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Valuation of Financial Synergies in Mergers and Acquisitions: A Case Study of Multiple Indian Entities

Vol 4, Issue 2, July - December 2017 | Pages: 22-49 | Research Paper  

 
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https://doi.org/10.17492/mudra.v4i02.11447


Author Details ( * ) denotes Corresponding author

1. * Anjala Kalsie, Assistant Professor, Faculty of Management Studies, University of Delhi, Delhi, India (kalsieanjala@gmail.com)
2. Aishwarya Nagpal, Research Scholar, Faculty of Management Studies, University of Delhi, Delhi, India (aishwarya.n_phd15@fms.edu)

Mergers and acquisitions are broadly undertaken to have extraneous advantages for the combined entity vis-à-vis standalone entities. The objective of the study is to evaluate the actual financial synergy realisations in case of four recent and significant M&A deals in three different sectors in India: automobile, banking, and pharmaceuticals. These are: Amtek Auto and JMT Auto; Kotak Mahindra and ING Vysya Bank; Sun Pharmaceuticals Industries Ltd and Ranbaxy Laboratories; and Express Scripts and Medco Health Solutions. Synergies are calculated for few basic parameters including revenue, expenditure, and PAT in all the four deals and also for industry-specific elementary performance indicators for proper evaluation of the industry. The results suggest Kotak Mahindra -ING Vysya Bank and Sun Pharma-Ranbaxy deals were able to realise most of the synergies that were estimated and were on the right track towards synergy realisation in the post-acquisition period. However, the Amtek Auto-JMT Auto deal couldn’t realise cost synergies as their expenditures elevated to high levels after the merger but it managed to attain lower cost of capital financial synergies. On the other hand, Express Scripts-Medco deal badly failed because it couldn’t attain revenue synergies after the merger. The study concludes with the relevant policy implications.

Keywords

Mergers and acquisitions; Financial Synergies; Cost of capital

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