6209 Mergers and Acquisitions in India - An Analytical Study

MERGERS AND ACQUISITIONS IN INDIA-
AN ANALYTICAL STUDY
A Project Submitted to
University of Mumbai for partial completion of the degree of
BACHELOR OF COMMERCE (ACCOUNTING AND FINANCE)
Under the Faculty of Commerce
By
JOVAN CARDOZO
Roll No. 6209
Under the Guidance of

PROF. ABHISHEK SOOD
St. Andrews College of Arts, Science and Commerce
St. Dominic Road, Bandra West,
Mumbai, Maharashtra 400050.
MARCH 2021
MERGERS AND ACQUISITIONS IN INDIA-
AN ANALYTICAL STUDY
A Project Submitted to
University of Mumbai for partial completion of the degree of
BACHELOR OF COMMERCE (ACCOUNTING AND FINANCE)
Under the Faculty of Commerce
By
JOVAN CARDOZO
Roll No. 6209
Under the Guidance of

PROF. ABHISHEK SOOD
St. Dominic Road, Bandra West,
Mumbai, Maharashtra 400050.
MARCH 2021
St. Dominic Road, Bandra West, Mumbai,
Maharashtra 400050
Certificate
This is to certify that Mr. JOVAN CARDOZO (Roll No. 6209) has
worked and duly completed his Project Work for the degree of Bachelor of
Commerce (Accounting & Finance) under the Faculty of Commerce in the
subject of Accounting and Finance and her project is entitled,
“MERGERS AND ACQUISITIONS IN INDIA - AN ANALYTICAL
STUDY” under my supervision. I further certify that the entire work has
been done by the learner under my guidance and that no part of it has been
submitted previously for any Degree or Diploma of any University.
It is his own work and facts reported by his personal findings and
investigations.
Prof. Abhishek Sood

Signature of Guiding Professor
_____________________
Date of submission: _________________

DECLARATION BY LEARNER
I the undersigned Mr JOVAN CARDOZO (Roll No. 6209) hereby,

declare that the work embodied in this project work titled “MERGERS
AND ACQUISITIONS IN INDIA – AN ANALYTICAL STUDY”,
forms my own contribution to the research work carried out under the
guidance of PROF. ABHISHEK SOOD is a result of my own research
work and has not been previously submitted to any other University for any
other Degree/ Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.
Jovan Cardozo
Roll No. 6209
Signature of Learner
Certified by,
Prof. Abhishek Sood
Signature of Guiding Professor
_________________________
ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous, and the
depth is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me a

chance to do this project.
I would like to thank my Principal, Dr. Marie Fernandes for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Co-ordinator Prof. Abhishek Sood, for his
moral support and guidance.
I would also like to express my sincere gratitude towards my project guide Prof.
Abhishek Sood whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference
books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my Parents and Peers who supported
me throughout my project.
CONTENTS
1. INTRODUCTION ......................................................................................................... 1
1.1 Background ............................................................................................................... 1
1.2 Merger – Meaning .................................................................................................... 2
1.3 Acquisition – Meaning ............................................................................................. 3
1.4 Distinction between mergers and acquisitions ......................................................... 4
1.5 Types of mergers ...................................................................................................... 5
1.6 Motives behind Mergers & Acquisitions .................................................................. 7
1.7 Advantages of Mergers & Acquisitions ................................................................. 12
1.8 Disadvantages of Mergers & Acquisitions ............................................................. 14
1.9 Regulatory framework of Mergers & Acquisitions in India ................................... 15
1.10 Procedure of Merger ............................................................................................... 17
2. RESEARCH METHODOLOGY............................................................................... 20
2.1 Objectives ............................................................................................................... 20
2.2 Hypothesis of the study .......................................................................................... 20
2.3 Scope of the Study .................................................................................................. 21
2.4 Primary data collection and sampling type ............................................................. 21
2.5 Structure of the Study ............................................................................................. 22
2.6 Limitations of the Study ......................................................................................... 22
3. REVIEW OF LITERATURE .................................................................................... 23
3.1 Impact on Operating Performance .......................................................................... 24
3.2 Impact on Financial Performance ........................................................................... 27
3.3 Impact on Shareholders Wealth .............................................................................. 30
3.4 Impact on employees and cultural aspect of M&A’s ............................................. 33

4. DATA ANALYSIS AND INTERPRETATION ....................................................... 36
I. SECONDARY DATA .................................................................................................. 38
4.1 Sample Case Study I – Vodafone Idea Merger .................................................. 38
4.1.1 Analysis of Vodafone-Idea Ltd merger ........................................................... 38
4.1.2 Merger specifics, in brief................................................................................. 39
4.1.3 Motives for the merger .................................................................................... 40
4.1.4 Expectations from the merger ......................................................................... 40
4.1.5 Impact on operational and financial performance ........................................... 42
4.1.6 Impact on employees performance.................................................................. 45
4.1.7 Impact on Shareholder’s wealth ...................................................................... 45
4.2 Sample Case Study II – HUL GSK Acquisition................................................. 46
4.2.1 About the Companies ...................................................................................... 46
4.2.2 Deal Structure and Specifics ........................................................................... 47
4.2.3 Analysis of the Deal ........................................................................................ 48
4.2.4 Deal structure to save on taxes and cash pay-outs by HUL ............................ 48
4.2.5 Effect on business growth market reach product and customers .................... 49
4.2.6 Impact on Operational Performance................................................................ 50
4.2.7 Impact on Financial Performance.................................................................... 51
4.2.8 Impact on Shareholders Wealth ...................................................................... 51
4.2.9 Impact of the Merger on the Employees of GSK India ................................... 52
4.3 Sample Case Study 3 – Merger between Indian Bank and Allahabad Bank .. 53
4.3.1 Merger of Allahabad Bank .............................................................................. 54
4.3.2 Impact on Operational Performance................................................................ 54
4.3.3 Impact on Financial Performance.................................................................... 55
4.3.4 Impact on shareholders wealth ........................................................................ 55
4.3.5 Impact on Employees ...................................................................................... 56
II. PRIMARY DATA ................................................................................................. 58

5. CONCLUSION & SUGGESTIONS .......................................................................... 64
5.1 Findings & Conclusion of the Study ................................................................... 64
5.1.1 Motive of M&A............................................................................................... 64
5.1.2 Impact of M&A on operational and financial performance ............................ 64
5.1.3 Impact of M&A on shareholder wealth creation ............................................. 65
5.1.4 Impact on employees ....................................................................................... 65
5.1.5 Conclusion ....................................................................................................... 66
5.2 Suggestions ............................................................................................................ 66
BIBLIOGRAPHY................................................................................................................ 68
QUESTIONNAIRE ............................................................................................................. 69
ABSTRACT
Mergers and acquisitions ('M&A') activity in India is booming. In recent years, the number
of merger and acquisition transactions has risen significantly. The past decade has witnessed
a phenomenal growth of the Indian multinationals and is responsible for putting India back
on the world economic map.
Mergers and acquisitions are necessary for the growth of the Indian industry if they wish to
become global players and have a worldwide presence. It is evident that the appetite of Indian
companies for making global acquisitions has grown bigger with time. Tata Steel’s
acquisition of the European steelmaker Corus, the merger of Vodafone India with Idea
Cellular Limited, the consolidation and merger of Indian nationalised banks, etc. have seen a
flurry of M&A transactions by Indian corporate enterprises in the past decade. The basic
objective behind these mergers seems to be improve the core competencies, increase
competition both globally and domestically, improve debt-equity restructuring to reduce high
interest obligations, efficient utilization of assets to generate higher cash flows, utilise the
synergies to reduce costs, create a strong brand image, thereby creating wealth to the ultimate
shareholders.
This study is broadly categorised in five parts. Part 1 discusses the basic concept,
introduction, meaning, types of mergers, merits/demerits of mergers and acquisitions, the
procedure for merger and the regulatory framework in India governing M&A. Part 2 defines
the objectives, scope, structure, and research methodology. Part 3 deals with the previously
conducted research studies, both in India and globally. Part 4 discusses the findings collected
from secondary and primary sources and a detailed analysis of these findings. Lastly, Part 5
discusses about the conclusion of the study.
KEYWORDS: merger, acquisitions, synergy, operational performance, integration,

financial performance, shareholder’s wealth.
1. INTRODUCTION
1.1 Background
Generally, mergers and acquisitions are considered as similar corporate actions – they
combine previously two separate firms into a single legal entity. The purpose of such business
combinations is to gain significant operational advantages. In fact, the goal of most mergers
and acquisitions is to improve company performance and shareholder value over the long
term.
The motivation to pursue a merger or

acquisition can be considerable; a company
that combines itself with another can
experience boosted economies of scale,
greater sales revenue and growth in its
market, broadened diversification, and
increased tax efficiency. However, the
underlying business rationale and financing
methodology for mergers and acquisitions
are substantially different.
A merger involves the mutual decision of two companies to combine and become one entity.
It can be seen as a decision made by two “equals”. The combined business, through structural
and operational advantages secured by the merger, can cut costs and increase profits, boosting
shareholder value for both the groups of shareholders. A typical merger, in other words,
involves two relatively equal companies, which combine to become one legal entity with the
goal of producing a company that is worth more than the sum of its parts. In a merger of two
corporations, the shareholders usually have their shares in the old company exchanged for an
equal number of shares in the merged entity.
A takeover, or acquisition, on the other hand, is characterised as the purchase of a smaller

company by a much larger one. This combination of “unequal” can produce the same benefits
as a merger, but it does not necessarily have to be a mutual decision. A larger company can
initiate a hostile takeover of a smaller firm, which essentially amounts to buying the company
in the face of resistance from the smaller company’s management. Unlike in a merger, in an
acquisition, the acquiring firm usually offers a cash price per share to the target firm’s
MERGERS AND ACQUISITIONS IN INDIA- AN ANALYTICAL STUDY 1|P a g e

shareholders or the acquiring firm’s shares to the shareholders of the target firm according to
a specified conversion ratio. Either way, the purchasing-company essentially finances the
purchase of the target company, buying it outright for its shareholders.
In this context, it would be essential for us to understand what corporate restructuring and
mergers and acquisitions all are about.
1.2 Merger – Meaning
Merger involves the mutual decision of two companies to combine and become one entity.
The combined business can cut cost of operation and increase profit which will boost
shareholder’s value for both the company’s shareholders. In a merger of two corporations,
shareholders usually have their shares in the old organization and are exchanged for an equal
number of shares in the merged entity.
According to the Oxford dictionary, “merger” means “combining of two companies into
one”. Merger is a fusion between two or more enterprises, whereby the identity of one or
more is lost and the result is a single enterprise. In a merger the assets and liabilities of both
the companies get vested in another company, the company that is merged losing its identity
and its shareholders becoming shareholders of the other company. All assets, liabilities, and
the stock of one company are transferred to the Transferee Company in consideration of the
payment in the form of:
• Equity shares in the transferee company,

• Debentures in the transferee company,
• Cash or
• A mix of the above modes.
In a pure sense, a merger happens when two firms, often of the same or similar size, agree to
come forward and combine into a single new company rather than remain separately owned
and operated. This kind of action is more precisely referred to as a merger between equals.
For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged
and a new company, Daimler Chrysler, was created. In the alternative, one company can
cease to exist and merge into an existing Company. The merger of Vodafone India, where
Vodafone ceased to exist and merged into Idea Limited, creating the merged entity Vodafone-
Idea Limited.

1.3 Acquisition – Meaning
Acquisition in a general sense is acquiring the ownership of the property. In the context of
business combinations, an acquisition is the purchase by one company of a controlling
interest in the share capital of another existing company.
On the other hand, acquisition means purchase of a smaller company by much larger one. A
larger company can initiate an acquisition of a smaller firm which essentially amounts to buy
the company in the face of resistance from smaller company’s management. Unlike mergers,
in an acquisition, the acquiring firm usually offers a cash price per share to target firm’s
shareholders.
Acquisition means an attempt by one firm to gain majority interest in the other firm called
the “target firm” and dispose of its assets or to take the target firm private by small group of
investors. 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.
An acquisition may be affected by:
(a) Agreement with the persons holding majority interest in the company management like
members of the Board or major shareholders commanding majority of voting power.
(b) Purchase of shares in the open market.
(c) To make takeover offer to the general body of shareholders.
(d) Purchase of new shares by private treaty.
(e) Acquisition of share capital through the following forms of considerations viz., means of
cash, issuance of loan capital, or insurance of share capital.
There are broadly two kinds of strategies that can be employed in corporate acquisitions:
1. Friendly takeover:
The acquiring firm makes a financial proposal to the target firm’s management and
board. This proposal might involve the merger of the two firms, the consolidation of
the two firms, or the creation of parent/subsidiary relationship.
2. Hostile takeover:
A hostile takeover may not follow a preliminary attempt at a friendly takeover. For
example, it is not uncommon for an acquiring firm to embrace the target firm’s
management in what is colloquially called a bear hug.

1.4 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 acquisitions mean slightly different things. When one
company takes over another and clearly established itself as the new owner, the purchase
is called 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 single new company rather than remain separately owned and
operated. This kind of action is more precisely referred to as “merger of equals.” Both
companies’ stocks are surrendered, and new company stock is issued in its place. For
example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged,
and a new company, DaimlerChrysler, were created.
In practice, however actual mergers of equals do not 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 its 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.
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.

