SYNOPSIS. 1. INTRODUCTION 1.1 Rationale of the Study

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1 SYNOPSIS 1. INTRODUCTION 1.1 Rationale of the Study Any company or business organization experiences changes on a continual basis. Often, these changes are forced upon the company by external environment such as increased competition, adoption of a new and more efficient technology, emergence of a new competing products, markets or new class of consumers, business cycles etc. Smarter corporations foresee these external changes well in advance and change themselves accordingly. Today, the corporate world is undergoing a paradigm shift, form expansion and diversification to ever-increasing Mergers and Acquisitions (M&A s). Merger waves began in 1883 following the depression that ended that year. The initial trend in mergers and acquisitions was dominated by a small number of mega deals involving big corporate. M&A s have become a strategic tool not only for acquiring established brands but also to expand into low cost markets. M&A s thus, play a considerable role in the survival and vitalization of the corporations today. They continue to be a major strategy for improving profitability, market share and stock prices. The factors responsible for making the M&A deals favorable in India can be the dynamic government policies, corporate investments in industries, economic steadiness, the ready to experiment attitude of Indian industrialists etc. [5]. Sectors like pharmaceuticals, IT, ITES, telecommunications, steel, construction etc. have proved their importance in the international scenario as well and the increasing participation of Indian firms in signing M&A deals has further triggered the acquisition activities in India. Due to the enormous wave of M&A s in India, the benefits arising from M&A deals have long been questioned and studied without attaining a consensus among practitioners, researchers and industry experts. Most prior studies fell short in combining various performance measures to better comprehend the consequences of such events and therefore gain knowledge on why M&A s occur. Also, studying M&A s and its possible impact on the firm s performance is important to investigate the value creation claims of the merging or acquiring firms by the means of a holistic approach of systems theory (nearly related to synergy ). Sirower (1997), defined Synopsis-1

2 synergy as the increase in performance of the combined firm over what the two firms are already expected or required to accomplish as independent firms. Moreover, it will also enable a better understanding of the justifications and possible consequences of upcoming mergers or acquisitions activities in India. The literature regarding post-m&a performance is full of contradictions and there is no unanimity in it. This study tries to bridge the gap that exists in the literature for the performance outcomes in both the pre and post-m&a backdrop. This study addresses the gap in the literature and examines the post mergers and acquisitions performance evaluation issues. This study provides evidence, specifically regarding the telecommunications industry in India that would enhance comprehension of the underlying structure of the current M&A trends in the Indian telecommunication industry. The primary objective of this study is to systematically discover evidence to answer a question Do M&A have an impact on the firm s performance in the telecom sector in India? Thus, this research will be significant as it will be available for use by parties contemplating a merger or acquisition who are interested in anticipating the customarily addressed financial, operating and strategic components. 1.2 Mergers and Acquisitions in Telecommunication Industry: India M&A s have been a foundation of the telecom industry for many years. In the past decade, the telecom industry has spent an astounding USD 1.5 trillion on M&A activities. However, the motivation behind the transactions have evolved over time and is believed the industry is on the cusp of a new wave of M&A activity driven by some of the disruptions now taking place (Jean and Peter, McKinsey & Company) [6]. With around 900 million telephone connections, India is the second-largest telecom market in 2013 in the world after China [11]. According to a report published by FICCI (Federation of Indian Chambers of Commerce and Industry), India is one of world s fastest growing telecom markets, has acted as the primary driver for foreign and domestic telecommunication companies investing into the sector. With the liberalization of the Indian economy, the telecom sector has become very attractive for M&A s. As a result, the number of M&A s in Telecom Sector has been increasing significantly. Given this massive wave of mergers and acquisitions and the potential for high returns from these types of M&A in the Indian Telecommunication industry, it seems likely that if M&A is wealth enhancing. Also, the benefits of the huge wave of Telecom Mergers in the past and today have been long questioned Synopsis-2

