 79963763 11011010165

244.00 7400000 1805600000 122.89 79963763 9826746835

289.00 7400000 2138600000 118.5 79963763 9475705916

303.37 7400000 2244938000 128.75 79963763 10295334486

339.03 7400000 2508822000 114.13 79963763 9126264271

374.01 7400000 2767637000 91.56 79963763 7321482140

366.45 7400000 2711730000 101.52 79963763 8117921220

386.50 7400000 2860100000 113.23 79963763 9054296884

365.50 7400000 2704700000 125.78 79963763 10057842110

322.52 7400000 2386648000 120.55 79963763 9639631630181.75 7400000 1344950000 129.5 79963763 10355307309

34.30 7400000 253820000 140.34 79963763 11222114499

33.50 7400000 247900000 152.5 79963763 12194473858

36.95 7400000 273393000 166.77 79963763 13335556756

39.13 7400000 289562000 167.55 79963763 13397928491

36.75 7400000 271913000 164.5 79963763 13154039014

39.00 7400000 288563000 187.73 79963763 15011597228

47.78 7400000 353572000 179.99 79963763 14392677702

55.98 7400000 414252000 181.19 79963763 14488634218

68.47 7400000 506678000 172.5 79963763 1379374911880.34 7400000 594516000 81.25 79963763 6497055744

89.03 7400000 658822000

ASAHI

_

X B 1230802040

_

X A 10796973826


44/52



Matrix Laboratories Ltd



23.88 7200000 171936000 555.825 9718451 5401758027

27.6 7200000 198720000 665.075 9718451 646349879926 7200000 187200000 824.65 9718451 8014320617

30.78 7200000 221616000 919.025 12297886 1130206468130.05 7200000 216360000 1078.35 12297886 13261425368

31.98 7200000 230256000 1350.425 12297886 16607372702

31.23 7200000 224856000 1589 12297886 19541340854

30.05 7187500 215984375 1470.2 12297886 1808035199728.8 7187500 207000000 1559 12297886 19172404274

30.9 7187500 222093750 1491.975 14547886 21705082215

47 7187500 337812500 1461.85 14547886 2126682714950.95 7187500 366203125 1387.975 14547886 20192102071

68.3 7187500 490906250 1400 14547886 20367040400121.93 7187500 876371875 1464.975 14547886 21312289293115.53 7187500 830371875 1553.475 14547886 22599777204

109.5 7187500 787031250 1749.95 14968321 26193813334

128.48 7187500 923450000 1812.475 14968321 27129707604

151.85 7187500 1091421875 2158.1 14968321 32303133550168.55 7187500 1211453125 1365.675 14968321 20441861782

244.4 7187600 1756649440 199.25 149683210 29824379593

313.05 7187600 2250078180 165.8 149683210 24817476218295.7 7187600 2125373320 173.35 149722210 25954345104

306.1 9718451 2974817851 168.625 149722210 25246907661

382.43 9718451 3716627216 194.15 149722210 29068567072505.23 9718451 4910052999

MATRIX

_

X B 1069785720

_

X A 20261160315


45/52



Cadila Healthcare Ltd



98.7 59541368 5876733022 319.19 62806854 20047319728

110.35 59541368 6570389959 360.60 62806854 22648151552

125.7 59541368 7484349958 398.03 62806854 24999012098

126.75 59541368 7546868394 395.00 62806854 24808707330

127.73 59541368 7605218935 442.49 62806854 27791404826

129.25 59541368 7695721814 441.48 62806854 27727969904

127.98 59541368 7620104277 515.49 62806854 32376305168

138.78 59541368 8263151051 463.55 62806854 29114117172

134.75 59541368 8023199338 439.76 62806854 27619942115

132.5 59541368 7889231260 453.50 62806854 28482908289

134.88 59541368 8030939716 487.25 62806854 30602639612

132.3 59541368 7877322986 494.35 62806854 31048568275122.13 59541368 7271787274 522.80 62806854 32835423271

113.95 59541368 6784738884 516.04 62806854 32410848938

113.05 59541368 6731151652 566.08 62806854 35553703912

117.79 59541368 7013377737 534.50 62806854 33570263463

126.49 59541368 7531387638 530.00 62806854 33287632620

121.5 59541368 7234276212 495.00 62806854 31089392730

120.5 59541368 7174734844 446.73 62806854 28057705887

122.68 59541368 7304535026 465.00 62806854 29205187110

123.89 59541368 7376580082 489.50 62806854 30743955033

148.3 59541368 8829984874 556.30 62806854 34939452880

215.53 59541368 12832951045 522.47 62806854 32814697009265.07 59541368 15782630416 535.00 62806854 33601666890