1.5 Types of mergers
1.5.1 Horizontal Merger:
This type of merger involves two firms that operate & compete in
a similar kind of business. Horizontal merger is based on the
assumptions that it will provide economics of scale from the larger
combined unit. The economies of scale are obtained by the
elimination of duplication of facilities, broadening the product
line, reduction in the advertising cost. Horizontal mergers also
have potentials to create monopoly power on the part of the
combined firm enabling it to engage in anti-competitive practices.
Examples:
• Mumbai – Glaxo India Limited and Smith Kline Beecham Pharmaceuticals
(India) Limited have legally merged to form GlaxoSmithKline
Pharmaceuticals Limited in India (GSK). A merger would let them pool their
research & development funds and would give the merged company a bigger
sales and marketing force.
• Merger of Centurion Bank & Bank of Punjab
• Merger between Holicim & Gujarat Ambuja Cement Ltd.
1.5.2 Vertical Merger:
A vertical merger involves merger between firms that are in

different stages of production or value chain. A company
involved in vertical merger usually seeks to merge with another
company or would like to take-over another company mainly to
expand its operations by backward or forward integration. The
acquiring company through merger of another’s units attempt to
reduce inventory of raw materials. The basic purpose of vertical
merger is to eliminate cost of searching raw materials. Vertical
merger takes place when both firm plans to integrate the
production process and capitalize on the demand for the product.
A company decides to get merged with another company when

it is not in a position to get strong position in a market because of imperfect market of
intermediary product, scarcity of resources.
Examples: - Among the Indian corporate that have emerged as big international
players is the Videocon group. The group became the third largest colour picture tube
manufacturer in the world when it announced the purchase of the colour picture tube
business of France-based Thomson SA, which includes units in Mexico, Poland, and
China, for about RS. 1260 crore.
1.5.3 Conglomerate merger:
Conglomerate merger means mergers between firms engaged in

unrelated types of business activity. The basic purpose of such
combination is utilization of financial resources. Such type of merger
enhances the overall stability of the acquirer company and creates
balance in the company’s total portfolio of diverse products and
production processes and thereby reduces the risk of instability in the
firm’s cash flows.
Conglomerate mergers can be distinguished into three types:

1. Product Extension Mergers:
These are mergers between firms in related business activities and may also called
concentric mergers. These mergers broaden the product lines of the firms.
2. Geographic market extension mergers:
These involve a merger between two firms operating in two different geographic
areas.
3. Pure conglomerates mergers:
These involve mergers between two firms with unrelated business activities. They
do not come under product extension or market extension.

1.6 Motives behind Mergers & Acquisitions
There are many reasons or factors that motivate companies to go for mergers and acquisitions
such as growth, synergy, diversification etc.
1.6.1 Growth: One of the most common reason for merger is growth. There are two
broadways a firm can grow. The first is through internal growth. This can be slow and
ineffective if a firm is seeking to take advantage of a window of opportunity is to merge
and acquire the necessary resources to achieve competitive goals.
Even though bidding firms will pay a premium to acquire resources through mergers,
this total cost is not necessarily more expensive than internal growth, in which the firm
has to incur all of the costs that the normal trial and error process may impose. While
there are exceptions, in the vast majority of cases growth through mergers and
acquisitions is significantly faster than through internal means.
Mergers can give the acquiring company an opportunity to grow market share without
having to really earn it by doing the work themselves – instead, they buy a competitor’s
business for a price. Usually, these are called horizontal mergers. For example, a beer
company may choose to buy out a smaller competing brewery, enabling the smaller
company to make more beer and sell more to its brand-loyal customers.
Example – RPG group had a turnover of only Rs 80 crores in 1979, which has increased
to about Rs. 5600 crores in 1996. This phenomenal growth was due to the acquisitions
of several companies by the RPG group. Some of the companies acquired are Asian
Cables, Calcutta Electricity Supply and Company, etc.
1.6.2 Synergy: Another commonly cited reason for mergers is the pursuit of synergistic
benefits. The most commonly used word in Mergers & Acquisitions is synergy, which
is the idea of combing business activities, for increasing performance and reducing the
cost. Essentially, a business will attempt to merge with another business that has
complementary strengths and weaknesses. This is the new financial math that shows
that 1+1=3. That is, as the equation shows, the combination of two firms will yield a
more valuable entity than the value of the sum of the two firms if they were operating
independently.
Value (A+B) > Value (A) + Value (B)

Although many merger partners cite synergy as the motive for their transaction,
synergistic gains are often hard to realize. There are two types of synergy one is derived
from cost economies and other one is derived from revenue enhancement.
Cost economies are the easier to achieve because they often involve eliminating
duplicate cost factors such as redundant personnel and overhead. When such synergies
are realized, the merged company generally has lower per- unit costs. Revenue
enhancing synergy is more difficult to predict and achieve. An example would be a
situation where one company’s capability, such as research process, is combines with
another company’s capability, such as marketing skills, to significantly increase the
combined revenues.
1.6.3 Diversification: Other reasons for mergers and acquisitions includes diversification. A
company That merges to diversify may acquire another company engaged in unrelated
industry in order to reduce the impact of a particular industry’s performance on its
profitability. The track record of diversifying mergers is generally poor with a few
notable exceptions. A few firms, such as General Electric, seem to be able to grow and
enhance shareholders wealth while diversifying. However, this is the exception rather
than a norm. Diversification may be successful, but it needs more skill and
infrastructure than some firms have.
1.6.4 Economies of scale: Yes, size matters. Whether it is purchasing stationery or a new
corporate its 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. This refers to the fact that the combined company can often
reduce duplicate departments or operations, lowering the costs of the company relative
to theoretically the same revenue stream, thus increasing profit.
1.6.5 Increase Market Share & Revenue: This reason assumes that the company will be
absorbing a major competitor and increasing its power (by capturing increased market
share) to set prices. 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.
Example: Premier and Apollo Tyres.
1.6.6 Increase Supply-Chain Pricing Power: By buying out one of its suppliers or one of
the distributors, a business can eliminate a level of costs. If a company buys out one of
its suppliers, it is able to save on the margins that the supplier was previously adding to
its costs; this is known as a vertical merger. If a company buys out a distributor; it may
be able to sale its product at a lower cost.
1.6.7 Eliminate Competition: Many mergers and acquisitions deals allow the acquirer to
eliminate future competition and gain a larger market share in its product’s market. The
downside of this is that a large premium is usually required to convince the target
company’s shareholders to accept the offer. It is not uncommon for the acquiring
company’s shareholders to sell their shares and push the price lower in response to the
company paying too much for the target company.
1.6.8 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 and vice versa.
1.6.9 Procurement of production facilities: Procurement of production facilities may be a

reason for acquiring company to go for mergers and acquisition. It is a kind of backward
integration. Acquiring firms will take the decision of merging with another firm who
supplies raw material to acquiring firm in order to safeguard the sources of supplies of
raw material or intermediary product. It will help acquiring firm to bring economies in
purchasing of raw material. It will also help to cut down the transportation cost.
Example: Videocon takes over Thomson picture tube in China to procure supply of
picture tube required for producing television sets.

1.6.10 Market expansion strategy: Many firms go for mergers and acquisitions as a part of
market expansion strategy. Mergers and acquisitions will help the company to eliminate
competition and to protect existing market. It will also help the firm to obtain new
market for promoting their existing or obsolete products.
Example, Lenovo takes over IBM in India to increase market for Lenovo products like
desktops, laptops in India.
1.6.11 Financial synergy: Financial synergy may be the reason for mergers and acquisitions.
Following are the financial synergy available in the case of mergers and acquisitions.
• Better credit worthiness- This helps companies to purchase good on credit, obtain
bank loan and raise capital in the market easily.
• Reduces cost of capital- The investors consider big firms as safe and hence they expect
lower rate of return for the capital supplied by them. So, the cost of capital reduces after
merger.
• Increase debt capacity- After the merger, the earnings and cash flows become more
stable than before. This increases the capacity of the firm to borrow more funds.
• Rising of Capital: After the merger due to increase in the size of the company, better
credit worthiness and reputation the company can easily raise the capital at any time.
1.6.12 Own development plans: The purpose of mergers & acquisition is backed by the
acquiring company’s own developmental plans. A company thinks in terms of acquiring
the other company only when it has arrived at its own development plan to expand its
operation having examined its own internal strength where it might not have any
problems of taxation, accounting, valuation, etc. but might feel resource constraints
with limitations of funds and lack of skill managerial personnel. It has to aim at suitable
combination where it could have opportunities to supplement its funds by issuance of
securities; secure additional financial facilities eliminate competition and strengthen its
market position.
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1.6.13 Corporate friendliness: Although it is rare, but it is true that business houses exhibit
degrees of cooperative spirit despite competitiveness in providing rescues to each other
from hostile takeovers and cultivate situations of collaborations sharing goodwill of
each other to achieve performance heights through business combinations. The
combing corporate aims at circular combinations by pursuing this objective.
1.6.14 General Gains:

I. To improve its own image and attract superior managerial talents to manage its affairs.
II. To offer better satisfaction to customers or users of the product.
1.6.15 Taxes: A profitable company can buy a loss maker to use the target’s loss as their
advantage by reducing their tax liability. In the United States and many other countries,
rules are in place to limit the ability of profitable companies to “shop” for loss making
companies, limiting the tax motive of an acquiring company.
 Ahmadabad Cotton Mills Merged with Arvind Mills (Rs. 3.34 crores)
 Sidhaper Mills merged with Reliance Industries Ltd. (Rs. 3.34 crores)

1.7 Advantages of Mergers & Acquisitions
Mergers and acquisitions are the permanent combination of the business which vest
management in the complete control of the business of merged firm. Shareholders in the
selling company gain from the mergers and acquisitions as the premium offered to induce
acceptance of the merger or acquisitions. It offers much more piece than the book value
of shares. Shareholders in the buying company gain premium in the long run with the
growth of the company.
Mergers and acquisitions are caused with the support of shareholders, managers, and
promoters of the combing companies. The advantages, which motivate the shareholders
and managers to give their support to these combinations and the resulting consequences
they have to bear, are briefly noted below.
 From shareholders point of view: Shareholders are the owners of the company so
they must be benefited from the mergers and acquisitions. Mergers and acquisitions
can affect fortune of shareholders. Shareholders expect that investment made by
them in the combing companies should enhance when firms are merging. The sale
of shares from one company’s shareholders to another and holding investment in
shares should give rise to greater values. Following are the advantages that would
generally be available in each merger and acquisition from the point of view of
shareholders:
1. Face value of the share is increased.
2. Shareholders will get more returns on the investment made by them in the
combing companies.
3. Sale of shares from one company’s shareholder to another is possible.
4. Shareholders get better investment opportunities in mergers and
acquisitions.

 From Promoters point of view:
1. Mergers offer company’s promoters advantages of increase in the size of their
company, financial structure, and financial strength.
2. Mergers can convert closely held and private limited company into public
limited company without contributing much wealth and losing control of
promoters over the company.
 From Consumers point of view: Consumers are the king of the market so they
must get some benefits from mergers and acquisitions. Benefits in favour of the
consumer will depend upon the fact whether or not mergers increase or decrease
competitive economic and productive activity which directly affects the degree of
welfare of the consumers through changes in the price level, quality of the products
and the after sales service etc.
Following are the benefits that consumers may derive from mergers and
acquisitions transactions:
1. Low price & better-quality goods: The economic gains realized from
mergers and acquisitions are passed on to consumers in the form of low
priced and better-quality goods.
2. Improve standard of living of the consumers: Low priced and better-
quality products directly improve the standard of living of the consumers.

1.8 Disadvantages of Mergers & Acquisitions
Mergers and acquisitions of two companies in the same field or in diverse field may
involve reduction in the number of competing firms in an industry and tend to dilute
competition in the market. They generally contribute directly to the concentration of
economic power. It may result in lesser substitutes in the market, which would affect
consumer’s welfare. Yet another disadvantage may surface, if a large undertaking after
merger because of resulting dominance becomes complacent and suffers from
deterioration over the years in its performance. Following are some disadvantages of
mergers and acquisitions.
• Creates monopoly- When two firms merged together get dominating position in
the market which may lead to create monopoly in the market.
• Leads to unemployment- Raiders should not have the right to buy up firms they
have no idea how to run – the employees who have spent their lives building up
the firm should be making decisions.
• Raiders become filthy rich without producing anything, at the expense of
hardworking people who do produce something.
• M&A damages the morale and productivity of firms.
• Corporate debt levels have risen to dangerous levels.
• Managers pressured to forego long- term investment in favour of short-term
profit.
• Shareholders may be paid lesser dividend if the firm is not making profits. There
may be a possibility that shareholders would be paid less returns on investment if
the company is not earning enough profit.
• Corporate raiders use their control to strip assets from the target, make a quick
profit, destroying the company in the process, throwing people out of work.

1.9 Regulatory framework of Mergers & Acquisitions in India
1.9.1 Company Law
An acquisition of shares is permissible with prior approval of the audit committee and board
of directors. Share sale between related parties may also require prior shareholder’s approval.
As per sections 230-234 of the Companies Act, 2013, all “schemes of arrangement” now
require approval of the National Company Law Tribunal (NCLT). Procedurally, any scheme
is first approved by the audit committee, the board of directors, stock exchanges (if shares
are listed) and then by the shareholders/creditors of the company with a requisite majority
(i.e., majority in number and 3/4th in value of shareholders/creditors voting in person, by
proxy or by postal ballot. NCLT will give its final approval to the scheme after considering
the observations of the Regional Director, Registrar of Companies, Official Liquidator,
income tax authorities, other regulatory authorities (RBI, stock exchanges, SEBI,
Competition Commission of India, etc.
1.9.2 Income-tax Act, 1961
A classical amalgamation and demerger—i.e., amalgamation/demerger involving issuance of

shares to shareholders to at least 3/4th in value of shares of the transferor company—is a tax-
neutral transaction subject to the fulfilment of certain conditions. The Income-tax Act also
provides for continuity of business losses to the transferee entity subject to the fulfilment of
certain conditions. In case of a slump sale/sale of shares of an unlisted company, capital gains
tax is chargeable at the rate of 20% or 30% on the resultant capital gains depending upon the
period for which the undertaking/shares are held. In case of a sale of shares of a listed
company, the capital gains arising on transfer of such shares on the stock exchanges would
be exempt from capital gains tax or would be chargeable at the rate of 15% depending on the
period for which such listed shares are held.
1.9.3 Securities laws
Any acquisition of shares of more than 25% of a listed company by an acquirer would trigger
an open offer to the public shareholders. Any merger or demerger involving a listed company
would require prior approval of the stock exchanges and SEBI before approaching NCLT.
Further, under the Takeover Code, a merger or demerger of a listed company usually does
not trigger an open offer to the public shareholders.