3 and leave a whole lot of opportunities of research in this sector. For this reason, this study attempts to review, analyze and evaluate previous general literature on pre and post-m&a performance with special reference to Indian Telecommunication Industry. The results of this study will thus, serve to project the future structure of the Indian Telecommunications Industry. 2. REVIEW OF LITERATURE 2.1 Pre-Merger and Acquisition Period This section of literature provides the key factors and problems concerned in the pre-m&a management processes which have a significant impact on the post-m&a performance outcomes. Pautler (2001) studied different motives that play a role in merger activity and the most common motive is that the purchasing firm considers the acquisition to be a profitable investment [18]. Apart from the common motive for mergers i.e. profitable investment, there are a few categories of factors that ought to play a role in at least some mergers. Those factors are: Efficiencies (Farrell et al, 2001), Financial and Tax benefits (Gilson et al, 1988), Market power effects (Stigler, 1968), Management Greed, Self-Aggrandizement or Hubris (Morck, 1990), for obtaining a good buy (Andrade et al, 2001) and Stakeholder Expropriation (Shleifer et al, 1988) [8] [9] [2]. 2.2 Post-Merger and Acquisition Period Literature in post-merger and acquisition scenario focused on integration strategies to minimize the substandard outcomes of the M&A process. Schweiger et al. (1993) stated that there are three factors critical to success in any M&A deal i.e. the transaction must be undertaken for strategic reasons, the ultimate purchase price should not exceed the combined value and the M&A must be effectively implemented by combining the organizations to realize the strategic benefits. (Pablo, 1994) stated that the target and acquiring firms are to be integrated after the deal is signed [17]. Smith et al. (1997), Ashkenas et al. (1998), Birkinshaw et al. 2000) and (Vaara, 2003) concluded that post-m&a management of an acquisition is the key determinant of any merger or acquisition success [21]. Synopsis-3

4 2.3 Post-M&A Performance: Evaluation Methods The empirical literature regarding the effects of mergers and acquisitions on the firm s performance uses various evaluation criteria s for measuring the post merger and acquisition performance outcomes. These resources can be classified as Stock Market Event-Based Studies, Accounting Data-Based Studies, Survey of Managers and Case Studies. One technique for examining the effects of a merger or an acquisition is the stock market s reaction to the event. There are equivocal results about the abnormal returns to the acquiring firm s shareholders. Some studies suggest no significant abnormal returns or negative abnormal returns. While some studies, by using diverse samples of mergers, Ravenscraft & Pascoe (1989), Healy et al. (1992), Kaplan & Weisbach (1992), Schwert (1996), Sirower & O Byrne (1998) as well as Conn et al. (2001) showed that ex-ante stock market returns are positively and significantly correlated with ex-post performance of the firms [21] [10] [13] [7]. In contrast, Agrawal et al. (1992), Loughran and Vijh (1997), Asquith et al. (1983) and Andre et al. (2004) document significant and negative announcement period abnormal returns in the post M&A [1]. Other technique for examining the effects of a merger or an acquisition is the accounting measures-based studies. Yook (2004) tested the affect of acquisition on the acquiring firm s financial performance by comparing pre and post acquisition Economic Value Added (EVA) relative to the industry average [24]. Martynova et al. (2006) investigated the long-term profitability of corporate takeovers of both the acquiring and target companies by undertaking financial ratios. 2.4 Gaps Identified from Literature Review Review of literature shows that the researchers have done significant work on mergers and acquisitions (both internationally and in Indian Context) with reference to its impact on the firms performance. The literature extends many aspects of the merger and acquisitions activities in different industries. Even though merger and acquisition characteristics differ across various industries, their impacts are similarly conditioned in most of the Indian researches. For this reason, this study attempts to review, analyze and evaluate previous general literature on pre and Synopsis-4

