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An analysis of mergers in the private corporate sector in India

Author

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  • P.L. Beena

    (Centre for Development Studies)

Abstract

The liberalised economic policies have exposed Indian industry to several challenges. In response to this, the Indian economy has witnessed a sharp increase in mergers and acquisitions. An attempt has been made in this paper to analyse the significance of such mergers and its characteristics. The study suggests that acceleration of the merger movement in the early 1990s is accompanied by the dominance of mergers between firms belonging to same business group or house with similar product lines. So it is argued that though the merger movement in the early 1990s might have contributed to an increase in product or asset concentration measured on a firm-wise basis, it could not have contributed to an increase in concentration as measured by relative shares of business groups. But, there are signs that mergers between unrelated firms, though numerically less significant, have been gaining ground. This is especially true of mergers involving foreign-owned firms. The participation of foreign-controlled firms in the merger process has increased significantly since 1992-93. However it is evident that mergers contributed significantly to asset-growth in only one fifth of the sample firms studied. Most of these firms mobilised a large share of resources through capital markets, to finance their expansion during 1989-90 to 1994-95. Therefore the study argues that the merger wave in the early 1990s was more a means of internal restructuring rather than an instrument to further product market or asset share.

Suggested Citation

  • P.L. Beena, 2000. "An analysis of mergers in the private corporate sector in India," Centre for Development Studies, Trivendrum Working Papers 301, Centre for Development Studies, Trivendrum, India.
  • Handle: RePEc:ind:cdswpp:301
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    File URL: http://www.cds.edu/wp-content/uploads/2012/10/wp301.pdf
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    References listed on IDEAS

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    1. Lye, Stephen & Silbertson, Aubrey, 1981. "Merger Activity and Sales of Subsidiaries between Company Groups," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 43(3), pages 257-272, August.
    2. Salop, Steven C, 1987. "Symposium on Mergers and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 3-12, Fall.
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    Cited by:

    1. Beena, S, 2006. "Mergers and Acquisitions in the Indian Pharmaceutical Industry: Nature, Structure and Performance," MPRA Paper 8144, University Library of Munich, Germany, revised 28 Jun 2007.
    2. N. Vijayamohanan Pillai, 2004. "CES function, generalised mean and human poverty index: Exploring some links," Centre for Development Studies, Trivendrum Working Papers 360, Centre for Development Studies, Trivendrum, India.
    3. Adrian R. Gourlay & Geetha Ravishankar & Tom Weyman-Jones, 2006. "Non-Parametric Analysis of Efficiency Gains from Bank Mergers in India," Discussion Paper Series 2006_18, Department of Economics, Loughborough University, revised Oct 2006.
    4. Basant, Rakesh & Mishra, Pulak, 2016. "Trends in Strategies and Performance of the Indian Corporate Sector What has changed in two decades of economic reforms?," IIMA Working Papers WP2016-03-31, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. Méndez Ortega, Carles, & Teruel, Mercedes, 2018. "To acquire or not to acquire: Mergers and Acquisitions in the Software Industry," Working Papers 2072/307043, Universitat Rovira i Virgili, Department of Economics.
    6. P.L. Beena, 2004. "Towards understanding the merger-wave in the Indian corporate sector: A comparative perspective," Centre for Development Studies, Trivendrum Working Papers 355, Centre for Development Studies, Trivendrum, India.
    7. repec:jfr:ijba11:v:9:y:2018:i:1:p:44-54 is not listed on IDEAS
    8. Rakesh Basant & Pulak Mishra, 2016. "Trends in Strategies and Performance of the Indian Corporate Sector: What has changed in two decades of economic reforms?," Working Papers id:11033, eSocialSciences.

    More about this item

    Keywords

    mergers and acquisitions; horizontal merger; vertical merger; conglomeration; private corporate sector; India;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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