1.9.4 Foreign exchange regulations
Sale of equity shares involving residents and non-residents is permissible subject to RBI
pricing guidelines and permissible sectoral caps. A typical merger/demerger involving any
issuance of shares to a non-resident shareholder of the transferor company does not require
prior RBI/government approval provided that the transferee company does not exceed the
foreign exchange sectoral caps and the merger/demerger is approved by the Indian courts.
Issuance of any instrument other than equity shares/compulsorily convertible preference
shares/ compulsorily convertible debentures to the non-resident would require prior RBI
approval as they are considered as debt.
1.9.5 Competition regulations
Any acquisition requires prior approval of CCI if such acquisition exceeds certain financial
within a common group. While evaluating an acquisition, CCI would mainly scrutinise if the
acquisition would lead to a dominant market position, resulting in an adverse effect on
competition in the concerned sector.
1.9.6 Stamp duty
The Indian Stamp Act, 1899, provides for stamp duty on transfer/issue of shares at the rate
of 0.25%. In case the shares are in dematerialised form, there would be no stamp duty on
transfer of shares. Conveyance of business under a business transfer agreement in the case of
a slump sale is charged to stamp duty at the same rate as in the case of conveyance of assets.
Typically, a scheme of merger/demerger is charged to stamp duty at a concessional rate as
compared to conveyance of assets. The exact rate levied depends upon the specific entry
under the respective state laws.

1.10 Procedure of Merger
1.10.1 Search for merger partner
The first step in mergers is to search for merger partner/ The top management may use their
own contact in the same line of the economic activity or in the other diversified field which
could be identified as a better merger partner. Such identification should be based on the
detail information of the merger partners collected from public and private sources.
1.10.2 Agreement between the two companies:
The beginning of actual merger procedure starts with the agreement between the merging
companies, but mere agreement does not provide egal cover to the transaction unless it is
sanctioned by the Court under section391 of Companies Act 1956.
1.10.3 Scheme of merger:
The scheme of merger should be prepared by the companies which have taken decision of
merging. There is no specific form prescribed for scheme of merger, but scheme should
contain following information:
• Particulars about the merging companies.
• Main terms of transfer of assets and liabilities from transferor to transferee.
• Conditions of conducting business.
• Particulars about share capital of merging companies specifying authorized
capital, issued capital and paid-up capital.
• Description of proposed profit-sharing ratio and any condition attached to it.
• Conditions about payment of dividend.
• Status of employees of the merging companies and also status of provident fund,
gratuity fund or any funds created for the benefits of existing employees.
• Treatment of debit balance of merging companies.
• Miscellaneous provisions covering income tax dues, contingencies, and other
accounting entries.

1.10.4 Approval of Board of Directors for the scheme:
The scheme for merger must be approved by the respective Board of Directors of transferor
and transferee companies.
1.10.5 Approval of scheme by financial institutions:
The Board of Directors should in fact approve the scheme after it has been approved by the
financial institutions, debenture holders, banks which have granted loans to the companies.
Approval of the Reserve Bank of India is also needed.
1.10.6 Application to the Court:
The next step is to make an application under section 39(1) of the Indian Companies Act
1956 to the high court for getting permission for merging between companies.
1.10.7 Approval of scheme by the Court:
On the receipt of the application for merger the court will decide whether to approve the
scheme of merger or not. Once the Court has approved the application then firms can merge.
1.10.8 Transfer of assets and liabilities:
The High Court has the power to give order for the transfer of any property from Transferor
Company to Transferee Company. By the virtue of such order assets and liabilities of the
Transferor Company shall automatically stand transferred to Transferee Company.
1.10.9 Allotment of shares to shareholders of transferor company:
By the virtue of sanctioned scheme of merger, the shareholders of the Transferor Company
are entitled to get shares in Transferee Company in the exchange of ratio provided under the
said scheme.
1.10.10 Intimation to stock exchanges:
After merger is affected, the company which takes assets and liabilities of the Transferor
Company should apply to the Stock Exchanges where its securities are listed, for listing the
new shares allotted to the shareholders of the company.
1.10.11 Public Announcement:
Public Announcement of merger is mandatory as required under SEBI regulations. The

Transferee Company shall appoint merchant bank to make a public announcement of merger
on the behalf of Transferee Company. Public announcement shall be made at least in one
national English daily newspaper, one Hindi daily newspaper and one regional language daily
newspaper of that place where the shares of that company are listed and traded. Public
announcement should be made within four days from the finalization of negotiations or
entering into any agreement of merger. Public announcement should contain following
information:
• Paid up share capital of the transferee company, the number of fully paid-up shares
and partially paid-up shares. The minimum offer price for each fully paid up or
partly paid-up shares. Mode of payment of consideration.
• Salient features of the agreement, if any, such as the date, the name of the seller,
the price at which the shares are being acquired, the manner of payment of the
consideration and the number and percentage of shares in respect of which the
acquirer has entered into the agreement to acquire the shares or the consideration,
monetary or otherwise, for the acquisition of control over the transferee company,
as the case may be.
• Objects and purpose of the merger and acquisitions and the future plans of the
transferor company for the transferee company.
• The date of opening and closure of the offer and the manner in which and the date
by which the acceptance or rejection of the offer would be communicated to the
shareholders.
• The date by which the payment of consideration would be made for the shares in
respect of which the offer has been accepted.
• Approvals of banks or financial institutions required, if any.
• Such other information as is essential for the shareholders to make them informed
about the offer.

2. RESEARCH METHODOLOGY
2.1 Objectives
 To understand whether mergers and acquisition result in increase in operational
performance for the merged entity.
 To ascertain whether an increase in the revenue/ market share necessarily results
in increase in net profit after tax for the merged entity and an enhanced financial
performance.
 To analyse the impact of mergers and acquisition on shareholders’ value creation.
 To analyse the impact of mergers and acquisition on human resource post-merger.
 To get the views of different professional advisors on mergers and acquisition
transactions trends in India.
 To analyse the purpose/rationale behind mergers and acquisitions undertaken by
industry players.
2.2 Hypothesis of the study

We will proceed with the study using the following assumption:
(1) H0: There is no significant increase in the operating efficiency and financial
performance position of the acquirer company in the post-acquisition period.
H1: The operating efficiency and financial performance of the acquirer company
significantly improves post-acquisition.
(2) H0: There is no significant difference in shareholder value of the merged entity.
H1: Shareholder Value/wealth of shareholders improves post-merger.
(3) H0: Mergers do not have an impact on employee’s absorption and retention despite
the cultural differences between the merged entities.
H1: Cultural differences adversely impact employee’s absorption and retention in
the merged entity.

2.3 Scope of the Study
 The study is primarily based on secondary data analysis and sample case studies of
recent M&A transactions like merger of Vodafone Idea and Idea Cellular, acquisition
by Hindustan Unilever Ltd of GSK Consumer and merger of Allahabad Bank with
Indian Bank.
 The part of the study dealing with the whole concept and regulatory framework of
merger and acquisition is collated through secondary data.
 The secondary data is obtained from the internet, newspapers, magazines, web sites
of companies contemplating, or which have undertaken merger transactions in the
recent past.
 The study relating to impact and analysis of the M&A activity in India is covered
using primary data.
2.4 Primary data collection and sampling type
 Primary data is the first-hand information obtained through surveys conducted

among existing senior executives and employees of some big multi-national
Companies/ Advisory firms functioning in Mumbai advising corporates on merger
and acquisition deals
 The tool used for collecting primary data was through questionnaire. Forms app was
the app used for collecting the primary data.
 The sample has not been chosen at random, as is required mathematically for
calculating margins of error and confidence levels of sample data. The sample has
been selected based on a non-random criteria i.e., non-probability sampling.
 The survey respondents were identified based on targeted approach. The sample has
been selected based on the convenience of the researcher.
 A total of 28 respondents who are professionals with expertise in the M&A area from
Mumbai responded to the questionnaire with their views. The professional
background of respondents was a blend of experts from the corporates as well as
M&A advisory and practice.
 The survey process involved two stages: First phase included identification and
selection of the target audience to be studied and to determine the parameters on
which the respondents will justify their preferences. A questionnaire was designed

to collect the needed information from the respondents. The second phase involved
collection of the primary data by making the respondents fill up questionnaires.
2.5 Structure of the Study

This study is broadly categorised in five parts. Part 1 discusses the basic concept,
introduction, meaning, types of mergers, merits/demerits of mergers and acquisitions
and the regulatory framework in India governing M&A. Part 2 defines the objectives,
scope, structure, and research methodology. Part 3 deals with the previously
conducted research studies, both in India and globally. Part 4 discusses the findings
collected from primary and secondary sources and a detailed analysis of these
findings. Lastly, Part 5 discusses about the findings, conclusion and provides
suggestions on of the study.
2.6 Limitations of the Study

• The study is limited to the M&A transactions initiated during the financial year
2017-18 onwards in India.
• Results are just an indication of the present scenario and may not be applicable in
the future.
• Many strategic and non-financial motives may also influence the performance of
the sample firms. Such motives fell outside the scope of this study and were not
considered for the present study.
• Mode of financing the merger and acquisition could make a difference but has not
been taken into consideration.
• As the study was conducted only in Mumbai, it can be said that the study has a
regional bias.
• The primary data contains information collated from senior executives who are
consultants/advisors to merger and acquisition transactions in India and hence
may not represent the whole universe.
• The post-merger analysis is for a period of less than 3 years and in some cases
nine months. The impact of M&A transactions, however, needs to be analysed on
a long-term basis.
• The disruption in the business and operational activities due to the Covid-19
pandemic may have an influence on the future projections/ benefits envisaged at
the time of merger.

3. REVIEW OF LITERATURE
The financial goal of modern corporate entities is the maximization of firm’s value with the
purpose to deliver superior returns to shareholders. Mergers and acquisitions are one of the
important strategies used by the corporate entities to attain synergies, tax savings, to
consolidate (Neelam Rani, Surendra S. Yadav, P. K. Jain, 2012; Arora, 2003; Seth, Song and
Pettit, 2000; Eun, Kolodny, and Scheraga, 1996). Various authors have put several theories
to explain the motives behind M&A’s. It includes efficiency theory-to achieve synergy,
monopoly theory-creating barriers to entry, valuation theory-where bidder managers have
unique information about the possible advantages they will derive by combining their
business with the target business, empire building theory-where managers maximise their
own utility instead of the shareholders, raider theory-where acquirers acquire a controlling
stake in a target firm to transfer wealth from target to bidder firms, and bankruptcy motive-
where firms choose merger or to be acquired in order to prevent themselves from going
bankrupt (Maria Evelyn Jucunda, 2013; Juanjuan Wang, 2007; Michael Lubatkin, 1983).
Besides, Friedrich Trautwein (1990) and Patrica M. Danzon, Andrew Epstein and Scan
Nicholson (2004), have concluded that economies of scale, economies of scope, higher
growth avenues, low concentrated businesses and higher cash flows are also drivers of
M&A’s.
It thus becomes clear that M&A's are aimed to create and deliver superior value to
shareowners. This raises few research questions for the academicians and practitioners to
explore. The most fundamental questions include: Whether the financial goals with which
mergers and acquisitions are aimed are achieved by and large? Why some mergers and
acquisitions fail to achieve the intended goals? The other relevant research question would
be to assess the impact of M&A's on employees. To address these and other research
questions related to M&A's, many studies have been conducted worldwide including India.
The literature on M&A’s is quite diverse. Most of the research has been on the impact of
M&As through their pre- and post-performance analysis, on operating performance, financial
performance, and shareholders’ wealth. The review of the studies has been presented in four
sections: impact of mergers and acquisitions on operating performance, financial
performance, shareholders' wealth, and employees/ cultural aspects of M&A's.

3.1 Impact on Operating Performance
This part of the study focuses on the analysis of changes in operating performance post M&A.
The work by Healy et al. (1992), serves as the primary standard of comparison for examining
operating performance. The operating performance was measured as operating cash flow
returns on tangible assets. Accounting performance measures represent actual economic
benefits.
The other notable studies on operating performance have been done by Jeannette A. Switzer
(1996), Ghosh (2001), who have used Healy’s research design. Healy, Palepu, Ruback
(1992), Ghosh (2001), defined operating cash flows as sales minus cost of goods sold, minus
selling and administrative expenses, plus depreciation and goodwill amortisation expenses.
Operating performance acts as a means to determine whether the benefits from mergers and
acquisitions are actually realised through operating cash flows as opposed to share price
appreciation, Andrade et al. (2001).
Jeannette A. Switzer (1996) examined the change in operating performance of merging firms
between 1967 and 1987 and has found that there were significant improvements in operating
performance post-merger. Statistically, significant improvements in both the cash flow
operating margin and in asset utilization was observed. The post-merger increase in operating
cash flow return was strongly positively linked to the abnormal stock returns at the merger
announcement. Factors such as the offer size, industry relatedness etc. have not found to
affect the results. Overall, the study concluded that mergers led to synergistic gains and better
performance in the long-term.
Aloke Ghosh (2001), analysed whether operating performance really improved following
corporate acquisitions or not. The sample consisted of large acquisitions between 1981 and
1995. It has been found that the post-acquisition operating cash flow did not increase when
control firms matched on performance and sizes were used as a benchmark. Acquisitions
failed to achieve synergetic gains. The study used control firms as benchmarks, instead of
using industry-median benchmarks (Healy, Palepu and Ruback, 1992).

