Effect of Mergers on Corporate Performance in India

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Research Articlefocuses on the analysis and resolution of managerial issues based on analytical and

empirical studies.

Effect of Mergers on Corporate Performance in India

Vardhana Pawaskar

This paper studies the impact of mergerson corporate performance. It compares thepre- and post-merger operating performanceof the corporations involved in merger toidentify their financial characteristics. Also,the effect on merger-induced monopolyprofits is identified by looking at the per-sistence profile of the profits. Taking asample of 36 cases of merger between 1992and 1995, it is seen that there are nosignificant differences in the financial char-acteristics of the two firms involved in

merger. The mergers seem to lead tofinancial synergies and a one-time growth.The analysis of the regression to normshows that there is no increase in the post-merger profits. The competitive process isnot impeded with merger even when nostrong anti-trust laws are present.

Vardhana Pawaskar is a Consultant in the Wholesale

Debt Market Section, National Stock Exchange, Mumbai.

The author is grateful to Dr Subir Gokam and Dr RajendraVaidya for their valuable guidance.

Vol. 26, No. 1, January-March 2001 19

The Indian corporate sector has experiencedmajor restructuring through mergers and acqsitions, with the changes brought about by tIndustrial Policy Resolution of June 1991. Durthe period from January 1985 to Decemb1991, 58 mergers and 127 acquisitions of copanies registered under the Monopolies aRestrictive Trade Practices Act (MRTP), 19were approved by the government.

1In the p

1991 period, there has been a sharp increain the overall number of mergers and acq

sitions. Studies by Khanna (1998)2 and Bas(2000)

3, have well documented the response

the Indian corporate sector to the New IndustrPolicy with reference to the merger and acqsition activity, the change in the shareholdipattern, adoption of product differentiation, aother corporate strategies. Khanna (1998)

2fin

that the withdrawal of all monopoly restrainin acquisitions has resulted in several markbecoming oligopolistic, with a reduction in copetition. Around 60 per cent of all mergersIndia were found to be horizontal in nature. T

study by Basant (2000) also finds that more th50 per cent of the mergers were horizontal a16 per cent were vertical in nature. The focof this study was from the industry point of viewhere various performance indicators liprofitability rates, export performance as was export to import ratio were found to havaried trends across industry groups.

In this article4

we change the focus frothe effect of merger at the industry level to teffect at the firm level. This study analyses t

post-merger operating performance of the quiring firm and attempts to identify the sourcof merger-induced changes. The analysis regression to norm is done to identify whethcompetitive forces would have led to prochanges even if the merger had not occurreThis study shows that merger did not lead t

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improved performance. The only significantgains to the acquired firm were through anincreased leverage. The analysis further showsthat mergers did not lead to excess profits forthe acquiring firm.

The paper is organized as follows: Section

1 gives a brief literature survey; Section 2 givesthe description of the sample used; Section 3attempts to identify the characteristics thatdistinguish the acquirers from the acquired firmsand to find the effect of merger on thesecharacteristics. Section 4 develops and tests themodel that examines the effect of merger onthe performance of the firm. Section 5 discussesthe implications and concludes.

Literature Survey

Studies of the post-merger performance usuallyfollow either of the two general approaches:share-price analysis or analysing the operatingperformance. Empirical research on share-priceperformance suggests that anticipated mergergains are not accomplished. The acquiring firmgenerally earns positive returns prior to an-nouncements, but less than the market portfolioin the post-merger period (Servaes, 1994; Bhagat,Shleifer and Vishny, 1990; Asquith, 1983).

