An Empirical Analysis of Mergers and Acquisitions in Indian Information Technology Sector and its Impact on Shareholders Wealth

Abstract

Mergers and Acquisitions (MandA) have become an important part of corporate newlinerestructuring exercise for firms across the globe and the Indian market is not untouched by it. There has been a surge in the MandA deals in India, both in terms of domestic as well as cross border deals across sectors, specially post liberalization and the Indian newlinecapital market has undergone sea change with respect to regulatory and other issues pertaining to them. The evaluation of MandA on various aspects such a operating newlineperformance, wealth effects, synergy gains, success/ failure, integration issues, etc to name a few have been well researched in the Western nations. However, despite the growing importance of MandA in India, in terms of evaluation of these deals on various aspects, there is dearth of work. newlineThe Indian Information Technology and Information Technology enabled Services (IT and ITeS) sector has been a key contributor to the Indian Gross Domestic Product (GDP) contributing 7.5% in the year 2011-2012 and is one of the important sectors that has pushed the growth of Indian economy. This sector has also been a prominent sector in deal activity both in terms of domestic and cross border deals. However, the research work related to MandA focusing the this sector is nearly non-existing as against other sectors like manufacturing, pharmaceutical, banking, etc. to name a few that have attracted more attention in terms of academic and corporate research in India. newlineHence, to fill in the twin broad gaps in literature, i.e., evaluation of MandA in India with specific focus on IT and ITeS sector, an empirical examination of shareholders wealth effects of MandA announcements in this sector was done for deals announced from 1999 to 2009 spanning a period of 11 years. These eleven years also witnessed different movements in the Indian capital market. newline