Patricia M. Danzon, Andrew Epstein and Sean Nicholson (2004), examined the effects of
merger activity in the pharmaceutical/ biotechnology industry from 1988 to 2001. The study
has found that the firms that experienced merger had slower growth in operating profit as
compared to the similar firms that did not merge. For smaller firms, mergers were mainly an
exit strategy in response to a financial trouble.
Ken C. Yook (2004), examined post-acquisition performance of acquiring firms that

experienced acquisitions occurring during 1989 to 1993. The study has shown that acquiring
firms significantly experienced deterioration in operating performance post-acquisition. The
results further suggested that acquiring firms experienced slightly improved performance
relative to their industry counterparts immediately after completion of the acquisition. But
the improved operating performance was wiped out by capital costs of the large premiums
paid to the target firm, creating no real economic gains to the acquiring firm’s shareholders.
R. Abdul Rahmana and R. J. Limmack (2004), analysed whether acquisitions involving

Malaysian companies over the period from 1988-1992 led to improvements in long run
operating cash flow performance or not. The study has revealed that the operating cash flow
performance for combined firms has been found to have improved significantly following
acquisitions providing potential for benefits to both the economy as a whole and to bidding
company shareholders. The improvements in post-acquisition performance were driven both
by an increase in asset productivity and higher level of operating cash flow per unit of sales.
These improvements were not achieved at the expense of the long-term viability of the
combined firms, as they were also accompanied by an increase in the level of capital
investment. It was also found that acquirers who made no immediate change to the
management team of the target company following the acquisition also achieved a greater
increase in post-acquisition performance.
Kruse, Park and Suzuki (2007) examined the long-term operating performance of Japanese
companies using a sample of 56 mergers of manufacturing firms in the period 1969 to 1997.
By examining the cash-flow performance of a five-year period following mergers, the study
has found evidence of improvements in operating performance. The study concluded that
control firm adjusted long-term operating performance following mergers in case of Japanese
firms was positive but statistically insignificant.

Ismail et al. (2011), examined operating performance of Egyptian companies involved in
merger and acquisition transactions in construction and technology sectors during the period
1996 to 2003. It was found that M&A failed to result into improved operating performance
of the Egyptian companies’ post-merger. With respect to both the sectors, the findings
revealed that no improvements were found in efficiency and cash flow position post-merger
and acquisition.
Choi and Harmatuck (2006), studied M&A deals in the construction industry in U.S between
1980 and 2002. Operating cash flows were used as an indicator to determine operating
performance. It was found that the operating performance reported slight improvement but at
an insignificant level. Regarding the management of wealth maximization, the size of firms
dramatically increased after the integration of the firms, and the operating performance has
slightly improved compared with the pre-event supporting the argument that managers tend
to increase their own wealth rather than shareholders’ wealth.
Paul M. Healy, Krishna C. Palepu, and Richard S. Rubak (1992), examined the post-merger
operating performance of merging firms using a sample of the 50 largest mergers of U.S.
public industrial firms completed in the period 1979 to 1983. The study found that merging
firms had witnessed significant improvements in operating cash flow returns after the merger,
resulting from increase in asset productivity relative to their industries. These cash flow
improvements did not come at the expense of long-term performance, as the sample firms
have been found to have maintained their capital expenditure and investments in R&D rates
relative to their industries after the merger. A strong positive relation between post-merger
increase in operating cash flows and abnormal stock returns at merger announcements was
also found.
K. Ramakrishnan (2008) analysed whether mergers in India have helped firms perform better
in the long run during the period 1996 to 2002 & has concluded that, on an average, merging
firms in India appear to have performed financially better post-merger. The study has further
revealed that the long-term post-merger operating profit margin of firms, on an average,
improved. Synergistic benefits appeared to have accrued to the merging entities due to the

transformation of the uncompetitive, fragmented nature of Indian firms before merger into
consolidated and operationally more viable business units.
3.2 Impact on Financial Performance
Operating performance as explained above, reflect the performance of the top-line i.e., sales
growth and operating margin. Improvements or no improvements in operating performance
may lead to better or poor financial performance due to the changes in financial structure
consequent upon a M&A activity. Therefore, it becomes important to study the performance
separately. Financial performance is measured in terms of profitability in relation to
investments in assets.
Yener Altunbas and David Marques (2007), assessed whether strategic fit between financial
institutions involved in mergers and acquisitions played an important role in improving post
deal financial performance or not. They studied mergers and acquisitions that took place in
the European Union banking sector between 1992 and 2001. In terms of the impact of
strategic relatedness on performance, the overall results have shown that broad similarities
between combining partners were conducive to improved performance, both for domestic
and for cross-border M&A’s. For domestic deals, it was found that dissimilarities in earnings,
loan and deposit strategies had a deleterious effect on performance, whereas differences in
capitalisation, technology and innovation strategies were found to improve performance. By
contrast, for cross-border M&A’s, differences in loan and credit risk strategies were
performance-enhancing, whereas a lack of coherence in capitalisation, technology and
financial innovation strategies had a negative effect on performance.
Hubert Ooghe, Elisabeth Van Laere and Tine de Langhe (2006) analysed post-acquisition
performance of privately held Belgian companies between 1992-1994. The study revealed
that acquisitions did not improve the performance of the acquiring firms as measured by their
profitability, liquidity, and solvency ratios. Possible reasons for the apparent decrease in
profitability might have been loss of managerial control problems which acquirers experience
while managing and integrating their acquisitions.

Choi and Russell (2004) determined whether mergers and acquisitions in the construction
sector in U.S. made any positive contributions to the performance of merging companies.
They studied the deals that occurred between 1980 and 2002 and determined the factors that
might have affected post-merger and acquisition performance as: method of payment,
acquisition timing and transaction size. It was found that the firms experienced insignificant
improvements in performance and the method of payment, acquisition time, or target status,
related diversifications, unrelated diversifications had no impact on post-merger or
acquisition performance. Unlike the majority of studies that supported the method of payment
as a primary factor influencing mergers and acquisitions, Choi, and Russell (2004) found no
evidence to support such results.
Ahmed Badreldin and Christian Kalhoefer (2009), using financial ratios, measured the
performance of Egyptian banks that have undergone mergers or acquisitions during the period
2002-2007. It was found that mergers and acquisitions have not led to significant
improvements in performance when compared to their performance before the deals. The
findings thus suggested that the process of financial consolidation and banking reforms have
not achieved their desired results in improving the banking sector in Egypt during the
reference period.
Katsuhiko Ikeda and Noriyuki Doi (1983) analysed the performances of 49 merging firms in
Japanese Manufacturing Industry which were engaged in mergers during the period 1964-75.
The study has revealed that in half the cases, managerial performances improved in the long
run, while the performances in the short run were inferior, reflecting the intra-firm adjustment
after mergers. In case of "big mergers", majority of the cases showed improved profitability.
However, the mergers between failing firms did not show improvement in managerial
performance. Overall, the study concluded that mergers resulted in enhancing profitability in
Japanese manufacturing industry.
Ramaswamy and Waegelein (2003), evaluated the long-term post-merger financial

performance of merging companies in Hong Kong to determine relationships between post-
merger performance and firm size, the compensation plan, and industry type. The sample
consisted of 162 merging firms from the period 1975 to 1990. The results concluded that
there was a positive significant improvement in the post-merger performance. Firms

acquiring relatively larger firms had more difficult time in effectively assimilating them into
the company's operations. Firms with long-term compensation plans had positive post-merger
financial performance. Firms in dissimilar industries (conglomerate mergers) experienced
better post-merger financial performance than firms in similar industries.
Muhammad Ahmed and Zahid Ahmed (2014) analysed the post-merger financial
performance of the acquiring banks in Pakistan during the period 2006-2010. The study has
found that the financial performance of merging banks improved in the post-merger period
but insignificantly. Post-merger profitability improved insignificantly, liquidity significantly,
capital leverage insignificantly while as assets quality parameter showed a significant
deterioration.
Pulak Mishra and Tamal Chandra (2010), studied the impact of M&A on the financial
performance of Indian Pharmaceutical Industry over the period from 2000-01 to 2007- 08. It
was found that the profitability of a firm depends directly on its size, selling efforts and export
and import intensities but inversely related to their market share and demand for the products.
M&A’s have not been found to any significant impact on profitability in the long run due to
entry of new firms in the market. Contrary to this, the study of Neena Sinha, K.P. Kaushik,
Timcy Chaudhary (2010), who examined the impact of mergers on the financial efficiency
of select financial institutions in India during the period 2000-2008 has indicated an improved
financial performance in post-merger period.
Pankaj Sinha and Sushant Gupta (2011), studied the impact of mergers in the Indian Financial
Services Sector during the period 1993-2010 & has found that merger activity had positive
effect on the profitability in of the majority cases but the liquidity position has deteriorated
after the mergers pointing to the fact, that though companies may have been able to leverage
the synergies arising out of the mergers but they were not able to manage their capital
structure to improve their liquidity.
Sonia Sharma (2013) measured the post-merger performance of BSE listed companies of
metal industry during the period 2009-10 and has found that the there was a marginal but not
significant improvement in the liquidity and solvency ratios while in case of profitability
ratios, there was a significant decline post-merger.

Jawahar Lal and Sunil Kumar (2013), measured the post-merger performance of 55 Indian
companies involved in M&A’s during the period 2000-01 to 2004-05. The study has found
that the firms have failed to generate more revenues to meet the business expenses, distribute
to shareholders and retain some of the profits for further growth and expansion. There is a
decline in operating and financial performance as measured by operating cash flow,
profitability turnover and solvency ratios.
Neha Verma and Rahul Sharma (2014) analysed the impact of mergers and acquisitions on
the performance of Indian Telecom industry during the period 2001-02 to 2007-08, by
examining pre and post-merger financial and operating variables. The study has found that
though, companies may have been able to leverage the synergies arising out of the merger or
acquisition, but they have not been able to improve their financial and operating performance.
The decisions of M&A’s might have been inspired by the intention of empire building,
market consolidation or acquiring bigger size which led to the declining performance.
3.3 Impact on Shareholders’ Wealth
Shareholder value creation has become a major concern of the companies, as the ultimate
goal of modern corporate entities is the creation of more wealth for its shareowners. The
wealth of the shareholders is represented by market value of the shareholding and any
dividend received or to be received. To increase the shareholders wealth, it is necessary for
companies that they increase profits only either by increasing revenue or decreasing operating
cost. Mergers and acquisitions (M&A’s) as a corporate restructuring strategy give an
opportunity to companies to become low-cost providers and increase its market share.
Therefore, M&A at times are aimed to enable the managements to create and deliver superior
value to shareholders. Event study methodology is the most widely used methodology to
explore the shareholder wealth effects. A large number of studies have been done to assess
the impact of M&A on shareholders’ wealth and majority of them have demonstrated that
mergers and acquisitions appear to create shareholder value but with most of the gains
accruing to the target shareholders.
Felix Lowinski, Dirk Schiereck and Thomas W. Thomas (2004) analysed the wealth effects
of 114 domestic and international acquisitions announced by Swiss corporations between
1990 and 2001.The study has found no significant difference in wealth creation of acquiring

banks between domestic and international acquisitions. In contrast to these results, Goergen
and Renneboog (2004), found significant positive bidder announcement returns for a sample
of European domestic and cross-border acquisitions.
Tse and Soufani (2001), examined the wealth effects of mergers in UK over the period 1990
to 1996. The sample was sub-divided into two merger eras: Low Merger Activity Era
(LMAE) from 1990 to 1993 and the High Merger Activity Era (HMAE) from 1994 to 1996.
The results indicated positive returns for the shareholders in high merger activity era while
the returns were found to be negative for shareholders in low merger activity era.
Gayle L. DeLong (2001) studied the impact of U.S. bank mergers on wealth announced
between 1988 and 1995. Banking firms were classified according to activity and geographic
similarity or dissimilarity. Abnormal returns to each group were examined as a result of the
merger announcement and it was found that mergers that focus on both activity and
geography enhanced stockholder value by 3 percent while others did not create value.
Deo and Shah (2011), studied the financial implications on the acquirer and target
shareholders wealth in the Indian Information Technology Industry (IT) that have taken place
from January 2000 to June 2010, taking a sample of 28 acquisition announcements. It was
found that acquisition announcements in the IT sector had no significant impact on the bidder
portfolio, whereas the acquisition generated significant positive abnormal returns for target
shareholders only.
S. Padmavathy and J. Ashok (2012), studied the impact of mergers on shareholders’ wealth
of merging companies listed in Bombay Stock Exchange during the year 2010. The study has
shown that the impact of merger announcements did not hold any significant difference on
movements of share price and no significant abnormal return was gained by merging
company shareholders around the announcement date.
Smita and Rao (2013), attempted to analyse and compare impact of acquisition activities on
the wealth in Indian IT and Info-Tech enabled services sector during the period 1999- 2009.
The results revealed that the acquiring firm shareholders made wealth gains in HDAP (high
deal activity period-2005, 2006, 2007) as well as LDAP (low deal activity period-rest 8
years). However, gains made in HDAP were higher than gains made in LDAP. Target firm
shareholders made wealth gains in HDAP. However, for LDAP, there were mixed results.

