RESEARCH PROJECT ON

THE EFFECTS OF MERGER AND ACQUISITION ON THE GROWTH OF

FLIPKART

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETE

ON OF DEGREE OF BACHELOR IN COMMERCE ( ACCOUNTING AND
FINANCE )
UNDER THE FACULTY OF COMMERCE

By

AKSHATA SANDEEP PATIL

CLASS: TYBAF (A)
PRN NO: 2019300107

UNDER THE GUIDANCE OF

DR. VINOD CHANDWANI

VIDYA PRASARAK MANDAL’S

K.G JOSHI College of Arts & N.G BEDEKAR College of
Commerce (Autonomous),
Chendani Bunder Road Thane (West) – 400601

2021-22
I
 Date: 21st February, 2022

Vidya Prasarak Mandal, Thane

K.G. JOSHI COLLEGE OF ARTS &

N.G. BEDEKAR COLLEGE OF COMMERCE, AUTONOMOUS,THANE.

CERTIFICATE

OF

PROJECT WORK
This is to certify that

Mr.Ms Akshata Sandeep Patil

of B.Com(Accounting & Finance) Semester - VI Roll No. 32has undertaken &

completed the project work titled The Effects Of Merger and

Acquisition On The Growth Of Flipkart. .

during the academic year 2021-22 under the guidance of

Mr./ Ms. Dr Vinod Chandwani

Submitted on 26th February, 2022 to this college in fulfilment of the curriculum of

BACHELOR OF COMMERCE (Accounting and Finance)

UNIVERSITY OF MUMBAI

This is bonafied project work & the information presented is True &

original to the best of our knowledge and belief.

PROJECT COURSE EXTERNAL PRINCIPAL

GUIDE CO-ORDINATOR EXAMINER

II
 DECLARATION BY LEARNER

I the undersigned Ms. Akshata Sandeep Patil here by, declare that the work embodied in this
project work titled “The effects of Merger and Acquisition on the growth of Flipkart” forms
my own contribution to the research work carried out under the guidance of Dr. Vinod
Chandwani is a result of my own research work and has not been previously submitted to any
other University for any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

(Akshata S. Patil)

Certified By

(DR. Vinod Chandwani)

III
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank my Principal Dr. Suchitra Naik madam for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator Dr. Neelam Shaikh madam, for her moral
support and guidance. Also I thank to all my all other teachers for indirect support.

I would also like to express my sincere gratitude towards my project guide Dr. Vinod
Chandwani sir whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in
the completion of the project especially my Parents and Peers who supported me
throughout my project.

IV
INDEX

V
Chapter Title of the Chapter Page No.
No.

1 INTRODUCTION 1-22
1.1 Meaning 2
1.2 Historical View 2-4
1.2.1 Evolution of Merger and Acquisition in India 4
1.2.2 Pre Liberalization Era 4
1.2.3 Post Liberalization Era 5
1.3 Concept of Merger and Acquisition 5
1.3.1 Concept of Merger 5
1.3.2 Concept of Acquisition 6
1.3.3 List of Mergers in India
6
1.3.4 List of Acquisitions in India
8-9
1.4 Theories of Merger and Acquisition
9-11
1.5 Types of Mergers
11-12
1.6 Motives of Merger
13-14
1.7 Company Profile of Flipkart: One of the leading
online selling store
14-15
1.7.1 Company Introduction
15-16
1.7.2 History of Flipkart
17-18
1.7.3 Working of Flipkart
19
1.7.4 Which E-Commerce Technology does
Flipkart Use?
19
1.7.5 The Business Model of Flipkart
19-21
1.8 Flipkart – Mergers and Acquisitions
21
1.8.1 Acquisition by Walmart
21-22
1.8.2 6 Famous Acquisition by Flipkart of all time

2 RESEARCH METHODOLOGY 23-34

2.1 Introduction 24
2.2 Problem Statement 25
2.2.1 Lacking a good motive for the acquisition 25
2.2.2 Targeting wrong company 25
2.2.3 Overestimating synergies 25
2.2.4 Overpaying 25
2.2.5 Exogenous risks 26
2.2.6 Losing the trust of important stakeholders 26
2.2.7 Inadequate due diligence 26
2.3 Objective of study 26
2.3.1 E-commerce ecosystem in India 27
2.3.2 Philosophy behind the acquisition 27
2.3.3 To examine major challenge faced by e- 28
commerce industry in India
2.3.4 The future of Indian e-commerce industry: 28
Attracting shoppers, Investors and global players
2.4 Scope of Study 28
2.5 Limitations of Study 29
2.6 Sample Size VI
29
2.7 Data Collection Method 30-32
2.8 Hypothesis 33
 LIST OF TABLES