5 post-m&a performance with special reference to Indian Telecommunication Industry. Hence, there is no study that measures the performance across a set of possible performance constructs using both event study and accounting measures of the entire industry for the Indian telecommunications industry. The primary purpose of this study is to analytically determine the answer to the question Do mergers and acquisitions have an impact on the firms financial and operating performance in the Indian Telecom industry? Some of the researches (Rau & Vermaelen, 1998, Megginson et al., 2004 and Mantravadi & Reddy, 2008) reported that there is still a dispute regarding the factors that affect the post- M&A performance, like; types of merger or acquisition transaction (related or unrelated) and firm size [15]. The present study fulfills this research issue by analyzing the impact of types of mergers and the effect of firm size of the acquiring firms on the post merger and acquisition performance outcomes with reference to the Indian Telecom sector. Further, all the studies depicted inconsistent results; where some studies represented little improvements in the financial performance at insignificant level, other studies reported significant positive performance or negative impact on financial performance. Therefore, one more research issue to explore which is also imperative, is that if M&A s are not able to enhance the financial or operating performance or in other words, are not able to create financial or operating synergies, does M&A creates shareholders wealth for the merging or acquirer companies in the post-m&a period. This research issue is fulfilled by analyzing whether or not M&A lead to the creation of shareholders wealth for the acquirer companies. Lastly, it is mentioned above that in most of the M&A s the value creation objectives are not achieved. Therefore another research issue is to investigate that before approving an M&A transaction and deploying huge resources and capital to a large M&A transaction, what should the board of directors and shareholders of the acquiring firms be worried about? The idea behind this objective is to estimate well in advance that whether undertaking an M&A transaction will create or destroy shareholders value for the acquirer firms in the post-m&a period. Hence, this issue is addressed in the last objective of the study. The present study has combined the accounting technique and stock market event study approaches to study the short-term as well long-term effects of mergers and acquisitions on the Synopsis-5

6 performance of acquiring firms in the Indian Telecom Industry during period to When combining both the methodology together, the results can provide indications about (1) whether the two approaches tend to produce consistent results and (2) whether the M&A typically create shareholders wealth and shareholders value post the M&A activity. Hence, this study tries to bridge the gap that exists in the literature for the performance outcomes in both the pre and post-m&a backdrop. 3. Research Objectives On the basis of the literature review, following objectives have been framed for the study: 1. To examine the relationship between Market Share and Financial and Operating Performance of the Acquirer Firms. 2. To analyze the effect of size of acquiring firms on its M&A performance. 3. To analyze the effect of M&A on the shareholder wealth of the acquirer companies. 4. To analyze the acquirer firms performance in creating shareholders value in the post-m&a scenario with respect to utilizing capital before the M&A. 5. To analyze the impact of types of mergers on post-merger performance outcomes of the acquiring firms. 4. Research Methodology This empirical study elaborates on the consequences of mergers and acquisitions in the Indian Telecommunication Industry during period to Secondary data has been used to analyze the impact of pre and post-m&a performance of acquirer firms in the Indian Telecommunication Sector. Using the Event Study Methodology, this study examines the effect of M&A on the shareholders wealth of the acquirer companies and by using the Accounting Data Methodology, this study investigates the success and synergistic effects of M&A s on financial and operating performance of acquirer companies in the pre and post-m&a scenario. Synopsis-6

7 4.1 Sample Selection and Construction This study covers the firms which were involved in mergers and acquisitions activities in the Indian telecommunications industry during the period to In total there were 203 deals during the year to , from which 86 deals are considered appropriate for this study. (Figure 4.1) presents the distribution of merger and acquisition events for the sample used in this study. The list of companies involved in mergers/acquisitions during the period was compiled from the database of CMIE-Business Beacon. The deals have been shortlisted according to the financial data availability relevant to this study of both the target and acquirer companies for at least three years. The M&A cases where at least two years of data was not available for pre and post-m&a period were removed from the final sample for the study. Figure 4.1: Sample Distribution of M&A Deals over time Firm Selection Criteria for the final sample: The M&A transactions which satisfied the following conditions were included in the final sample of the study: 6) The completed merger or acquisitions (deal states). 7) The acquirer company must be listed in India. 8) The transaction has to be of the types of a merger or an acquisition. 9) The final M&A s announcement date corresponds to the aforementioned time period taken for the study. 10) The financial information must be available for at least -2 and +2 years from the date of the deals. For example, for the deals in the data for (pre deal years , & and post deal years , & ) must be available. Synopsis-7