319.67 59541368 19033589109

CADILLA

_

X B 8455398220

_

X A 29807373992


46/52



Sundram Fasteners Ltd



278.45 10215662 2844551084 92.29 102156620 9428034460

276.75 10215662 2827184459 92.37 102156620 9436206989286.95 10215662 2931384211 91.74 105064185 9638588332

297.65 10215662 3040691794 100.13 105064185 10520076844291.7 10215662 2979908605 114.25 105064185 12003583136

304.56 10215662 3111282019 112.29 105064185 11797657334

286.5 10215662 2926787163 109.8 105064185 11536047513

300.48 10215662 3069602118 114.52 105064185 12031950466318.5 10215662 3253688347 111.7 105064185 11735669465

332.53 10215662 3397014085 120.05 105064185 12612955409

319.02 10215662 3259000491 112.95 105064185 11866999696337.21 10215662 3444823383 117.84 105064185 12380763560

354.48 10215662 3621247866 130.64 105064185 13725585128419.91 10215662 4289658630 129.02 105064185 13555381149464.28 10215662 4742927553 130.99 105064185 13762357593

492.78 10215662 5034073920 144.43 105064185 15174420240

515.05 10215662 5261576713 147.5 105064185 15496967288

581.03 10215662 5935606092 146.25 105064185 15365637056711.4 10215662 7267421947 154.47 105064185 16229264657

840.3 10215662 8584220779 158.05 105064185 16605394439

1065.03 10215662 10879986500 166.14 105064185 17455363696697.4 10215662 7124402679 154.74 105064185 16257631987

101.46 10215662 1036481067 163.49 105064185 17176943606

91.28 10215662 932485627.4 165.64 105064185 1740283160396.73 102156620 9881609853

SUNDRAM

_

X B 4467104679

_

X A 13466512985


47/52



JK Tyre & Industries Ltd



13.85 34565102 478726662.7 40.325 34565102 1393837738

14.30 34565102 494280958.6 70.55 34565102 2438567946

15.25 34565102 527117805.5 67.7 37459346 2535997724

16.43 34565102 567731800.4 56.85 37459346 2129563820

15.18 34565102 524525422.9 45.25 37459346 1695035407

15.65 34565102 540943846.3 50.775 37459346 1901998293

16.23 34565102 560818780 43.75 37459346 1638846388

18.38 34565102 635133749.3 39.3 37459346 1472152298

20.30 34565102 701671570.6 37.35 37459346 1399106573

27.30 34565102 943627284.6 45.75 37459346 1713765080

29.25 34565102 1011029234 54.875 37459346 205558161225.20 34565102 871040570.4 62.525 37459346 2342145609

23.63 34565102 816600534.8 68.025 37459346 2548172012

24.80 34565102 857214529.6 78.425 37459346 2937749210

25.83 34565102 892643759.2 74.25 37459346 2781356441

28.08 34565102 970415238.7 84.5 37459346 3165314737

27.90 34565102 964366345.8 98.275 37459346 3681317228

25.38 34565102 877089463.3 105.9 37459346 3966944741

22.70 34565102 784627815.4 102.775 37459346 3849884285

22.70 34565102 784627815.4 106.225 37459346 3979119029

29.55 34565102 1021398764 103.175 37459346 3864868024

34.38 34565102 1188175381 121.45 37459346 454943757235.33 34565102 1221012228 113.8 37459346 4262873575

38.93 34565102 134544659540.33 34565102 1393837738

JK

TYRES

_

X B 838964155.7

_

X A 2708853710


48/52



Welspun Gujarat Stahl Rohren Ltd


9.08 122719760 1114295421 10 141355760 1413557600

9.65 122719760 1184245684 15.78 141355760 2230593893

9.28 122719760 1138839373 24.25 141355760 34278771807.35 122719760 901990236 25.83 141355760 3651219281

7.20 122719760 883582272 28.75 141355760 4063978100

6.13 122719760 752272128.8 37.68 140345760 52882282377.20 122719760 883582272 43.88 140345760 6158371949

9.83 122719760 1206335241 47.73 140345760 6698703125

11.00 122719760 1349917360 43.8 141355760 6191382288

9.93 122719760 1218607217 37.38 141355760 52838783099.05 122719760 1110613828 32.98 141355760 4661912965

9.53 122719760 1169519313 35.15 141355760 4968654964

8.23 141355760 1163357905 31.9 141355760 45092487447.60 141355760 1074303776 27.93 141355760 3948066377

9.15 141355760 1293405204 31.65 141355760 4473909804

10.65 141355760 1505438844 32.23 141355760 45558961458.20 141355760 1159117232 37.8 141355760 5343247728

7.83 141355760 1106815601 40.73 141355760 5757420105

7.55 141355760 1067235988 40.18 141355760 56796744378.95 141355760 1265134052 42.45 141355760 6000552012

9.60 141355760 1357015296 43.88 141355760 62026907499.03 141355760 1276442513 43.2 141355760 6106568832