Ravenscraft and Scherer (1987) examine the

target line of business performance using ope-rating earnings. They find no strong evidenceof improvements in performance for these targetlines of business after the merger. Their analysisof merger effect on regression of profits to normshows that regression to norm exists and is fasterfor the merging firms as compared to the non-merging firms. They conclude that acquisitionactivity lowers profitability and that part of thiswas due to the regression to norm fromunsustainably high pre-merger performance.Cosh et al., (1998) attempt to identify successfulmergers based on the pre-merger characteris-tics, the impact of financial institutions as share-owners on the merger outcome, and finally theeffect of mergers in the framework of theregression to norm. Overall, they find that sizewas significantly different for the acquirers andthe acquired firms. The analysis of persistence

Vol. 26, No. 1, January-March 2001 20

of profits shows that regression to norm exitsin the absence of mergers and is reinforced bytheir presence. Healy, Palepu, and Ruback(1992) integrate accounting and stock return datain a consistent form to permit richer tests ofcorporate control theories. They find a strong

positive relation between post-merger increasesin operating cash flows and abnormal stockreturns at merger announcements indicating thatexpectations of economic improvements explaina significant portion of the equity revaluationof the merging firm.

Studies of mergers in India are few and havestopped at comparing pre-merger and post-merger performance using a case by caseapproach (Kaveri, 1986) or a general descriptionof mergers and takeovers and their accountingframework (Kumar and Parchure, 1990).

In the present study, we attempt to analysethe pre- and post-merger operating performanceof the acquiring firm and to identify the sourcesof merger-induced changes. Secondly, the effectof merger-induced monopoly profits are iden-tified by looking at the persistence of profits inthe regression to norm framework used by Coshet al, (1998) developed earlier by Mueller (1986)to study the effect of mergers.

Data Description

The sample consists of 36 firms engaged in amerger over the period from 1992 to 1995(Appendix). The firms were selected such thatdata were available for the pre-merger (fouryears prior to the merger) period for acquirersand acquired firms and post-merger (three yearsafter the merger) data were available for the newentity. Capitaline-Ole database was used as thebase for collecting the data.

In addition to 36 acquiring firms, a matched

sample of 36 non-acquiring firms was drawnfrom the same database. The matched firm wasselected from the same industry

5and size group

1'

as the acquirer. Size was measured by net assets7

in the year prior to the year of merger. Theaverage asset size of the acquiring firms wasRs 70.48 crore while the average of the matched

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sample was Rs 58.53 crore in the year of mergerand was measured for the same chronologicaltime period. The main objective of matchingthe time period was to make some allowancefor the overall market effect (which includesdifferences over time in general economic

conditions) on the firm performance. Matchingby the time period allowed for possible industryeffects as well. To control for the industrydifferences and changes in the economic envi-ronment, all financial variables were measuredas differences from the average values for other

companies in their industry groups.8

Characteristics of Merging Firmsand the Effect of Merger

This section describes certain factors that could

distinguish the acquirer and the acquired firmfrom the industry and also from each other. Acomparison of these factors for the pre- and post-merger period would yield some insights re-garding the effect of merger. The list of variablesused has been described in Box 1.

Box 1: Description of the Various Variables Used in the Present Study

The measures of profitability used here are:

PREPROF : Pre-merger profitability, measured as the operating return on assets (profit before interestdepreciation and tax on net assets), averaged over the three pre-merger years (t-3) to (t-1).

PREFIMP : Short-run improvements in performance measured by the change in operating return over

the three pre-merger years [(t-1) less (t-3)]. POSTPROF : Post-merger profitability measured by the operating return on net assets averaged over

the three post-merger years (t+1) to (t+3). WPREPROF : Weighted average pre-merger profitability of the acquirer and the acquired measured as

operating profits over net assets, weighted by net assets and averaged over the three pre-merge years.

The growth rate is defined as:

PREGRO : Pre-merger growth, average growth rate in total assets in the three pre-merger years [thatis, from (t-4) to (t-1) year].

POSTGRO : Post-merger growth, average growth rate in total assets in the post-merger years [thatis, from (t+1) to (t+3) year].

The leverage of the f irm is given as:

PREDE : Leverage ratio = total debt/ (total debt + equity capital), averaged over the three year period

(t-3) to (t-1) prior to merger. POSTDE : Leverage ratio, averaged over the three year post-merger period (t+1) to (t+3).