Acquisition announcements resulted in wealth loss during the years 1999, 2003, 2004 & 2008
while there were wealth gains for the years 2000, 2001, 2002 & 2009.
A K Mishra and Rashmi Goel (2005) studied the impact of merger of Reliance Petroleum
Ltd. (RPL) with Reliance Industries Ltd. (RIL) on shareholders’ wealth by evaluating stock
price movements. The study concluded that there was a transfer of wealth from RPL to RIL.
Excess returns to RIL-RPL combine have been found to be negative. There was an average
cumulative loss to the combined firm in terms of market capitalisation as well as book value.
The deal was led with the ‘empire building’ motive along with spreading the risk and return
more equally among the shareholders of the two companies.
Aneel Karnani (2010), studied whether companies from emerging economies create
shareholders’ value through foreign acquisitions or not. The sample has been supplemented
by examining three largest acquisitions (acquisition of Corus by Tata steel, Novelis by
Hindalco, and Jaguar/Land Rover by Tata Motors). The study concluded that large foreign
acquisitions have failed to create wealth for shareholders. The cause of this performance
being too little integration, agency problems and easy access to capital. The acquisition of
Jaguar/Land Rover by Tata Motors was value destructive, given the lack of synergies and
high cost of operations involved. The same were the results obtained for Corus-Tata steel
(minimum synergies, expensive acquisition, organisation integration was lacking) and
Novelis-Hindalco (motive being reduction in volatility of earnings which could be easily
attained through diversification of portfolio).
Hamendra Kumar Porwel, Ankur Gupta and Anchal Khaneja (2011), studied the impact on
the operating performance of the bidder firm in the acquisition of Spice Communications by
Idea Cellular Limited and have found a decline in the operating performance post-acquisition.
Poor integration, inadequate valuation of the target, inability to achieve synergy were the
primary reasons that the acquisition failed to meet the required expectations. The results have
also shown the failure of the acquisition to generate value for the shareholders of both the
bidding as well as the target firm.
Arti Trivedi, Jay Desai and Nisarg A Joshi (2013), studied the impact of M&A on operating,
financial performance, and shareholders’ value of the acquiring firms in oil and gas sector in
India. They studied the merger of Indian Petroleum Corporation Limited with Reliance
Industries Limited (RIL) and Indo-Burma Petroleum Based Company with Indian Oil
Corporation (IOC). The results of the study have revealed that, for RIL, shareholders’ value

increased after merger with EPS being on a positive side. For, IOC, shareholders’ value
declined due to drop in EPS. Overall, the deals were not able to create wealth for its
shareholders. It was also found that for both RIL and IOC, operating and financial
performance has declined significantly after the merger.
3.4 Impact on employees and cultural aspect of M&A’s
Business etiquettes, organization structures, management styles, for example, belong to

‘organizational culture’. The relationship between cultural differences and M&A
performance is more complex than it appears. While some studies found national or
organizational cultural differences to be negatively related to different measures
performance, others found cultural differences to be unrelated or even positively related to
the success of M&A’s. Steven H. Appelbaum and Joy Gandell (2003), analysed the impact
of culture upon a health care merger. A case study of the merger of four well established
hospitals into MLMC (Maple Leaf Medical Centre) was examined. It has been found that
conflicts within the top management and an unclear communication resulted in decreased
overall adjustment of employees and increased rates of failure. Human resource department
did not follow the cultural plans of action.
Daniel Rottig (2007) examined the cause of failure rates in international M&A in response to
the cultural differences. The study has found that high failure rates of cross border M&A
were not due to cultural differences but because, firms most of the times were not able to
combine dissimilar cultures due to poor management. Thus, the question is not whether to
acquire companies in culturally distant market but how to do it successfully. The results have
shown that there were four major determinants of successful cultural combinations: cultural
due-diligence, cross cultural communication, connection, and control. Time and again, cross-
cultural management is mishandled by top executives in M&A’s and eventually results in
failure, as in the case of the Daimler Chrysler merger (Kuhlmann and Dowling, 2005).
Chaoyun Liu (2012), analysed the impact of national culture on post-merger performance.
The results have been analysed using Hofstede’s cultural measures (power distance,
individualism, masculinity, and uncertainty avoidance). It has been found that difference in
individualism was positively related to merger performance whereas differences in other
cultural aspects were negatively related. Rajesh Chakrabarti, Swasti Gupta-Mukherjee, and
Narayanan Jayaraman (2009) studied the impact of culture on long term post-acquisition

performance of the firms. They studied the impact of cultural differences using three
measures: legal origin, religion, and language. The study has shown that M&A deals
involving culturally distant firms performed better in the long run. Culturally distant firms
can spur innovation by helping break rigidities, prompt the firms to go for better screening,
evaluation leading to more complete contracts between firms. Such cultural variations can
thus be turned into huge business advantages.
Taco H Reus and Bruce T Lamont (2009) aimed to understand the role of cultural distance in
international acquisitions through its effects on the development & application capabilities
(in terms of understandability, communicability & key employee retention). The study has
revealed mixed results. On one hand, cultural distance impeded understandability of key
capabilities that need to be transferred & restricts communication between acquirers and their
acquired units, thus bringing a negative impact on acquisition performance. On the other
hand, it enriched acquisitions by overcoming these impeding effects and enhancing
synergistic benefits. However, the effect of cultural distance on key employee retention was
found neutral.
Hema Bajaj (2009), examined the role played by the cultural factors in M&A’s by studying
the acquisition of old private sector bank (OPSB) by new private sector bank (NPSB) during
the period 2003-2004. It was found that culture played a very significant role in M&A’s.
Despite this fact, cultural similarities/dissimilarities were not taken into consideration before
the decision of acquisition was taken. The study also revealed that the two banks had huge
cultural differences; threat of cultural conflict was very high. OPSB was well aware about
the banking rules and regulations while as NPSB focused much on sales and marketing.
OPSB followed a centralised system of communication while as NPSB followed a
decentralised one. These cultural differences had a negative impact on the overall
productivity after the acquisition took place.
Piero Morosini, Scott Shane and Harbir Singh (1998), examined the effect of national cultural
distance on cross-border acquisition performance during the period 1987 to 1992. They
examined 52 cross-border acquisitions in which one of the firms was an Italian corporation,
and the other was headquartered either in Europe or the United States and found a positive
association between national cultural distance and cross-border acquisition performance. It
was found that when companies entered culturally distant countries through acquisition, they
performed well compared to that acquisitions that were in culturally close countries. The

cross-border acquisitions that performed better were those in which the routines of the target
firm, such as inventiveness, innovation, entrepreneurship, and decision-making practices
were, on an average more distant than those of the acquirer's, providing a mechanism for
firms to access these diverse routines which in turn, enhanced the combined firm's
performance over time.
Lodorfos, G., and Boateng, A. (2006), examined the role of culture in the merger and
acquisition process in the European chemical industry. The study found that cultural
differences acted as a key element affecting effectiveness of the integration process and
consequently the success of M&A’s. The cultural fit constituted a key factor in M&A success
and should be given the necessary attention at all stages of M&A’s. It was concluded that
proper planning with culture being placed at the heart of integration strategies and
implementation and the creation of a positive atmosphere for the change before initiating any
actual consolidation of human and physical assets were likely to contribute to merger and
acquisition success and value creation.
Deepak K. Datta and George Puia (1995), examined the impact of cultural distance on wealth
effects. They studied 112 large cross-border acquisitions undertaken by U.S. firms between
1978 and 1990 and has found that cultural fit does have an important impact on post-
acquisition performance. Cultural differences resulted in an inadequate understanding of the
foreign firm, causing the acquiring firm to overpay for the acquisition. Acquisitions thus
characterized by high cultural distance were accompanied by lower wealth effects for
acquiring firm shareholders.

4. DATA ANALYSIS AND INTERPRETATION
The Indian M&A landscape has witnessed several big-ticket deals in the past few years. At a
time when Indian business houses are constantly looking at inorganic growth through
acquisitions of other businesses, the M&A arena appears stronger than ever before now.
Recently, a lot of consolidation in the form of mergers, share acquisitions and business
acquisitions has been observed in telecom, cement, banking, power, and insurance.
Following are some of the major mergers undertaken in India in the recent past:
Mergers in India
S. Name of the First Company Name of the Company Year in

No. Merged with which it
was
Merged
1 Indus Towers Bharti Infratel 2020
2 National Institute of Miners’ ICMR – National Institute of 2019

Health (NIMH) Occupational Health (NIOH)
3 Indiabulls Housing Finance Lakshmi Vilas Bank Limited 2019

Limited (IBHFL) and Indiabulls (LVB)
Commercial Credit Limited
(ICCL)
4 Bank of Baroda Vijaya Bank and Dena Bank 2019
5 IndusInd Bank Bharat Financial (SKS 2019

Microfinance)
6 NBFC Capital First IDFC Bank 2018
7 Vodafone India Idea Cellular 2018
8 TATA Steel ThyssenKrupp 2018
9 Housing.com PropTiger.com 2017
10 State Bank of India Bhartiya Mahila Bank, SB of 2017

Bikaner and Jaipur, SB of
Patiala, SB of Travancore
Source: www.byjus.com

Some of the major acquisitions in India are given below:
Acquisitions in India
S. Acquiring Company Acquired Company Year of

No. Acquisition
1 Infosys Kaleidoscope Innovation 2020
2 Reliance Retail Future Group’s Retail Business 2020
3 Ola Etergo 2020
4 ITC Sunrise Foods 2020
5 Zomato Uber Eats 2020
6 HUL GSK Consumer 2020
7 Hindalco Aleris 2020
8 Ebix Yatra 2020
9 LIC IDBI bank 2019
10 Reliance Brands Hamleys Global Holdings 2019

(HGHL)
11 India UPL Ltd. Arysta LifeScience Inc 2019
12 Power Finance Rural Electrification Corporation 2019

Corporation Limited
13 OYO Rooms Europe’s Leisure Group 2019
14 Disney 21st Century Fox 2019
15 Bandhan Bank Gruh Finance 2019
16 Tata Steel Bhushan Steel 2018
17 PVR SPI (Sathyam, Escape, Pallazo) 2018
18 Walmart Flipkart 2018

Source: www.byjus.com

I. SECONDARY DATA
As this research is primarily based on secondary data, the M&A transactions effected from
the year 2017 onwards have been analysed. The sample case studies discussed below are
based on the M&A deals completed post 2017 and have been selected on random basis, of
listed companies in respect of which financial and other data were readily available, over the
internet, and in those business or industrial sectors where big-ticket M&A deals have
materialised during the aforesaid period i.e., the telecom sector, fast-moving consumer goods
(FMCG) sector and the banking sector.
4.1 Sample Case Study I – Vodafone Idea Merger
The analysis of merger of Vodafone India and Idea Cellular Ltd. undertaken as part of the
research study is given hereunder.
4.1.1 Analysis of Vodafone-Idea Ltd merger
Vodafone and Idea announced their merger in 2017, which made a huge impact in the Indian
telecom sector. This was a major consequence of Reliance Jio’s cruising dominance in the
industry which backed other major players to take precarious steps to maintain their stand in
the Indian telecom market. Prior to the merger, Vodafone India was the second-largest player
of the Indian Telecom Industry in terms of subscriber base, while Idea Cellular Limited had
the third largest subscriber base in India. Idea Cellular Limited was a subsidiary of Aditya
Birla Group.
This merger did not only create a telecom giant but also had wide-ranging implications for
the industry, services, the staff, and consumers as well as it pushed more merger moves in
the telecom sector. In this study, the current scenario of the Indian telecom market is also
analysed to understand where Vodafone-Idea stands today.
Idea, Vodafone and Combined Vi

1500
1000
500
0
Revenues EBITDA Net Debt Spectrum investment
Idea Vodafone Combined
Source: www.vodafoneidea.com

4.1.2 Merger specifics, in brief
The merger included different percentage of shares for Vodafone and Idea while the rest
would belong to the public shareholders. Post-merger Vodafone would hold approximately
45.1% of shares of the merged entity while the ownership of 26% would be of Aditya Birla
Group and the balance 28.9% would be held by the general public. The chairman of the
merged entity would be Kumar Mangalam Birla and chief financial officer would be
appointed by Vodafone. From a total of 12 members of the Board, 3 members each would be
nominated by the promoters and rest of the members would be independent. Vodafone India
and Idea Cellular Limited made an agreement to complete the merger within 24 months. On
31st August 2018, the merger was completed, and the joint venture was renamed as Vodafone
Idea Ltd.
This transaction required various approvals from government authorities including SEBI,
Department of Telecommunications (DoT) and Reserve Bank of India, among others. The
DoT gave the green signal in August 2018 for the merger of Vodafone India and Idea - the
largest merger and acquisition agreement in the telecom sector, which then displaced Bharti
Airtel from top position after over 15 years.