8 4.2 Data Collection The data collection began from taking an overview of the sector company s financial highlights, balance sheet, profit & loss account in companies annual reports and databases. The data for both Event Study Methodology and Accounting Study methodology has been extracted from CMIE database PROWESS. Researchers have selected year to to identify M&A deals in the Telecom sector. 4.3 Variables used for the Study Following the discourse above on performance variables to measure the value impact of M&A on both short and long-term performance of the acquirer firms in the Indian Telecom Industry, three groups of performance variables are used for the analysis. Table 4.1 Classification of Variables used in the study METHODOLOGY VARIABLES PURPOSE Event- Methodology Accounting-Study Methodology Study Event Study Variables Short-term Analysis of M&A s Financial Performance Variables Long-term Analysis of & Operating Performance M&A s Variables 4.4 Statistical Techniques Used For Data Analysis: Table 4.2: Techniques used to study the aforementioned objectives Objectives Relationship between Market Share and Financial & Operating Performance Impact of Types of Mergers Effect of Size of Acquiring Firms Effect of M&A on Shareholders Wealth Technique Arellano-Bond (1991) Regression Analysis Paired two-sample t-test for means Paired two-sample t-test for means Fama-French Three Factor Model Creating Shareholders Value Univariate Analysis and Multivariate Regression Analysis 4.5 Hypotheses Development: Following hypotheses have been developed for the study. H01: M&A s declined the financial performance of acquirer firms if undertaken to enhance market power Synopsis-8

9 H02: M&A s declined the operating performance of acquirer firms if undertaken to enhance market power H03: Market Capitalization has no significant effect on the post M&A performance of firms. H04: There is no huge contrast between the impact of Large Cap Firms and Mid Cap Firms in post M&A execution. H05: There is no huge contrast between the impact of Mid Cap Firms and Small Cap Firms in post M&A performance. H06: There is no huge contrast between the impact of Small Cap Firms and Large Cap Firms in post M&A performance. H07: Acquirers will continue to deliver superior returns to their shareholders in the new M&A transactions, if, they produced higher net returns in the pre-m&a scenario. H08: The types of mergers (Horizontal, Vertical and Conglomerate) have no significant impact on the post-merger performance. H09: There is no considerable distinction between the impact of Horizontal and Vertical mergers on post-merger performance H010: There is no considerable distinction between the impact of Vertical and Conglomerate mergers on post-merger performance H011: There is no considerable distinction between the impact of Horizontal and Conglomerate mergers on post merger performance 5. ANALYSIS AND INTERPRETATION This section presents the findings and results of the analysis for meeting the objectives of the study. 5.1 RESULTS FOR EXAMINING THE RELATIONSHIP BETWEEN MARKET SHARE AND FINANCIAL AND OPERATING PERFORMANCE OF THE ACQUIRER FIRMS. An exhaustive analysis was performed by panel data analysis to check for consistency and robustness of the M&A impacts on acquirer firms. Synopsis-9

10 5.1.1 RESULTS FOR ARELLANO-BOND REGRESSION (Refer Tables and of Appendix A) Results for Financial Performance FIN_PERFit = α0 + 2 s 1 α1s f (FIN_PERFit-s) + α2mergerdummy + α3opr_perfit-1 + αi c CONTROLS + Table presents the Arellano-Bond regression estimation results for the financial performance equation. The results here depicted that the acquirer firms which were doing well in generating cash continued their performance. The insignificance of GS after the M&A s disclosed the lack of synergies in the acquirer firms, that in turn again, builds up the market power intentions of the acquirers. The deteriorated financial performance hence supported H01 i.e. M&A s leads to a significant deterioration in financial performance of acquirer firms in the Telecom Industry, if undertaken to enhance market power. Results for Operating Performance OPR_PERFit = β0 + 2 s 1 β1s f (OPR_PERFit-s) + β2mergerdummy + β3fin_perfit-1 + βi c CONTROLS + Table presents the Arellano-Bond regression estimation results for the operating performance equation. The results indicated the acquirer firms inefficient management of the resources and that firms are not growing into its capacity i.e. M&A s did not appear to contribute the recovery of inefficient management of the acquirer firms. The deteriorating operating performance hence supports H02 i.e. M&A s leads to a significant deterioration in operating performance of acquirer firms in the Telecom Industry, if undertaken to enhance market power. 5.2 RESULTS FOR EFFECT OF SIZE OF ACQUIRING FIRMS ON ITS POST- MERGER & ACQUISITION PERFORMANCE Synopsis-10