Table No. Description Page

No.
Table 1.1 Trend of Merger and Acquisition during 1972-73 to 1985-89 4
Table 1.2 Trend of Merger and Acquisition during 1990 to 2000 5
Table 1.3 List of Mergers in India 6
Table 1.4 List of Acquisitions in India 7
Table 1.5 Motives for Merger and Acquisition 12
Table 1.6 Flipkart - Mergers and Acquisitions 20
Table 1.7 Place of Domicile of Respondent 55
Table 1.8 Age group of Respondent 56
Table 1.9 Education of Respondent 57
Table 1.10 Do you know what Merger and Acquisition means? 58
Table 1.11 Do you know different types of Merger and Acquisition ? 59
Table 1.12 Is Merger or Acquisition only option left when company faces crisis. 60
Table 1.13 How comfortable are you with shopping online? 61
Table 1.14 Do you know Walmart Company? 62
Table 1.15 Do you know E-bay Company? 63
Table 1.16 Do you know about Myntra ? 64
Table 1.17 Do you know that Flipkart Merged with Walmart ,Ebay and Myntra? 65
Table 1.18 Do you do Online Shopping? 66
Table 1.19 Do you think Online shopping is better than Offline shopping? 67
Table 1.20 What benifits you received while doing Online Shopping? 68
Table 1.21 Do you like the service provided by Flipkart? 69
Table 1.22 The quality of product purchased from Flipkart is highly satisfactory 70
Table 1.23 Do you prefer Flipkart among all other shopping sites of apps? 71
Table 1.24 Which of the following features do you like about Flipkart? 72
Table 1.25 How do you rate your overall Flipkart Experience? 73
Table 1.26 Is Merger or Acquisition affects consumer? 74
Table 1.27 Do you think that after Merger or Acquisition company's environment 75
change?
Table 1.28 Do you think that Merger or Acquisition helps company to grow? 76
Table 1.29 Do you think it is risky to do merger or acquisition with corporate? 77
Table 1.30 Do you think that Merger and Acquisition of the company affects 78
shareholders wealth?

VII
 LIST OF CHARTS

Chart No. Description Page No.

Chart 1 Flipkart Private Limited 13

Chart 2 Working of Flipkart 17
Chart 3 E-commerce ecosystem of India 27
Chart 4 Place of Domicile of Respondent 55
Chart 5 Age group of Respondent 56
Chart 6 Education of Respondent 57
Chart 7 Do you know what Merger and Acquisition means? 58
Chart 8 Do you know different types of Merger and Acquisition ? 59
Chart 9 Is Merger or Acquisition only option left when company 60
faces crisis.
Chart 10 How comfortable are you with shopping online? 61
Chart 11 Do you know Walmart Company? 62
Chart 12 Do you know E-bay Company? 63
Chart 13 Do you know about Myntra ? 64
Chart 14 Do you know that Flipkart Merged with Walmart ,Ebay and 65
Myntra?
Chart 15 Do you do Online Shopping? 66
Chart 16 Do you think Online shopping is better than Offline 67
shopping?
Chart 17 What benifits you received while doing Online Shopping? 68
Chart 18 Do you like the service provided by Flipkart? 69
Chart 19 The quality of product purchased from Flipkart is highly 70
satisfactory
Chart 20 Do you prefer Flipkart among all other shopping sites of 71
apps?
Chart 21 Which of the following features do you like about Flipkart? 72
Chart 22 How do you rate your overall Flipkart Experience? 73
Chart 23 Is Merger or Acquisition affects consumer? 74
Chart 24 Do you think that after Merger or Acquisition company's 75
environment change?
Chart 25 Do you think that Merger or Acquisition helps company to 76
grow?
Chart 26 Do you think it is risky to do merger or acquisition with 77
corporate?
Chart 27 Do you think that Merger and Acquisition of the company 78
affects shareholders wealth?

VIII
 Abbreviation

M&A - Merger and Acquisition

GDP – Gross Domestic Product

MNCs –Multinational Corporation

US - United States

USA - United States of America

FDI - Foreign direct investment

IT – Information Technology

HCL - Hindustan Computers Limited

EAS - Enterprise Applications Service

FERA - Federal Emergency Relief Administration

MRTP Act - Monopolies and Restrictive Trade Practices Act, 1969

NEP - New Economic Policy

MNE - Multinational Enterprises

SEBI - Securities and Exchange Board of India

CEO - Chief Executive Officer

UPI -Unified Payments Interface

UNIX - UNiplexed Information Computing System

B2B - Business to Business

B2C - Business to Customer

C2C - Customer to Customer

IMRB - Indian Market Research Bureau

IAMAI - Internet & Mobile Association of India

IX
 CHAPTER 1 - INTRODUCTION

Sr Figure Description Page No.