4.1.3 Motives for the merger
The main reason for the Vodafone-Idea merger was to tackle the rising dominance of
Reliance Jio in the Indian Telecom sector, through a brutal price war between all the major
companies in this sector. While the merging companies were typically quite confident about
their synergy benefits, most analysts also agreed that the Vodafone-Idea merger holds the
potential for significant cost savings. With a larger scale and elimination of duplicate costs,
margins could rise substantially. The combined entity became the largest cellular services
operator in prominent circles. Post-merger in a couple of circles, it upstaged Bharti Airtel as
the number one operator, while in some other circles, it graduated to a strong No. 2.
The spectrum licenses of Idea in two circles and Vodafone India in seven circles, are valid
till 2021-22 and together valued at around Rs 12,000 crores as per the last auction price.
These permits with Vodafone India and Idea are not in common circles hence there could be
potential spectrum capital expenditure synergies between the companies.
The merger of Vodafone India and Idea Cellular boosted their combined market share to 35%
and made it the country’s largest telecom operator leaving Bharti Airtel off its top position.
4.1.4 Expectations from the merger
A) Spiral effect of M&A activities in the Telecom sector: This merger caused more
mergers and acquisitions of other telecom companies. The assets of Telenor India and
Reliance Communication were bought by Bharti Airtel. Tata Teleservices customers started
migrating to the Airtel network under an Intra Circle Roaming (ICR) arrangement. Various
initiatives were taken by the merged entity like renewal of price. The huge number of
subscriber base in India made India the fastest growing market and with the merging of huge
telecom players it was expected that the growing market would endow the telecom sector
with health and life.
B) Cost and capital expenditure synergies: It was expected that the merger would provide
support in overcoming the debt of Idea Cellular and Vodafone India as large sum of credit
would be infused in the joint venture. Impact of merger could be observed in various service
providers in terms of quality of service in telecom sector. This impact could also be observed
on the savings, synergies, and the spectrum in rapid growth. Cost and capex synergies could
be created for both companies which was estimated to be around 10$ billion after integration

cost. The major cost and capex synergies would be around network infrastructure, savings in
energy costs, operational efficiencies, service centres, lower maintenance expenses. The
merger would reduce the operation cost incurred to about 60% of the total cost which will
aid in improving the quality and performance of the service provided by the company.
C) Leading position in the Telecom sector: After the merger, it was expected that Bharti
Airtel will be left behind by Vodafone Idea Ltd and the merged entity will acquire the top
position in Indian telecom industry with a revenue market share of 40%. With the disruptive
entry of Reliance Jio, it was the beginning of price war in the Indian telecom industry. Since
the merged entity had enough resources it resulted in a resource consolidation which
ultimately brought a greater benefit to consumer. With very few companies remaining in the
sector, there was a higher chance of stability of prices. Analysts predicted a market correction
of telecom pricing and the country could see the companies teaming up to increase the prices
of all services. With only 4 major players remaining: Idea-Vodafone, Airtel, BSNL and Jio
(Airtel has merged Aircel, bought Telenor, and may merge with Tata), rates of these services
would be a something which can be arbitrated easily.
Source: Vodafone Idea Merger Presentation 2017

4.1.5 Impact on operational and financial performance
The REALITY – the great Indian Telecom battle
Not very long ago, India had a booming telecom industry, with a dozen operators battling for
market share in this billion-user market. But a brutal tariff war started, which kicked several
operators out of the race to provide wireless services and left many with battle scars. Today,
just two other private operators, Bharti Airtel and Vodafone Idea are left to compete with Jio.
Even three years post the merger, the combined entity has not been able to achieve fully the
benefits/synergies expected at the time of the merger.
A. Loss of subscriber base: Although Vodafone-Idea soon after the merger attained the top
spot in terms of subscriber base, but if one compares India’s number one and number two
players on metrics like profitability, revenue, 4G data users and the growth trend of the
operators’ average revenue per user, the results that emerge boggle the mind. For starters,
Vodafone Idea, with the largest user base, made a net loss of ₹4,874 crores in the June
‘20 quarter, while Jio made a profit of ₹891 crores. Both companies have priced mobile
services at almost similar levels. Though Vodafone Idea believes that it is delivering on
its stated strategy, the benefits are not yet visible in its top line. It also expects better
financial performance going forward. But that depends on when tariffs improve in the
market, and that call is clearly in Jio’s hands.
Service Provider-wise monthly growth rate in subscriber base
as on 31 December 2020
Growth in Wireless Subscribers

5.00%
0.00%
Bharti Airtel Reliance Jio MTNL BSNL Vodafone Idea Reliance Com
-5.00%
-10.00%
-15.00%
-20.00%
-25.00%
Source: Telecom Subscription Data as on 31st December 2020 – Press Release of TRAI dated 18/2/21

B. Diminishing returns: The merged entity – Vodafone Idea – combined EBITDA as has
fallen to about a third of the levels at the time of the merger announcement and has made
the leverage ratios go hay wire. In terms of Gross Revenue, the entity stood third as per
the results announced by the Company for the QE Dec 2020, lagging behind Reliance Jio
and Bharti Airtel.
COMPETITIVE MARKET POSITION

Others, 7%
Vodafone Idea,
Jio , 37%
24%
Airtel, 32%
Source: Investor Presentation for December 2020: www.vodafoneidea.com
Vodafone Idea Ltd. continues to struggle because of its liabilities even as India’s telecom
operators saw their revenue and operating income rise in the third quarter ended December
2020, aided by better ARPU and subscriber additions amid work from home.
The aggregate revenue and earnings before interest, tax, depreciation, and amortisation of the
three carriers- Bharti Airtel Ltd., Vodafone Idea Ltd., and Reliance Jio Infocomm Ltd.- rose
4.8% and 7.6% sequentially, respectively, in the quarter ended December 2020, according to
data compiles from exchange filings. Year-on-year, the cumulative revenue and EBITDA
increases 20.5% and 37.8%.
Their average operating margin rose to 42.89% in the reported quarter from 41.85% in the
July- September period.
The performance comes amid intense competition and even as they repay pending statutory
levies worth thousands of crores. The performance of the 3 leading telecom service providers
in India, for the QE December 2020 is given in the table below:

Source:https://www.bloombergquint.com/quarterly-earnings/telecom-sector-sees-rise-in-arpu-users-in-q3-for-vi-it-only-masks-
troubles
The Vodafone Idea results for the QE December 2020 reflect the following:
• The company suffered a loss for the tenth straight quarter. It is the only one among
peers to post a loss in the reported period.
• The consolidated loss, however, narrowed to Rs 4,532 crore from Rs 7,218 crore in
the second quarter, helped by one-time gain from its stake sale in Indus Towers.
• Its Average Revenue Per User (ARPU) rose to Rs 121 from Rs 119 in the quarter
ended September 2020
• Its total subscriber base stood at 26.98 crore.
• Gross subscribers reduced by 20 lakhs in the reported quarter compared with a decline
of 80 lakh in the preceding three months.
• However, improved 4G network has helped the company to retain subscribers.
• The current debt of the merged entity is at a staggering Rs 1.09 lakh crores.

4.1.6 Impact on employees performance
Reduction in the workforce: The Vodafone Idea merger resulted in a duplication of

resources across the country which required job cuts too. The combined entity had to lay off
their employees on a huge scale, as Chairman of the new merger, Kumar Mangalam Birla,
had already pointed towards it. When the main objective of both the telecom firms is to reduce
their indebtedness via merger, then the cut downs were pretty much expected. Although the
CEO of Vodafone had not hinted towards layoffs, but analysts predicted that 5-10% of the
labour pool from the merged entity may be asked to resign. There has been a massive
reduction in the workforce – as per last estimates close to 5000 employees were to be given
the pink slip. This would have adverse repercussions on the society and economy at large.
4.1.7 Impact on Shareholder’s wealth
Erosion of shareholders’ wealth: The market price of the share of Vodafone-Idea since the
announcement of the merger has seen a great downslide with virtual erosion of the investment
value of the shareholders in the merged entity. From a market price of approximately Rs.115
per share in March 2017, the share price has fallen to Rs.10.20 per share as on 12 March 2021
– i.e., a downslide of negative 78.40% as against the rise in the BSE SENSEX by 51.07%
during the same period.
Source: www.moneycontrol.com

4.2 Sample Case Study II – HUL GSK acquisition
In December 2018, GlaxoSmithKline (GSK) the parent company of GlaxoSmithKline

Consumer India Limited (GSK India), decided to divest GSK India and sell its business to
the existing Indian companies. Companies such as Nestle, Coca- Cola and Hindustan
Unilever Limited (HUL) made bids for acquiring GSK India. Eventually, the proposal of
HUL was accepted by GSK and the equity merger deal of GSK India with HUL was
concluded in April 2020.
4.2.1 About the Companies
HUL is the Indian subsidiary of Unilever Plc based in the United Kingdom. Unilever holds
67.2% stake in HUL and is listed on the BSE and NSE. HUL has been operating in India for
more than 80 years and is popularly known for production, marketing, distribution and selling
of various fast moving consumer
goods. It has a large customer base
and some of its famous brands
include LUX, Lifebuoy, Surf Excel,
Brooke Bond, etc. HUL is mainly
engaged into four types of
commodities i.e., personal care
products, home care products a, food
and refreshments and home purifiers.
GSK India is a sister concern of GSK

established in United Kingdom. GSK
India has been known for its popular energy drinks like Horlicks and Boost which accounts
for more than 40% of the energy milk powder market. Other popular brands of GSK India
are Sensodyne, ENO, Otrivin and Crocin. Prior to the merger, GSK held 72.5% stake in GSK
India.

4.2.2 Deal Structure and Specifics
After considering multiple bids from various companies like Coca- Cola, Nestle and HUL,
GSK decided to merge its Indian subsidiary with HUL for a total consideration of
approximately Rs.42,242 crores. The consideration was in the form of equity shares of HUL,
and no cash transaction was involved. The shares swap ratio was 4.39:1 that is for every
single share of GSK India 4.39 share of HUL would be issued. This ratio was arrived at based
on the value of the shares prevailing in September 2018. Post the merger the promoters
holding in HUL decreased by 5.28% and concurrently the shareholding of GSK under the
public shareholding category increased by 5.7%.
The arrangement also included a consignment service agreement which stated that GSK along
with HUL would distribute it’s over the counter drugs (OTC) or non-prescription drugs and
oral healthcare products (OH) through the distribution channels of HUL. Such an
arrangement would initially be for a period of 5 years and would be subject to renewal by
mutual consent.
Source: hul.co.in

4.2.3 Analysis of the Deal
It was expected that post the acquisition of the business of GSK India, HUL would strengthen
its market in the food and refreshment business segment. Acquisition of popular brands like
Boost and Horlicks the profit margins of HUL would immediately rise. In exchange for the
business of GSK India, HUL not only acquired successful trademarks of GSK India but also
its production units and distribution channels. This would result in the increase in the share
price of HUL resulting in increase in shareholders wealth.
For the arrangement of OTC/OH with GSK, HUL would provide their distribution channels
and would also keep their
margins making it a win-win
situation for both the entities.
GSK would be responsible
for demand generation,
portfolio strategy, R&D, and
marketing for the OTC/OH
brands like Crocin,
Sensodyne, ENO, etc. Source: hul.co.in
GSK’s decision to divest GSK India’s business to HUL was to obtain capital in return. Even
after the conclusion of the merger, GSK clearly stated that their intention was to sell the
acquired equity stake in HUL as and when they feel appropriate and when the market
conditions were favourable.
4.2.4 Deal structure to save on taxes and cash pay-outs by HUL
In case cash was decided as a consideration for buying a divested business, raising money for
executing such a large transaction would involve multiple hurdles. Any company would not
have such a large cash reserve for the purpose of payment of such huge acquisition expenses.
Such cash transactions are also taxable as Capital Gains in the hands of the promoters of the
target company. The exchange of shares among the parties meant that this transaction was a
tax neutral transaction as per section 47 (vii) of the Income Tax Act, 1961. Hence, opting
for a share exchange was beneficial for both the parties from the point of view of execution
of the transaction and for taxation as well.

4.2.5 Effect on business growth market reach product and customers
While the overall growth of the FMCG Industry stood at 5%, the total sales of HUL grew by
20% during the financial year 2020. Sales and profit margin of the food and refreshment
segment rose by 19%. Net profit rose by HUL in the last quarter was 19% higher as compared
to the last quarter of 2019.
Source: HUL Merger Update as of July 2020 on company’s website
HUL in their investor presentation has mentioned that the Horlicks brand has significantly
helped the company in increasing their turnover. The company would be focusing more on
expanding their product availability in rural areas. It plans to utilize their distribution
channels and increase their rural area market for milk energy drink. This acquisition has made
HUL stand out against their competitors in the FMCG sector.

4.2.6 Impact on Operational Performance
It was envisaged that post the merger there would be a potential for double digit growth and
margin expansion of 800 to 1000 basis points (bps) over the March 2018 numbers.
Source: December 20 Quarter Result of HUL
The post-merger results for the quarter ended December 2020 shows that even considering
the after mark of COVID- 19 the food and refreshments business segment has shown an 80%
growth in revenue terms and a 14% growth in margins. The overall sales of the company
were Rs. 11,682 crores in the December 2020 quarter as against Rs. 9,696 crores in the
corresponding quarter of 2019. This reflects a 20% growth in revenue terms with a domestic
consumer growth of 7%.