11 5.2.1 ANALYSIS OF THE DIFFERENT TYPES OF FIRMS ON THE BASIS OF MARKET CAPITALIZATION (Refer Tables (a), (b) and (c) of Appendix B) Comparison of pre and post M&A financial and operating ratios for all the three types of firms individually, demonstrated that the large cap firms showed the highest improvement than the mid cap firms and small cap firms in the post-m&a period. Based on the results, the alternate hypothesis (H13) is accepted. This means the null hypothesis is rejected i.e. the Market Capitalization has no significant effect on the post M&A performance of firms COMPARISON OF TYPES OF FIRMS BASED ON MARKET CAPITALIZATION (Refer Tables (d), (e) and (f) of Appendix B) The comparison of pre and post M&A financial and operating performance, for the different types of firms (Large Cap, Mid Cap and Small Cap Firms) evidenced that Large Cap Firms showed the highest improvement than the mid cap firms and small cap firms in the post- M&A period. 5.3 RESULTS FOR ANALYZING THE EFFECT OF M&A ON THE SHAREHOLDER WEALTH OF THE ACQUIRER COMPANIES Ri,t Rf,t = αi + βi (Rm,t - Rf,t) + si SMB + hi HML + ei,t Table 5.3 gives the summary of the results for all the event windows combined, for the shortterm event study of the acquiring firms in the Indian Telecommunication Industry. The results suggested that M&A s created a short-term abnormal returns for the acquiring companies i.e. M&A s have a positive impact on wealth creation for company shareholders for a short-term period in the Indian Telecom Sector. The result reported above are consistent with Ferris and Park (2001) and Park et al. (2002) which was conducted in the telecommunications industry and documented negative abnormal returns to the acquirers after the M&A announcements due to long-term integration costs, differences in corporate culture and agency-problems. Synopsis-11

12 5.4 RESULTS FOR ANALYZING THE ACQUIRER FIRMS PERFORMANCE IN CREATING SHAREHOLDERS VALUE IN THE POST-M&A SCENARIO WITH RESPECT TO UTILIZING CAPITAL BEFORE THE M&A (Refer Tables and of Appendix D) Univariate Analysis Abn_ROAi, t = α + β1 InvestCapt-1 + β2 InvestCapt-2 + β3 InvestCapt-3 + β4 Aget-1 + β5 Leveraget-1 + β6 LnSizet-1 This analysis is done in order to compare the relative operating performances of the selected groups with those of the other acquirers to examine the differences in the performance of the two sets (Table 5.4.1). The results from the univariate analysis depicted that low residual acquiring firms showed a significant decline in the post-m&a operating performance than the non-low residual firms. The gaps in the ROA for the three-year post operating performance were 7.4%, 7.9% & 7.6% respectively. On the other hand, high residual firms showed a significantly higher post operating performance (ROA) than the non-high residual firms. The gaps in the ROA for the high residual firms were 6.8%, 5.3% and 7.2% respectively Multivariate Analysis ROA = α + β1lowresidual + β2highresidual + β3smallacquirer + β4relativesize + β5preannreturn + β6pooling + β7stock + β8highmb + β9lowmb + β10accruals + β11noa + β12acquirercash Table of Appendix D reports the results from regressions for long-run operating performance (ROA) of the merged/acquired firms for all the three years post the M&A transaction. The results depicted that the long-run operating performance of the firms in the Telecom Sector was worse if the acquirer firms were small in size. As far as the impact of lowresidual firms was concerned, the results suggested that the performance of the firms after the M&A was significantly worse in all the three years after the transaction, if the acquirer firms belonged to the high residual group underperformed initially in the first two years after the M&A but performed better in the third year post the M&A deal. These outcomes, hence affirms the hypothesis (H07) that the market & investors before the mergers/acquisitions do not fully Synopsis-12