The measures used to capture the effect on tax are:

PRETAX : Tax provision as a ratio of the operating profits, averaged over the three year period (t-

3) to (t-1) prior to merger.

POSTTAX: Tax provision as a ratio of the operating profits, averaged over the three year post-merger

period (t+1) to (t+3).

The variables used to measure liquidity are:

PRELR : Liquidity ratio = [(current assets - inventory)/current liabilities], averaged over the three

year period (t-3) to (t-1) prior to merger.

POSTLR : Liquidity ratio, averaged over the three year post-merger period (t+1) to (t+3).

The 'other' factors that could influence merger decision are proxied as:

HORI : Dummy variable, 1 when acquirer and acquired belong to the same industry group and 0

otherwise.

SUB : Dummy variable, 1 when acquirer and acquired belong to the same business group and 0otherwise.

BIFR : Dummy variable, 1 when merger took place because the acquired firm was under the BIFRand

0 otherwise.

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Profitability

Mergers can raise or lower the profits of the

two merging companies from what they would

have been had they not merged. Most hypothe-

ses as to why mergers occur assume that

managers maximize profits (Mueller, 1986;Scherer, 1990). The successful mergers raise the

profitability of the merged firm. This increase

in profitability could be due to enhanced

monopoly or increase in efficiency. Similarly,

any decrease in profitability is explained by the

managerial theory of the firm. It considers that

the managers pursue corporate growth at the

cost of some current profits (Marris, 1964).

The gains to the acquiring firm may come

through economies of scope and scale that

improve asset productivity by eliminating facili-

ties that are underutilized if each firm operated

separately. An alternate view of the impact of

mergers on profitability emphasizes selection

through the capital market (Ravenscraft and

Scherer, 1987; Cosh et al, 1998). This links pre-

merger profit and growth performance to post-

merger success. The causation here works

through shifts in performance arising from

movement toward the production possibility

frontier. This argument is based on the view

that merger leads to efficiency improvements

not through any scale or complementary factors

but simply through the replacement of inferior

by superior management of existing assets in

the market for corporate control. The average

pre-merger profitability and the extent of short-

run improvements in pre-merger profits are

used as independent variables to explain post-

merger profitability.

Growth in Total Assets

The objective of the merger need not in all cases

be the pursuit of profit but could be the pursuit

of managerial self-interest which is not intendedto improve profitability. These then may lead

to the appearance of unsuccessful mergers in

profit terms and account for the poor average

performance post-merger which has been ob-

served in many studies. The rate of growth of

the firm in pre-merger period could then be used

Vol. 26, No. 1, January-March 2001

as an explanatory variable to study its effect on

post-merger firm profits.

In the context of mergers, there are two

aspects of growth that can be studied. First, it

can be the immediate (absolute) growth of the

acquiring firm subsequent to the merger (com-

pared with the pre-merger position). This growthis achieved by definition through merger. Sec-

ond, one can compare the average annual rate

of growth in the years prior to the merger and

in the post-merger years, excluding the year of

merger(t). What needs to be checked is whether

merger contributes to its annual rate of growth

of the firm in the years following the merger

(excluding the yeartof merger).

Leverage

Mergers provide an opportunity to eliminate

under-investment problems arising from unused

borrowing capacity. It is suggested that one

reason for the firm takeover is shortage of long-

term capital (Tzoannos and Samuels, 1972).

Lewellen (1971) claims that with merger, espe-

cially between firms operating in uncorrelated

industries, if the income streams become more

stable, then the lenders can increase the limits

on lending to the newly created firm. This limit

would be above the sum of the original limits

that would be available for the merging parties

individually. The leverage is measured as theratio of total debt to the total capital (total debt

plus the equity capital).

Tax Savings

Mergers can result in tax savings to the acquir-

ing firms.9

Tax laws permit the deduction of

interest payment in the calculation of taxable

income. A source of tax savings is the accu-

mulated loss of the acquired firm which is used

in offsetting the profits of the acquiring firm.

The extent of tax saving is proxied by taking

the ratio of tax provision to the total operatingprofits.