4.2.7 Impact on Financial Performance
HUL post the merger has seen a rise of 5% in market share and 24% growth in net profits
i.e., profit after tax by the quarter ended June 2020. HUL further projects a rise in net profits
by more than 20% margin and rise of 500 to 700 bps in the next 4 – 5 years. Even during the
period of economic downfall and financial crunch in almost every sector, the company has
managed to increase its profit margin by 19% in the last quarter of 2020 as compared to the
last quarter of 2019.
4.2.8 Impact on Shareholders Wealth
When HUL announced the deal of acquisition of GSK India the share price of HUL saw a
surge in December 2018. The share price surged from Rs.1,600 per share to Rs.1,850 per
share approximately in December 2018. Similarly, after the announcement of completion of
the deal in April 2020 the share price surged from approximately Rs.2,000 per share to a high
of Rs.2,500 per share. The below chart shows the performance of the share price of HUL vis-
a-vis the movement in the BSE Sensex.
Source- www.hul.co.in/investor-relations/share-price

4.2.9 Impact of the Merger on the Employees of GSK India
At the time when the merger deal was announced in December 2018 GSK India had around
4,000 employees on its payroll. With the completion of the merger in the April 2020 around
3,500 employees of GSK India moved to HUL. Thus, the company has been able to observe
and retain substantial workforce of GSK India. However, the integration of the business units
of the two companies is the next step in the merger process. Analysts expect the integration
process to be delayed due to the ongoing supply chain and manufacturing disruption caused
by the COVID – 19 pandemic and HUL expects that the integration itself would take around
18 months to be completed. Hence, the long-term retention of these absorbed employees of
GSK India would depend upon how HUL is able to navigate and meet the short-term
challenges caused by the pandemic.

4.3 Sample Case Study 3 – Merger between Indian Bank and Allahabad Bank
Banking sector reforms were considered necessary in India to keep this sector healthy and
strong. The fact that the banking system faced conundrums of Non-Performing Assets
(NPAs), wilful defaults, frauds, mismanagement, and collapse of business houses contributed
to making the situation deplorable. All these factors along with the aim of strengthening the
banking sector provided fillip to a paradigm shift in the banking sector.
In the year 2019, the government of India announced the merger ten of its banks into four.
Amongst these was the merger of Allahabad Bank with the Indian Bank.
Of all the afore-stated banks, the merger between

Allahabad Bank and Indian bank was challenging
for three reasons. First, unlike other mergers,
Allahabad Bank and Indian Bank were roughly the
same size i.e., roughly around Rs. 4,00,000 crores
of asset size. Second, the merger involved mid-
sized banks rather than smaller banks merging
with bigger ones in the other three cases. And
third, whereas the other banks involved merger of
banks operating the same region or geographical
area with similar work-cultures, Allahabad Bank
was headquartered in Kolkata and Indian Bank in
Chennai.
The widely differing cultures were evident in the staffing. Though Allahabad Bank was
slightly smaller in terms of business, it had many more people- 3,169 branches and 23,210
staffers, compared to Indian Bank’s 2,834 branches and 19,604 employees. The merger was
complicated by the fact that the government had no allowed post-merger lay-offs for any of
the banks under this process.
Also, Indian Bank, the anchor bank in this merger, is traditionally considered a conservative
bank. But it had been profitable. In 2018-19, it made a profit of Rs. 321.92 crore and its net
non-performing assets (NPAs) stood at 3.75 per cent. Allahabad Bank, on the other hand,
was considered a “zombie” bank, racking up losses of Rs 8,334 crores in 2018-19 and with
net NPAs of 5.22 per cent.

4.3.1 Merger of Allahabad Bank
The merger of Allahabad bank with Indian Bank become effective from 1st April 2020. The
merger has been advantageous in terms of increasing the balance sheet size and providing
Indian Bank with a wider geographical reach leading to deeper penetration. The bank will
also have access to a larger and more diversified talent pool, better products and opportunities
to cross sell or up sell. It would also be able to leverage upon increased operational and
process efficiencies.
4.3.2 Impact on Operational Performance
Post the merger Indian Bank advances grew by 7% year on year to Rs 3,89,646 crores as of
December 2020 as against Rs 3,62,536 crores in the corresponding period last year. The
banks’ capital adequacy ratio too improved by 42 bps to 14.06% as of quarter ended
December 2020 as against 13.64 % as of quarter ended September 2020.
The Banks NPA were at 9.04% as of quarter ended December 2020 as against 12.69% in the
corresponding last year. On sequential basis also the NPAs reduced by 85 bps. Post the
merger Indian Bank has managed to deliver decent growth as well as presently surprised on
asset quality front.
Source: Research

4.3.3 Impact on Financial Performance
Post the merger the bank’s net interest income rose by 31% year on year for the quarter ended
December 2020 to Rs.4,313 crores from Rs.3,293 crores in the corresponding period last
year. The net interest margin improved by 42 bps and is at 3.13% for the period ended
December 2020 as against 2.71% for the same period in 2019.
The banks operating profit registered a growth of 10%. The operating profit was Rs.3,099
crores for the quarter ended December 2020 as against Rs.2,816 crores for the same period
last year.
The net profit of Indian Bank stood at Rs.514 crores for the period ended December 2020 as
against the net loss of Rs.1,739 crores for same period last year.
4.3.4 Impact on shareholders wealth
With the improved results and a positive outlook

has contributed to the share price of Indian Bank
moving from a low of Rs.41.7 per share to a high
of 109 per share within a year. This has
contributed to increasing the shareholders wealth.
With the business outlook improving analysts
believe that the share price increasing to Rs.170
per share that is an upside of 91% provided the
COVID- 19 situation normalises soon.

4.3.5 Impact on Employees
Yet, a year later, the merger has shifted Indian Bank from the ninth to seventh largest public
sector bank and it is considered one of the success stories for its seamless merger, growing
its business from about Rs 8 trillion to Rs 9.1 trillion at the end of December 2020. Last
month, a report from ICICI Direct said Indian Bank has shown an encouraging performance
considering the current situation and it remains positive on the relative performance of the
bank. The merger was a challenge from the perspective of integration of the workforce. The
fact that a mid-level shakeup was due in 2020 with over ten general managers of Indian Bank
slated for retirement, when the merger was underway, added to the strain. And then, there
was the Covid-19 pandemic to contend with.
With the average age of employees being around 40 years, human resource integration was a
top priority. Promotions of employees were fast-tracked. Transfers accorded as per the needs
of the employees. Around 2000 employees were repositioned as part of the merger process
and only 94 employees opted for Voluntary retirement, which was a routine number not
linked to the merger process.
After assuring job-security, the management turned to skilling and identifying synergies. To
cope with the sensitive issue of culture clashes, the bank conducted a “culture survey” with
the help of consulting firm Deloitte in which more than 15,000 employees participated.
The survey revealed surprisingly strong alignments between the culture practices of both
banks. This complementarity made the integration of branch networks and improvements in
asset quality relatively easy. So, decisions on the technology platforms to be used in the
merged entity were taken quite quickly with the technology partner Tata Consultancy
Services, and the leadership team worked to address all interface issues in systems, processes,
structure, and people.

Common workshops were also conducted for both sets of zonal managers at Lucknow,
Kolkata, and Chennai pre- amalgamation. The sessions covered team building, integration
challenges under HR, IT and other areas, communication, and leadership skills.
A leadership development programme was conducted with around 400 mid-level executives
to identify and build leadership capabilities.
Down the ranks, 14 aspiration workshops were conducted with around 180 participants from
corporate office and field to discuss the bank’s strategy going forward. The bank also
introduced the “buddy branch” concept. These buddy branches (of Indian Bank) were
mapped to former Allahabad Bank branches to provide technology support and the managers
of each were often deputed to each other’s branches.
There were many other processes that contributed to the seamless merger but the focus on
HR ensured that the critical culture mismatch was addressed early. This has ensured that the
bulked-up Indian Bank is in a position to compete more effectively and take on loans of
bigger ticket size.

II. PRIMARY DATA
1. How strong will the Indian M&A market be during the next 12 months?
Weak
7%
Neutral
32%
Strong
61%
Strong Neutral Weak
61 percent of the survey respondents saw the future of M&A market in India as strong
or somewhat positive. As per them, the post pandemic business scenario would ensure
the survival of the fittest which would increase M&A activity in India. Advisors were
slightly more confident than company respondents on the future of Indian M&A
market. 32% and 7% of the respondents had a neutral view and weak view of the
Indian M&A market, respectively.
2. What sector will see the most M&A activity in India in the next 12 months?
11% 11%
11%
17%
22%
28%
Healthcare and biotechnology Information Technology

Financial Services Automotive
Power & Infrastructure Manufacturing (Non Automotive)
28 percent of the respondents selected the automotive industry, 22 percent chose

financial services, 17 percent chose infrastructure and power, 11 percent chose
healthcare and biotechnology, 11 percent chose information technology, 11 percent
chose manufacturing (non-automotive).

3. In the next 12 months do you feel that your company would be acquired, sold,
downsized, or involved in a spinoff?
43%
57%
YES NO
57 percent of all respondents who identified themselves as a company officer or

executive felt their company will be involved in an acquisition, sale, downsizing or
spin-off in the coming year.
4. Do you think mergers and acquisitions play a crucial role in the business world
for corporates to improve their performance in the market?
45%
55%
YES NO
55 percent of the respondents feels that mergers and acquisitions can fuel growth. 45
percent felt that with mergers and acquisitions alone, a company cannot sustain
growth and leadership position in the long term.

5. What do you think are the main reasons why organisations undertake M&A
activities?
11%
13%
49%
27%
Growth Competition & Dominance Synergies Economies of Scale
49 percent of the respondents felt that companies use M&A to grow in size and
leapfrog their rivals. It can take years or decades to double the size of the company
through organic growth. 27 percent of the respondents felt that M&A activities are
undertaken to ward of competition and gain dominance in their respective sector of
operation. Use of M&A activity as a tool to take advantage of synergies and
economies of scale was the opinion of 13 percent of the respondents surveyed. Only
11 percent felt that companies use M&A to take tax benefits, although this is an
implicit motive rather than an explicit motive in all M&A deals.
6. Do you agree with the statement, “Merger and acquisition helped companies to
maximise their profits and increase their revenue share /leadership position in
the market?
27%
49%
24%
Agreed Neutral Disagreed
49 percent of the respondents agreed with the view that M&A activities helps
companies to maximise their profits and market share. 27 percent disagreed while 24
percent were not so sure that M&A would always result in maximisation of profits.

7. What is the general time taken for completion of the legal process of merger and
acquisition in India?
4%
22%
74%
Within 1 Year 1-2 Years More than 2 Years
A majority of 74 percent respondents, based on past experience opined that

completion of regulatory compliances for mergers in India, took anywhere between 1
to 2 years. Completion of regulatory merger formalities took more than 2 years in the
case of 22 percent of the respondents. Only 3 percent could complete the process
within a year.
8. Does merger and acquisition results in increasing the operational efficiency of

companies and efficient utilisation of resources?
51% 49%
Pre-Merger Post-Merger
There seems to be a mixed evidence of on achieving the efficiency of operations post-

merger. 51 percent of the respondents felt that efficiencies rise post-merger because
of synergies in operations. However, 49 percent felt that it is difficult to maintain pre-
merger efficiencies because the scale of operations increases exponentially.

9. Do you agree with the statement, “M&A can be treated as a tool to augment the
wealth of the shareholders?”
21%
18% 61%
61 percent of the respondents agreed with the view that M&A can be an effective
tool to augment the wealth of the shareholders. 21 percent of the respondents did
not agree. The balance 18 percent felt that wealth creation is limited to a small-time
window available around the announcement of the M&A deal, during which time
the share prices generally tend to go up.
10. Do you feel the management and position of a Company’s employees is

compromised upon after the acquisition takes place?
26%
74%
Yes No
The majority of the respondents, 74 percent believed that post-merger or acquisition,

their place in the organisation does get jeopardised. There could be many chances of
culture differences, with the employees of either of the two organisations not settling
in with the other. Further, there could be differences in pay-scales, promotion policies,
etc. of the two organisations, the integration of which is always a challenge. This
could lead to inefficient functioning of the organisation till such time that synergy is
reached.

11. What has been your experience on the success of M&A deals undertaken in the
past?
21%
4%
75%
A majority 75 percent of the respondents agreed that though M&A activities can have
a profound effect on the company’s growth prospects and long-term outlook, overall
M&A transactions are estimated to have only a 30 percent chance of success. 21
percent of the respondents disagreed, while the balance 4 percent had a neutral view.
12. What are the reasons as to why M&A deals fail in India?
26%
10% 64%
Integration Risk Over-payment Culture Clash
64 percent of the respondents felt that integrating the operations of two companies is
the most difficult task in practice. Because of lack of integration, companies generally
cannot achieve cost savings from synergies and economies of scale. 26 percent of the
respondents felt that M&A transactions fail because the corporate cultures of the two
companies are so dissimilar that integrating them proves difficult from the point of
view of employee satisfaction and morale. Only 10 percent felt that overpayment to
the acquired company can be a major drag on future financial performance.