13 recognize the capability of the firms to create shareholders value after the transaction and are thus thwarted by the poor post operating performance of the low residual acquiring firms. 5.5 RESULTS FOR IMPACT OF TYPES OF MERGERS ON POST-MERGER PERFORMANCE OUTCOMES OF THE ACQUIRING FIRMS ANALYSIS OF THE DIFFERENT TYPES OF MERGERS (Refer Tables (a), (b) and (c) of Appendix E) Comparison of pre and post merger financial and operating ratios for all the three types of mergers individually, demonstrated that conglomerate mergers had caused the highest decline in the post merger performance of the merging companies, followed by horizontal mergers. On the other hand, vertical mergers in Indian Telecom sector depicted some significant improvements in the financial and operating performance in the post merger period. Based on the results, the alternate hypothesis (H18) is accepted COMPARISON OF TYPES OF MERGERS (Refer Tables (d), (e) and (f) of Appendix E) The result of comparison between different combinations of mergers (i.e. horizontal, vertical and conglomerate), concluded that vertical mergers have the potential to outperform the horizontal and conglomerate mergers. 6. FINDINGS OF THE STUDY This section discusses the main findings of the study as below: Findings for objective 1: To examine the relationship between market share and financial and operating performance of the acquirer firms. From the outcomes, it is concluded that the M&A s in the Indian Telecommunications Industry generally takes places for market power enhancements and not for value creation purposes for the combined firms. It was theorized that Indian Telecommunication firms undertake M&A s with the primary goal to achieve market power. The hypothesis of the study stated, if market power enhancements has not been the stimulus for M&A s, than a significant improvements in measures of performance and operating efficiency would be observed in the Synopsis-13

14 results. The conclusion for this objective revealed considerable evidence that M&A s are accompanied by significant declination in profitability and operating performances. The results are similar to Gugler (2003) observations, which suggested that M&A s taking place around the world have appeared to be welfare reducing to the acquirer firms. Findings for objective 2: To study the effect of size of acquiring firms on its post M&A performance to find a relationship, if any, between size and performance. The findings revealed a significant positive relationship between size and performance of acquirer firms i.e. a positive relation persists between firm size and gains from M&A s. The comparison indicated that Large Cap Firms showed the highest improvement than the mid cap firms and small cap firms in the post-m&a period. Large cap firms outperformed in the post- M&A scenario, as compared to mid cap and small cap firms. The findings suggested that large firms adequately took advantage of the opportunities arising from the M&A s by employing resources efficiently and effectively & integrating acquired units into existing ones. The results were in line with those of Kitching (1967), Lubatkin (1986) and Mantravadi & Reddy (2007) who found positive relationship between firm size & gains in the post-m&a performance [16]. Findings for objective 3: To study the effect of M&A s on the shareholders wealth of the acquirer firms. Here the findings revealed that M&A s created a short-term abnormal returns for the acquiring companies i.e. M&A s have a positive impact on wealth creation for company shareholders for a short-term period in the Indian Telecom Sector. It is thus, concluded from the results that M&A announcements for the acquiring firms are neither value creating nor value destroying, but at the best, wealth is economized in the short-term. The analysis found that the acquiring firms shareholders received positive and significant abnormal returns a month prior to the announcement and till a month after the completion of the deal, resulting in an evidence of short-term shareholders wealth creation for the firms. Findings of objective 4: To study the acquirer firms performance in creating shareholders value in the post-m&a scenario with respect to utilizing capital before the M&A. Synopsis-14