Liquidity

Another motive advanced for mergers is the

expected improvement in the liquidity of the

acquiring firms. A firm hard pressed for liquid-

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ity might merge with one which abounds inliquid assets with the objective that the combinedshort-term financial situation will improve.Liquidity ratio measures the firm's ability tosatisfy its current obligations. The more liquidthe firm before a merger, the more likely it will

not face liquidity problems if it assumes addi-tional post-merger costs, such as higher interestpayments. If, however, the firm is only mar-ginally liquid at the time of merger, it mayexperience liquidity problems following themerger, unless it can rely on the other mergerpartner for additional liquidity (Tzoannos andSamuels, 1972). The liquidity is measured as theratio of current assets (net of inventories) tocurrent liabilities.

Additional Factors Considered in Merger

As a corollary to the above stated characteristics,it has been suggested that the 'successful' mergeroutcomes that lead to higher profitability aremore likely to be from the horizontal mergerhaving similar operations. This is becausediversification by large holding companiesthrough mergers is likely to have problems ofcontrol loss and inferior post-merger perform-ance (Ravenscraft and Scherer, 1987). On theother hand, the diversified firms could be easilyintegrated than in the case of horizontal acqui-sition. This could be due to the predominant

divisionalized management structure in thetypical large diversified firm and the acquisitionof human as well as physical capital in themerger process. These approaches suggest thatthe direction of merger whether horizontal orunrelated could influence post-merger success.

The case of mergers between group orsubsidiary firms has been very specific to theIndian firms. The formation of many group orsubsidiary firms is attributed to the governmentpoli ci es which pl ayed an ac tive role in the

growth of the firm until 1991. The merger ofthe subsidiaries or group companies into thesame firm has been a major part of therestructuring process to improve performance.

Some of this restructuring activity has alsobeen driven by the directive given to revive sickunits (firms) under the Board for Industrial and

Financial Reconstruction (BIFR). The BIFRwas established under the Sick Industrial Com-panies (Special Provisions) Act, 1985. It has beenplaying a signif icant role in arranging mergerof viable firms through package deals. Thesedeals are done with the creditor financial in-

stitutions and banks in regard to the ways offuture finance, continued business activity, andother changes in the business, if any. In oursample, there are 14 horizontal mergers, 24mergers between subsidiary or group compa-nies, and six mergers under the BIFR.

Characteristics of Firms Involved ina Merger

This section attempts to identify the character-istics of firms which distinguish them from those

of the overall industry. Since the sample hasan inherent selection bias (as they are only thosefirms which have gone in for a merger), thecomparison is done with respect to both themean and median of each group. Table 1 showsthe results of the test of difference in means andmedians of the pre-merger characteristics of theacquired and acquiring companies comparedwith their industry averages. The WilcoxonRank Sum test111 is used to test the differencein the median between the two groups. In allcases, the t-test at two-tailed statistical signifi-cance levels was applied for the variables, sinceit was unclear a priori whether the differencewould be positive or negative for the profits andother factors.

Table 1 indicates that, on an average, theacquirers were high growth firms, which hadimproved their performance over years priorto merger and had a higher liquidity. Theacquired firms, on the other hand, were mainlyfirms with performance that was at the industryaverage levels. However, as discussed earlier,

the selected sample of firms had a selection bias.In such a situation, the merging firm charac-teristics distinguished from those of the industrycould be better described by comparing themedian of the two groups. On the basis of themedian comparison, it was seen that the firmsinvolved in merger were significantly smaller

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Table 1: Pre-merger Characteristics Comparison of 36 Acquirers and 36 AcquiredFirms with their Industry

(Significance Level of T-test in Percentage)

