Saturday, August 25, 2012

THEORY ‘I’ OF M&AS

The how, when, why, wherefrom of what all we undertook in this mammoth M&A analysis of Indian cases ranging from the year 2000-2006
Now the tough read! The methodology adopted during the study was empirical, with broad usage of deductive and cognitive reasoning. The study tests the hypothesis on a factor-by-factor analysis. The study was divided into three phases. In phase I, the analysis of shareholder value change using market capitalisation values was undertaken. In Phase II, analysis of shareholders’ value change using the Tobin’s q factor value was conducted [Tobin’s q is the ratio of the market value to book value of a firm’s assets (also known as replacement cost) where market value is the sum of the book value of long term debt and the market value of equity (m-cap)]. In phase III, analysis on the basis of revenue and profit was performed. Within the overall analysis, we’ve considered different deal sizes (three in case of Indian firms acquiring Indian firms: less than $10 million deal value, between $10-50 million deal value, greater than $50 million deal value) (three again in the case of Indian firms acquiring foreign firms: less than $50 million, between $50-250 million, and greater than $250 million).

If T is year in which the acquisition took place, then the results in each of the scenarios and levels have been analysed for four time periods, or event windows (EWs) – the first (EW1) being the period T-1 to T+1 (where T+1 and T-1 represent one year durations, plus and minus) the second (EW2) being in the period T-2 to T+2, the third (EW3) being in the period T to T+1 and finally the fourth (EW4) one corresponding to the period T to T+2. And finally, to make it more complicated for the finance-nerds, we’ve thrown in a few summary tables. Where will you find the comprehensive research? Our website of course (www.businessandeconomy.org). As the saying goes, more of that later. Enjoy the experience...


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