15 The findings affirmed that the acquirer firms in the Indian Telecom Industry before utilizing capital for large-scale M&A s as a part of their strategic decision process, do not rationally acknowledge whether the firms are capable of creating or rather protecting the shareholders value or not. Hence, the need to predict the post-m&a performance in order to help the merged/acquired firms in the Indian Telecom Industry, to protect the shareholders value on the basis of judging its efficient performance before the M&A transaction becomes very crucial. This study stated that the firm s efficiency in utilizing capital leading up to the proposed M&A transaction can help the acquirer firms in protecting and in turn creating shareholders value in the new M&A transaction. Findings of objective 5: To analyze the impact of types of mergers on post-merger performance outcomes of the acquiring firms. The findings indicated a significant positive relationship between types of mergers and performance of acquirer firms. The result for the comparison indicated that Vertical mergers had showed the highest improvements in both financial and operating performance, which were also statistically significant. Telecommunications industry is high fragmented industry that comprises of a large number of small firms selling related products. Hence, vertical mergers enable the acquirer firms in replacing two or more independent firms with a single firm and incorporate the management of the successive activities. The results reported above are also in line with the findings of Kitching (1967) and Lubatkin et al. (1986) which showed that vertical mergers outperformed horizontal & conglomerate mergers. 7. SUGGESTIONS AND CONCLUSION Over time, Mergers and Acquisitions have become more and more significant for the growth of a firm. With increasing globalization and the severe competition among companies, there is an escalating trend for M&A s that have helped companies realize certain strategic and financial objectives. It is the reason by which the companies around the world are growing. This inorganic route has been adopted by companies forced by mammoth competition, impregnation in domestic markets, maximizing shareholders wealth and value, hurl to grow big, enter into new markets etc. The results in the previous studies are mixed as to whether M&A s enhanced or deteriorated the firm s performance in the post-m&a scenario. Synopsis-15

16 The key purpose of this study is to systematically discover evidence to answer a question Do M&A have an impact on the firm performance in the telecom sector in India? This empirical study elaborates on the consequences of mergers and acquisitions in the Indian Telecommunication Industry during period to More specifically, the study investigated the short-term as well long-term effects of M&A s on the performance of acquiring firms in the Indian Telecommunications Industry of the 86 Indian acquirer firms. Furthermore, the present study has combined the accounting technique and stock market event study approaches. It is confounding that companies in the Telecom Industry still continue to largely engage in M&A s given the results reported above and in the previous studies. M&A s are undertaken for producing a win-win situation for all the stakeholders of the company. Companies may choose to engage in M&A s because they think it is a good investment and that they can earn a positive return on the investment. Therefore, it can be concluded that, if M&A s are supposed to increase the value of the acquirer firms, it can be expected to witness a decline in the trend over time. Hence, while measuring the performance of a company, the strategic structure and the issues preoccupying the senior management should also be considered as the criteria and benchmarks along with the financial and operating structure of the company. Similarly, M&A s can be like venture capital platforms where the expectation of the firms is that the majority of deals will fail but a few will fetch in a sufficient amount of profits to justify the whole concept of M&A. This study presents evidence regarding the Telecommunications Industry specifically, in order to augment our understanding about a part of the primary structure of the current M&A waves in the Indian Telecommunication market. Additionally, with this study we hope to have contributed to a better perceptive of current fundamental changes in the Indian Telecommunications Industry. 8. IMPLICATIONS AND DIRECTIONS FOR FUTURE RESEARCH It can be inferred from the study that M&A s in general failed to enhance the financial and operating performance for the acquirer firms in the Indian Telecommunication Industry, which might be due to factors like motivation for engaging in M&A s purely to enhance market power Synopsis-16