Variable Sample Firm vs.Industry Mean

T-test

(two-tail)Vo

Firm vs.Industry Median

T-test(two-tail)/o

SIZE Acquired Higher 0.1 Lower 0.1SIZE Acquirer Higher 0.1 Lower 0.01

PREGRO Acquired Lower - Lower 10

PREGRO Acquirer Higher 0.1 Lower 5

1 Year Profitability Acquired Higher 5 Higher 1

1 Year Profitability Acquirer Higher 0.1 Higher 0.01

PREPROF Acquired Higher 1 Higher 1

PREPROF Acquirer Lower 0.1 Higher -

PERIMP Acquired Lower - Lower -

PERIMP Acquirer Higher 0.1 Higher -

PREDE Acquired Lower - Lower -PREDE Acquirer Lower - LowerPRETAX Acquired Lower - Lower 5PRETAX Acquirer. Lower - Lower 10PRELR Acquired Higher - Lower 10PRELR Acquirer Higher 5 Higher -

Note: Difference computed as firm-industry.Wilcoxon Rank Sum test used to compute difference in medians.

in size with a lower growth rate than the rest

of the industry. The firms had, however, higher

than industry levels of profitability. The acquirer

had a significantly lower pre-tax ratio as com-

pared to the industry and a liquidity ratio atindustry levels. The acquired firms had liquidity

lower than the industry, which does not support

our initial hypothesis that acquired firms would

have higher levels of liquidity. Both these

observations do not support our initial premise

that merger took place due to any tax or liquidity

related strategic benefits to the acquirer.

In the sample of the merging firms, we next

try to distinguish the characteristics of the firms

that were acquired from those that had taken

over these firms (the acquirers). As shown in

Table 2, there is no significant difference in the

size, capital structure or tax provision ratio of

the two firms. The acquirers were firms with

higher average growth rate and average liquidity

than the acquired. The comparison of medians

shows that acquirers were highly profitable

firms than those that were acquired.

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Effect of Merger

The impact of merger was studied by comparing

the post-merger performance of the acquirer with

its pre-merger performance. All variables were

adjusted for industry average. The size of theacquirer was significantly larger after merger.

The immediate (absolute) growth of the acquiring

firm subsequent to the merger (compared with

the pre-merger position) has been distinguished

from the change in the annual rate of growth in

the years following the merger. There is no doubt

that the first type of growth is achieved, by

definition, through merger. The increase in assets

for the 36 acquiring firms in the merger year was

43 per cent. The average annual growth rate over

the three years prior to merger and the three post-

merger years was nearly the same at around 16

per cent to 17 per cent. The growth in sales and

operating income for the acquiring firms in the

merger year was 39 per cent and 185 per cent

respectively. The annual average growth rate

over the pre-merger period and the post-merger

period was less than 20 per cent."

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Table 2: Pre-merger Characteristics Comparison of the Acquirer with the Acquired

(Significance Level of T-test in Percentage)

Variable Differencein Means

T-test (two-tail) %

Difference inMedians

T-test(two-tail)%

SIZE Lower - Lower -

PREGRO Higher 5 Higher -

1 Year Profitability Higher - Higher -

PREPROF Higher - Higher 10

PREIMP Higher - Higher -

PREDE Higher - Higher -

PRELR Higher 5 Higher -

PRETAX Lower - Lower -

Note: Difference computed as acquirer-acquired.

Wilcoxon Rank Sum test used to compute difference in medians.

From Table 3 it is seen that merger resultedin an expected once-and-for-all increase in assets,sales, and operating profit margin. The differ-ence at the average showed that there is noincrease in the growth rate of the acquiring firmin subsequent years. However, the medianindicates an increase in growth rate in post-merger years.

Merger has a negative impact at averageand no impact at median of the acquirerperformance as indicated by all the profitabilitymeasures. Instead of just comparing the prof-

itability measures at the pre- and post-mergerlevels, we also compare the post-merger prof-itability with the weighted average of pre-mergeracquirer and acquired firm profitability. Thismeasure shows no significant gains in profitabil-ity in the post-merger period. There was asignificant increase in the leverage of the ac-quirer. Overall, the effect of merger is seen insignificant increase in size (once-and-for-allgrowth) and financial synergies (increased lev-erage).