8.60 141355760 1215659536 38.25 141355760 54068578207.25 141355760 1024829260 38.55 141355760 5449264548

7.53 141355760 1064408873

WELSPN

_

X B 1139478577

_

X A 4894656466


49/52



Ispat Industries Ltd

Prior Merger post merger


1.83 692590309 1267440265 8.01 692590311 5547648391

2.68 692590309 1856142028 6.68 692590311 4626503277

5.4 692590309 3739987669 8.26 692590311 5720795969

6.33 692590309 4384096656 10.92 692590311 7563086196

4.48 692590309 3102804584 11.18 692590311 7743159677

3.95 692590309 2735731721 12.43 692590311 8608897566

3.85 692590309 2666472690 15.43 692590311 10686668499

4.6 692590309 3185915421 21.30 692590311 14752173624

5.3 692590309 3670728638 22.23 692590311 15396282614

5.8 692590309 4017023792 26.30 692590311 18215125179

5.4 692590309 3739987669 29.23 692590311 202444147914.93 692590309 3414470223 26.45 692590311 18319013726

4.68 692590311 3241322655 22.08 692590311 15292394067

4.9 692590311 3393692524 19.00 692590311 13159215909

7.68 692590311 5319093588 19.43 692590311 13457029743

12.03 692590311 8331861441 21.50 692590311 14890691687

16.14 692590311 11178407620 22.63 692590311 15673318738

13.2 692590311 9142192105 17.43 692590311 12071849121

13.76 692590311 9530042679 12.82 692590311 8879007787

12.18 692590311 8435749988 10.30 692590311 7133680203

14.9 692590311 10319595634 19.68 1222442218 24057662850

14 692590311 9696264354 16.70 1222442218 2041478504110.78 692590311 7466123553 13.54 1222442218 16551867632

8 692590311 55407224889.34 692590311 6468793505

ISPAT

_

X B 5433786540

_

X A 13000229230


50/52



GlaxoSmithKline Consumer Healthcare Ltd

Prior Merger Post merger


372.53 74475000 27744171750 650.1 74475000 48416197500349.00 74475000 25991775000 731.5 74475000 54478462500

330.45 74475000 24610263750 756.45 74475000 56336613750319.68 74475000 23808168000 723.8 87322546 63204058795

303.55 74475000 22606886250 707.5 87322546 61780701295

297.45 74475000 22152588750 736 87322546 64269393856

300.00 74475000 22342500000 731.95 87322546 63915737545308.33 74475000 22962876750 739 87322546 64531361494

354.03 74475000 26366384250 783.45 87322546 68412848664

361.00 74475000 26885475000 853.5 84703017 72294025010387.50 74475000 28859062500 920 84703017 77926775640

423.98 74475000 31575910500 874.08 84703017 74037213099454.50 74475000 33848887500 878.5 84703017 74411600435446.50 74475000 33253087500 1,029.50 84703017 87201756002

492.00 74475000 36641700000 1,095.03 84703017 92752344706

555.95 74475000 41404376250 1,012.33 84703017 85747405200

589.00 74475000 43865775000 1,042.25 84703017 88281719468621.00 74475000 46248975000 1,093.50 84703017 92622749090

601.50 74475000 44796712500 1,105.53 84703017 93641726384

642.98 74475000 47885935500 1,090.08 84703017 92333064771622.50 74475000 46360687500 1,033.50 84703017 87540568070

595.03 74475000 44314859250 1,014.63 84703017 85942222139

605.00 74475000 45057375000 1,109.50 84703017 93977997362617.53 74475000 45990546750 1,054.48 84703017 89317637366

640.50 74475000 47701237500

GSK

_

X B 34531048710

_

X A 76390590839


51/52



8.1 BIBLIOGRAPHY

Books

Approaches to M&A - Jangaiah Paladi

Financial Management- Ravi M Kishore

WEBSITES

www.capitalmarket.com

www.investopidia.com

www.finance.yahoo.org

www.jstor.org

Database

Capitaline

Prowess


52/52


8.2. References

Friedrich Trautwein (May-June 1991), merger motives and mergerprescriptions Strategic management journal, Vol.11, No.4, pp 283-295

Pieter T. Elgers; John J. Clark (1980), merger types and shareholdersreturns: additional evidence Financial management, Vol.9, No.2, pp 66-72

Tim Loughran and Anand M Vijh(Dec 1997), Do Long Term ShareholdersBenefit From Corporate Acquisitions The Journal of Finance, Vol.52, No. 5

Deepak K Dutta & George E. PinchesV.K Narayanan (1992), FactorsInfluencing Wealth Creation From Mergers And Acquisition: A Meta

Analysis" Strategic Management Journal Volume, Pages: 60-84

Documents

Mergers Creating Value to Shareholders Wealth