17 or lack of proper due diligence, as also confirmed from the findings of the present study that have a negative impact on acquirers post-m&a performance. Despite the negative indication concerning post-m&a performance, firms still chose to engage in M&A s on account of external or internal motives. The findings of this study might serve as guidance for acquirers in the Indian Telecommunication Industry to improve their M&A process. The present study is quite holistic and concentrates on examining the short-term as well long-term effects of M&A s on the performance of acquiring firms in the Indian Telecommunications Industry by combining both the accounting technique and stock market event study approaches. However, there is still a wide scope for further investigation. There is further scope to examine post-m&a performance of the acquiring firms by other methodologies (mentioned in the previous chapter) like survey of executives and clinical studies, since there is a possibility that other approaches might get different conclusions about the effects of M&A in the Indian Telecommunications Industry. The present study evaluated the impact of three different types of mergers on the firms performance. Further research of the impact of the other types of merger event on firm performance would present deeper insight for the managers of telecommunications industry. Another extension of this study would be studying the valuation impact of M&A s for both the Indian economy and the Indian Telecommunications Industry. REFERENCES [1] Agrawal, A., Jaffe, J.F. and Mandelker, G.N., The post-merger performance of acquiring firms: a re-examination of an anomaly, Journal of Finance, vol. 47, pp , [2] Andrade, G., Mitchell, M. and Strafford, E., New evidence and perspectives on mergers, Journal of Economic Perspective, vol. 15, no. 2, pp , [3] Armitage, S., Event study methods and evidence on their performance, Journal of Economic Surveys vol. 8, no. 4, 25 52, [4] Beena, P. L., An Analysis of Mergers in the Private Corporate Sector in India, Working Paper 301, Centre for Development Studies, Thiruvananthapuram, pp. 1-61, [5] Business maps of India, Synopsis-17

18 [6] Business Today, 24th April, 2014, [7] Conn, R.L., Cosh, A.D., Guest, P.M. and Hughes, A., Long-run Share Performance of UK Firms Engaging in Cross-border Acquisitions, ESRC Center for Business Research, Cambridge, [8] Farrell & Shapiro, Scale Economies and Synergies in Horizontal Merger Analysis, 68 Antitrust Law Journal 685, [9] Gilson & Kraakman, The Law and Finance of Corporate Acquisition, Supplement, [10] Healy, P.M., Palepu, K.G. and Ruback, R.S., Does corporate performance improve after mergers?, Journal of Financial Economics, vol. 33, no. 2, pp , [11] Jean-Christophe Lebraud and Peter Karlströmer, The future of M&A in Telecom, [12] Jensen, M.C., Agency costs of free cash flow: corporate finance, and takeovers, American Economic Review, vol. 76, pp , [13] Kaplan, S. & Weisbach, M., The success of acquisitions: Evidence from divestitures, Journal of Finance, vol. 47, pp , [14] Kumar, S. and Bansal, L.K., The Impact of Mergers and Acquisitions on Corporate Performance in India, Management Decision, vol. 46, no.10, pp , [15] Mantravadi, P. and Reddy A., "Relative Size in Mergers and Operating Performance: Indian Experience", Working Paper Series, available at: [16] Mulherin, J. H. and Boone, A., Comparing acquisitions and divestitures, Journal of Corporate finance, vol. 6, pp , [17] Pablo, A.L., "Determinants of acquisition integration level: A decision-making perspective", Academy of Management Journal, vol. 37, no. 4, pp. 803, [18] Pautler, P.A., Evidence on Mergers and Acquisitions, Bureau of Economics, Federal Trade Commission, [19] Rainer Lenz, Logic of Merger & Acquisition Pricing, Professor for International Finance, available at: [20] Ravenscraft, D., & Pascoe, G., Can the stock market predict merger success?, mimeo: University of North Carolina Centre for Economics Studies, Bureau of the Census, Synopsis-18

19 [21] Vaara, E., Tienari J. and SÃ ntti R., "The international match: Metaphors as vehicles of social identity-building in cross-border mergers", Human Relations, vol. 56, no. 4, pp , [22] Weston, J.F., Mitchell, M. and Mulherin, L., Takeovers, Restructuring, and Corporate Governance, 4th ed., Prentice-Hall, Englewood Cliffs, NJ, [23] Yaylacicegi, U, The Performance Consequences of Mergers and Acquisitions in the U.S. Telecommunications Industry, PhD thesis, [24] Yook, K.C., The Measurement of Post-Acquisition Performance Using EVA", Quarterly Journal of Business & Economics, Summer, pp , [25] Zhu, J. L., A New Measure for Shareholder Value Creation and the Performance of Mergers and Acquisitions, available at: Synopsis-19