Effect of Merger on Profitability

In a finite sample period, the population of allfirms would change since there would be newentry and exit from the industry. The entry couldbe through merger of an established firm with

an incumbent. Similarly, the merger of anincumbent would lead to its exit from theindustry. This process of restructuring of thefirm, primarily through mergers, makes itdifficult to construct a sample of firms that canbe analysed with long-run data to isolate theeffect of a merger. Hence the short-run data fora merging firm was considered, which was longenough for pre- and post-merger period, so asto capture the merger effects. The next sectiondescribes the model developed by Cosh et al.,(1998) which has been used here to analyse the

effect of merger on profitability.The Model

The model to test for the existence of persistenceof profits, in firm i at tim^ t, expressed relativeto industry profits, is given by:

i t = i + X i t + i t - 1 + i t ........ (1)

where it is the excess profitability given as thedifference between profitability of firm at timet and profitability of industry i at time t andXitare the exogenous variables.

In the above model, the term ' + Xitcaptures the factors which systematically influ-ence excess profitability (IT, while the intercepta. captures the factors which influence firm fs

profi ts and which are not time varying. isassumed to be common for all firms. Thecoefficient A indicates the degree of inertia



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Table 5: Effect of Merger on Performance

*Significant at 10% level. **Significant at 5% level.

or subsidiary firms suggesting that it was more

a part of the restructuring activities by the firms

in response to the changes in the industrial

policy. However, this restructuring was not seento improve the profitability of the firms in the

post-merger period.

Comparing the performance of the firms

involved in merger with a firm which was not

involved in merger shows that if no merger had

taken place, the post-mergei period profitability

would have improved. Merger had a negative

impact on the profitability. If the firms with a

higher than industry average performance would

takeover a firm with lower than industry average

profi tability and size, then there is an averageof performance with merger. However, in our

case, both the firms were at the industry

performance levels and the merger did not lead

to an increase in profits. In terms of the

regression to norm, it was seen that there is

a significant amount of persistence of profits of

the firm and it was not significantly affected by

Vol. 26, No. 1, January-March 2001

merger. This implies that the competitive pro-cess was not impeded with merger. In otherwords, it was seen that mergers did not lead

to monopoly effects in terms of increased rents.

Attributing most of the mergers to therestructuring process also explains the case thatthere was the existence of regression to normof the firm profitability to the industry averagebut contradictory to the other studies (Cosh etal, 1998; Mueller, 1986), there was no signifi-cant increase in the rate of regression of profitsto norm with merger (accelerating effect).

In terms of the policy implications, thisresearch is a contribution to the empirical

research on corporate strategy rather than asa guide to specific policies public or private.Most diversification and expansion decisionshad been influenced by the government policiesuntil 1991. Not much work had been done laterthat would provide insights into the situation inthe post-liberalized era. It becomes importantfor them to understand what went wrong and

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Model 7 Model 2

Coefficient t-stat Coefficient t-stat

CONSTANT -0.11 -1.43 0.56 3.89"

MERG 0.20 1.93" -0.39 -1.77'

PREPROF 0.81 3.9" 0.52 2.85"

SIZE 0.30 3.34"

PERIMP -0.09 -0.52

PREGRO 0.58 2.07"

AGE -0.008 -3.96"

MPREPROF -0.49 -1.71' -0.18 -0.66

MSIZE -0.27 -2.19"

MPERIMP 0.11 0.51

MPREGRO -0.55 -1.09

MAGE 0.008 2.65"

MBIFR -0.16 -1.18MSUB 0.03 0.29

MHOR1 -0.10 -1.06

A.R7 0.19 0.41

F-Stat 6.37 4.57

D.F. 68.00 58.00

29


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how to avoid making similar errors in the future.

The anti-trust policy existing until 1991 had a

strong stance towards allowing merger to avoid

the possibility of creating monopolies. Covering

a time period when there were no anti-trust laws

in existence, our results do not support the

contention that all mergers were efficiency

enhancing but we can make a counter statement

that the mergers did not give rise to high

monopoly rents.