5. CONCLUSION & SUGGESTIONS
5.1 Findings & Conclusion of the Study
5.1.1 Motive of M&A
The mergers and acquisitions in the Indian industry have revealed that the nature and pattern
of M&A strategies adopted by the Indian firms were mostly horizontal and vertical type of
deals (Rabi Narayan Kar & Amit Soni, 2008; Beena Saraswathy, 2010; Partap Singh, 2012;
Khanna, 1998; Basant, 2000). Indian companies are focusing on their core areas and
expanding mostly in related areas of strength to realize the synergistic benefits. The possible
reasons for restructuring of business by the Indian firms is to-
(a) improve the core competencies,

(b) ward-off competition both globally and domestically,
(c) improve debt-equity restructuring to reduce high interest obligations,
(d) efficient utilization of assets to generate higher cash flows,
(e) increase the brand presence and attain increased market power,
(f) reduce the number of organizational layers for increasing the operational efficiency,
economies of scale, economies of scope and improve managerial efficiency.
5.1.2 Impact of M&A on operational and financial performance
A series of mergers and acquisitions have taken place in India in the recent past. In light of
the review of the sample case studies conducted, it was found that some of the sample cases
selected reported a positive change in performance post-merger/acquisition. For instance, the
acquisition of GSK Consumer Healthcare by HUL reflected a 20% growth in revenue terms
with a domestic consumer business segment growth of 7% of HUL, post the acquisition.
Similarly, post the merger of Allahabad Bank with Indian Bank, Indian Bank has managed
to deliver decent growth as well as presently surprise analysts on the asset quality front.
Earlier research on this aspect has also supported this finding like the one reported in
Jeannette A. Switzer, 1996; Ramaswamy and Waegelein, 2003; Lau et al., 2008; K.
Ramakrishnan, 2008. However, some of the sample studies revealed that the M&A deals
were unable to generate positive returns like the sample case study in Vodafone-Idea. The

results have revealed that though the turnover of the merged entity has increased in volumes,
but the operating performance, following the merger event, of the merged entity have
decreased. In terms of Gross Revenue, the merged entity was third in the sector indicating
that it had lost its subscriber and revenue base to its competitors. The finding that M&A does
not always result in improved financial performance for the merged entity was also concluded
in earlier research conducted. (Ismail et al., 2011; Akben-Selcuk and Altiok Yilmaz, 2011;
Kumar, 2009; Jawahar Lal & Sunil Kumar, 2013).
5.1.3 Impact of M&A on shareholder wealth creation
The post M&A results in the case of HUL and Indian Bank have demonstrated that mergers
and acquisitions appear to have created value to the target shareholders by way of increase in
the share price. Earlier research studies on the subject (Goergen and Renneboog 2004, Gayle
L DeLong 2001, Deo & Shah 2011) had similar findings. However, the findings in the case
of Vodafone-Idea were that of erosion of shareholder wealth. Earlier studies (A.K. Mishra
and Rashmi Goel 2005, Aneel Karnani 2010, Hemendra Kumar Porwel, Ankur Gupta and
Anchal Khaneja 2011, etc. also concluded erosion in shareholders wealth post M&A activity.
5.1.4 Impact on employees
The findings in the case of Vodafone-Idea merger reflected that the merger resulted in
duplication of resources across the country which required job cuts too. There was a massive
reduction in the workforce post-merger. Similar was the finding in the case of HUL-GSK
acquisition where it is uncertain whether the employees of the merged entity i.e., GSK would
be retained by HUL in the long run. Also, the primary data reveals that 74 percent of the
respondents believed that the position of the employees in the merged entity get jeopardised
post M&A. The negative impact of M&A on employee retention post-merger was also the
finding in the case of study conducted earlier (Kuhlmann and Dowling 2005, Piero Morosini,
Scott Shane and Harbir Singh 1998). On the other hand, the finding in the case of Indian
Bank showed that if human resource integration if given the proper priority, culture mis-
match issues could be addressed, and employees could be retained and efficiently utilised.

5.1.5 Conclusion
Thus, it can be inferred that the results of this study are by and large inconclusive. The results
have also revealed that though generally M&A’s have been able to produce significant
changes in the operating performance and financial performance, they have not been able to
increase shareholders’ wealth over the long term. It has been observed that merger and
acquisition deals do provide real benefits but the same have not been detected by the
empirically based studies. A variety of factors like over-optimistic appraisals of market
potential, over estimation of synergies, overbidding, poor integration strategies and many
others have contributed to the same.
5.2 Suggestions
The literature on mergers and acquisitions is quite diverse. A number of studies have been
conducted in this area, both nationally and globally, however, the number of studies in the
Indian context are limited, primarily because this aspect of corporate restructuring has gained
momentum only after liberalisation. Considering the findings in the previous literature and
that of the present study, following suggestions are being offered:
• Mergers and acquisitions alone cannot achieve strong, efficient, and competitive
systems because performance is dependent on a number of other factors as well. They
need to be supplemented by other measures such as enhancing the expertise and
professionalism of the personnel, congruence between the two companies'
preferences about the implementation strategy for the merger or acquisition, bringing
about more effective corporate governance measures to further elevate the
competitiveness of the institutions in the context of the challenges of a globalized and
liberalized environment.
• It is essential for managers of parent firms to decide about the immediate benefits they
will derive from mergers and acquisitions and how this will result in long term
synergies for both the parties. Management should seek to understand each other’s
technologies and businesses. Providing clear, consistent, factual, and up-to-date
information will increase the abilities of employees which in turn will increase their

productivity leading to sustained competitive advantage by achieving the projected
strategic fit and synergies.
• It is believed that the size of the firms involved in a merger or an acquisition deal
should be reasonably large to ensure effective pooling of the resources so that benefits
of the large-scale operations can be realized. Size is considered to be a very important
yardstick by which most organizations judge themselves. There is a strong tendency
on part of managers to build big empires, as their compensation is affected by size,
leading to unwise merger and acquisition deals. It is suggested that while evaluating
such deals, focus should be on maximizing shareholders’ value rather than on the
increasing size of the company.
• Many integration problems have been seen to occur when firms merge or get acquired.
Inadequate understanding of such cultural differences has led to the failure of a
number of M&A deals to deliver the desired results. Even the best strategy can be
ruined by poor implementation. A proper integration of two different organizations
post-merger or acquisition is a pre-requisite for the success of such deals and should
be duly taken into consideration.
• The data on mergers and acquisitions is not so easily accessible in India. It is thus
suggested that the government should take measures to install information system on
company mergers and acquisitions so that all the practitioners, policy makers,
academicians etc. who are interested in such information can have an easy access to
the same.
• The process of merger and acquisition in India is court driven, long drawn and delayed
(Neelam Rani, Surendra S. Yadav & P. K. Jain, 2012; Afra Afsharipour, 2010;
Umarkanth Varotill, 2012; Sayantan Gupta, 2008; P. K. Swain & M. D. Pahi, 2014).
As revealed by the primary study the legal process of merger and acquisition in India
on an average takes around 1 to 2 years for completion. To reap the benefits and
synergies of M&A activity, government should ensure completion of the legal
formalities within a shorter span of time say 6 months.

BIBLIOGRAPHY
• Corporate Acquisitions and Mergers in India – By PK Jain (2016)
• https://vodafoneidea.com
• https://www.bloombergquint.com/quarterly-earnings/telecom-sector-sees-rise-in-
arpu-users-in-q3-for-vi-it-only-masks-troubles
• https://en.wikipedia.org/wiki/Vodafone_Idea_Limited
• https://mnacritique.mergersindia.com/idea-vodafone-telecom-merger/
• https://timesofindia.indiatimes.com/business/india-business/vodafone-idea-merger-
indiagets-a-telecom-behemoth/articleshow/65162327.cms
• https://www.livemint.com/Industry/HUE25L2lh1QefpX1C1WKmJ/Idea-unveils-
11- billion-fundraising-plan-ahead-of-Vodafone.html
• https://telecom.economictimes.indiatimes.com/news/idea-cellulars-board-
approvesvodafone-idea-merger/57726148
• https://www.investopedia.com/terms/m/merger.asp
• https://www.jagranjosh.com/articles/idea-and-vodafone-merger-a-saga-of-
becomingindias-largest-telecom-company-1490598696-1
• https://www.livemint.com/
• https://www.business-standard.com/article/companies/here-s-why-vodafone-idea-
losingto-reliance-jio-on-several-fronts-119010301212_1.html
• Telecom Regulatory Authority of India | Government of India (trai.gov.in)
• December Quarter 2020 results | Investor Relations | Hindustan Unilever Limited
website (hul.co.in)
• https://www.livemint.com/companies/news/hul-acquires-horlicks-as-company-
completes-merger-with-gsk-consumer-11585732372435.html
• https://www.campaignindia.in/article/hul-gsk-consumer-healthcare-merger-
completed/459207#:~:text=The%20merger%20of%20GlaxoSmithKline%20Consu
mer%20Healthcare%20with%20HUL%20has%20been,cent%20to%2061.9%20per
%20cent.
• www.indianbank.net.in
• https://economictimes.indiatimes.com/industry/banking/finance/banking/hr-
integration-to-be-prioritised-for-merger-indian-bank-chief-kolkata

QUESTIONNAIRE
Respondents: < 30
1. How strong will the Indian M&A market be during the next 12 months?
 Strong
 Neutral
 Weak
2. What sector will see the most M&A activity in India in the next 12 months?
 Healthcare and biotechnology
 Information Technology
 Financial Services
 Automotive
 Power & infrastructure
 Manufacturing (Non- Automotive)
3. In the next 12 months do you feel that your company would be acquired, sold,
downsized, or involved in a spinoff?
 Yes
 No
4. Do you think mergers and acquisitions play a crucial role in the business world
for corporates to improve their performance in the market?
 Yes
 No
5. What do you think are the main reasons why organisations undertake M&A
activities?
 Growth
 Competition & Dominance
 Synergies
 Economies of Scale
6. Do you agree with the statement, “Merger and acquisition helped companies to
maximise their profits and increase their revenue share /leadership position in
the market?
 Agreed
 Neutral
 Disagreed

7. What is the general time taken for completion of the legal process of merger and
acquisition in India?
 Within 1 year
 1 year -2 years
 More than 2 years
8. Does merger and acquisition results in increasing the operational efficiency of

companies and efficient utilisation of resources?
 Pre-merger
 Post-merger
9. Do you agree with the statement, “M&A can be treated as a tool to augment the
wealth of the shareholders?”
 Agreed
 Neutral
 Disagreed
10. Do you feel the management and position of a Company’s employees is

compromised upon after the acquisition takes place?
 Yes
 No
11. What has been your experience on the success of M&A deals undertaken in the
past?
 Agreed
 Neutral
 Disagreed
12. What are the reasons as to why M&A deals fail in India?
 Integration Risk
 Over payment
 Culture Clash

6209 Mergers and Acquisitions in India - An Analytical Study

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6209 Mergers and Acquisitions in India - An Analytical Study

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MERGERS AND ACQUISITIONS IN INDIA-

Under the Guidance of

Under the Guidance of

St. Dominic Road, Bandra West, Mumbai,

Prof. Abhishek Sood

Date of submission: _________________

I the undersigned Mr JOVAN CARDOZO (Roll No. 6209) hereby,

I take this opportunity to thank the University of Mumbai for giving me a

1.1 Background ............................................................................................................... 1

1.2 Merger – Meaning .................................................................................................... 2

1.3 Acquisition – Meaning ............................................................................................. 3

1.4 Distinction between mergers and acquisitions ......................................................... 4

1.5 Types of mergers ...................................................................................................... 5

1.6 Motives behind Mergers & Acquisitions .................................................................. 7

1.7 Advantages of Mergers & Acquisitions ................................................................. 12

1.8 Disadvantages of Mergers & Acquisitions ............................................................. 14

1.9 Regulatory framework of Mergers & Acquisitions in India ................................... 15

1.10 Procedure of Merger ............................................................................................... 17

2.1 Objectives ............................................................................................................... 20

2.2 Hypothesis of the study .......................................................................................... 20

2.3 Scope of the Study .................................................................................................. 21

2.4 Primary data collection and sampling type ............................................................. 21

2.5 Structure of the Study ............................................................................................. 22

2.6 Limitations of the Study ......................................................................................... 22

3. REVIEW OF LITERATURE .................................................................................... 23

3.1 Impact on Operating Performance .......................................................................... 24

3.2 Impact on Financial Performance ........................................................................... 27

3.3 Impact on Shareholders Wealth .............................................................................. 30

3.4 Impact on employees and cultural aspect of M&A’s ............................................. 33

I. SECONDARY DATA .................................................................................................. 38

4.1 Sample Case Study I – Vodafone Idea Merger .................................................. 38

4.1.1 Analysis of Vodafone-Idea Ltd merger ........................................................... 38

4.1.2 Merger specifics, in brief................................................................................. 39

4.1.3 Motives for the merger .................................................................................... 40

4.1.4 Expectations from the merger ......................................................................... 40

4.1.5 Impact on operational and financial performance ........................................... 42

4.1.6 Impact on employees performance.................................................................. 45

4.1.7 Impact on Shareholder’s wealth ...................................................................... 45

4.2 Sample Case Study II – HUL GSK Acquisition................................................. 46

4.2.1 About the Companies ...................................................................................... 46

4.2.2 Deal Structure and Specifics ........................................................................... 47

4.2.3 Analysis of the Deal ........................................................................................ 48

4.2.6 Impact on Operational Performance................................................................ 50

4.2.7 Impact on Financial Performance.................................................................... 51

4.2.8 Impact on Shareholders Wealth ...................................................................... 51

4.2.9 Impact of the Merger on the Employees of GSK India ................................... 52

4.3.1 Merger of Allahabad Bank .............................................................................. 54

4.3.2 Impact on Operational Performance................................................................ 54

4.3.3 Impact on Financial Performance.................................................................... 55

4.3.4 Impact on shareholders wealth ........................................................................ 55

4.3.5 Impact on Employees ...................................................................................... 56

II. PRIMARY DATA ................................................................................................. 58

5.1 Findings & Conclusion of the Study ................................................................... 64

5.1.1 Motive of M&A............................................................................................... 64

5.1.2 Impact of M&A on operational and financial performance ............................ 64

5.1.3 Impact of M&A on shareholder wealth creation ............................................. 65

5.1.4 Impact on employees ....................................................................................... 65

5.1.5 Conclusion ....................................................................................................... 66

5.2 Suggestions ............................................................................................................ 66

KEYWORDS: merger, acquisitions, synergy, operational performance, integration,

The motivation to pursue a merger or

A takeover, or acquisition, on the other hand, is characterised as the purchase of a smaller