Appendix 1: Sample of the Merging Firms

Acquiring Company Acquired Company Year of Merger

Nicco Corporation Ltd.

Core Parenterals Ltd.

SOL Pharmaceuticals Ltd

Asea Brown Boveri

Voltas Ltd.

Sakthi Sugars Ltd.

Mafatlal Industries Ltd.

ESAB India Ltd.

Mahindra and Mahindra Ltd.

United Breweries Ltd.

Carbon Everflow

NOCIL

J.K. Corp Ltd.

Akar Laminators

Hindustan Lever Ltd.

Balrampur Chinni Mills Ltd.

Enkay Texofood Industries Ltd.

GTN Textiles Ltd.

Bindu Synthetics Ltd.

Amforge Industries Ltd.E.I.D. Parry (India) Ltd.

PCS Industries Ltd.

Novopan Industries Ltd.

Khaitan Electric Ltd.

Vam Organic Chemicals Ltd.

Aarti Industries Ltd.

Aminsons Ltd.

Cimmco Birla Ltd

Aarti Drugs Ltd.

Nicholas Piramal Ltd. Jai Corporation Ltd.

Crompton Greaves Ltd

Escorts Ltd.

Nicco Corporation Ltd.

Royal Enfield (Eicher Ltd.)

Asian Paints (India) Ltd.

Nicco Orissa Ltd.

Core Laboratories Ltd.

Standard Organics Ltd.

Flakt India Ltd.

Hyderabad Allwyn Ltd.

Sakthi Soya Ltd.

Mafatlal Fine Spg & Mfg. Co. Ltd.

Maharashtra Weldaids Ltd.

Mahindra Nissan Allwyn Ltd.

Indo Lowenbrau Breweries Ltd.

Graphite Vicarb

Polyolefins Industries

Orissa Synthetics Ltd.

Uvifort Metal

Tata Oil Mills Ltd.

Babhnam Sugar Mills Ltd.

Enkay Synthetics Ltd.

Perfect Spinners Ltd.

Kaypee Mantex Ltd.

Tru Wheels Ltd.Falcon Gulf Ceramic Ltd.

PCS Data General India Ltd.

Novopan India Ltd.

Khaitan Fan (India) Ltd.

Ramganga Fertilizers Ltd.

Salvigor Laboratories

Superhouse Ltd.

Biax Ltd.

Rupal Chemical Industries Ltd.

Sumitra Pharmaceutical and Chemicals Ltd.Comet Steels Ltd.

Northern Digital

Escort Tractors Ltd.

Nicco Batteries Ltd.

Eicher Tractor

Pentasia Chemicals Ltd.

1992

1993

1993

1993

1993

1993

1993

1993

1993

1993

1993

1993

1993

1994

1994

1994

1994

1994

1994

19941994

1994

1994

1994

1994

1994

1994

1995

1995

1995

1995

1995

1995

1995

1995

1995

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Kumar, Ashok N and Parchure, Rajas (1990). Mergersand Takeovers in India, Pune: Times ResearchFoundation.

Lewellen, W G (1971). "A Pure Financial Rationalefor the Conglomerate Merger," Journal of Finance,Vol 26, pp 521-537.

Marris, R (1964). The Economic Theory of ManagerialCapitalism,New York: Basic Books.

Mueller, Dennis C (1986). Profits in the Long Run,"Cambridge, New York and Sydney: CambridgeUniversity Press.

Ravenscraft, David J and Scherer, Frederic M (1987).

Mergers, Sell-ojfs, and Economic Efficiency, Washing-ton, DC: Brookings Institution.

Saple, Vardhana (2000).Diversification, Merger and theirEffect on Firm Performance: A Study of the IndianCorporate Sector, unpublished PhD thesis, Mumbai:Indira Gandhi Institute of Development Research.

Scherer, F M (1990). Industrial Market Structure and

Economic Performance, Boston: Houghton Mifflin.

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Effect of Mergers on Corporate Performance in India