No. No.
1 1.1 Meaning 2
2 1.2 Historical View 2-4
3 1.3 Concept and Merger and Acquisition 5-9
4 1.4 Theories of Merger and Acquisition 8-9
5 1.5 Types of Mergers 9-11
6 1.6 Motives of Mergers 11-12

7 1.7 Company Profile of Flipkart:One of the leading online 13-19

selling store
8 1.8 Flipkart – Mergers and Acquisitions 19-22

1
1.1. MEANING

In today's globalized economy, competitiveness and competitive advantage have become the buzzwords for
the corporates around the world. Business houses are thriving to reach the pinnacle of success seeking
competitive edge over their rivals. In order to remain competitive and to grow rapidly, the companies world-
wide have been aggressively trying to build new competencies and capabilities. Here, the role of
restructuring comes into existence, which is the corporate strategy of reorganizing a company for value
creation and making it more efficient. Many companies undertake restructuring activities to focus on core
businesses, while divesting non-core business activities. Restructuring is the strategy through which a firm
changes its set of businesses or financial structure (Bethel and Liebeskind, 1993). Now a days every business
concern wants to become world-class. Thus, corporate restructuring that brings excellence is inevitable to re-
establish organization’s competitive advantage and respond more quickly and effectively to new
opportunities and challenges. Corporate restructuring usually implies restructuring the corporate sector from
multidimensional angles with a view to obtain competitive edge and thereby ensuring business success.
Simply stated, corporate restructuring is a comprehensive process by which a company can consolidate, split
up its business operations and strengthen its positions for achieving its short-term as well as long-term
corporate objectives and goals. At its most generic level, the term ‘corporate strategy’ can and has been used
to mean almost any change in operations, capital structure, and in ownership that is not part of the firm’s
ordinary course of business (Marshall and Bansal, 2004).

Merger and acquisition is a commonly used strategy world over for achieving larger size, faster growth and
for becoming more competitive through economies of scale. Several merger waves are recognized in the
history of M&A deals across the globe. The origins of such deals were UK and USA. Merger waves are
classified on the basis of time. It is found that each wave is significantly different from each other.
Historians refer the first wave of merger in USA since 1890. The first US merger wave was started at the end
of 18 th century and lasted till 1904. The reason behind this dynamic change in the economy was the rising
stock market and the introduction of Sherman Anti Trust Act, 1890. Like the first wave, the second wave
also began with upturn in the corporate world in 1920 and ended with a huge economic slowdown in 1929.
The period is also renowned as the great depression of the world. The trend of M&A during the period 1940
and 1980 fluctuates a lot due to the passing of Celler-Kefauver Act, 1950*, which restricts the merger
activity. The period of 1965-1969 was devoted to conglomerate mergers. During this period, US economy
underwent through a strong boom again. The decade of the 1970s, also known as the era of hostile takeovers,
witnessed a dramatic decline in the number of mergers, yet the decade showed some trendsetting events.
This fourth wave is known as the wave of mega mergers, when the relative percentage of hostile takeovers
increased a lot. This happened in the sectors like oil and gas, pharmaceuticals, medical equipment’s,
petroleum and banking. The 1992 onward period led to a major economic transition in many economies.
This was the biggest merger wave that broke all the previous records. This wave was very much deal
friendly, where only 4% of deals were of hostile nature.

1.1 Historical View

Indian M&A history is not as old as discussed in the case of USA. Earlier, our economy was majorly based
upon the agriculture sector. Further, the industrial needs at that time and even now are based upon small-
scale, village, cottage and tiny industries. The share of manufacturing sector in GDP was very low.
Government/regulatory bodies were not much aware about the merger standards and codes. Our exposure in
this regard was very limited. When we talk about the deals in 1991, hardly few of the deals took place in our
2
economy. The domestic markets and companies were not as sound as global MNCs. It is important to note
that since 1991, Indian economy is following the path of deregulation and the process of economic reforms
seems to be accelerating. These changes are forcing Indian businesses to become domestically and globally
competitive by making major changes in corporate structure and management culture. A number of trends
exist that accelerate this process. First, deregulation and global opening of the Indian economy got firmly
established and it is unlikely to reverse regardless of the type of government in power. Second, internet-
based technologies are being rapidly implemented in India. Third, India is finally investing in infrastructural
developments. All of these changes and technology investments speed up business process, eliminate most
impacts of distance, make prices more transparent, and generally reduce dead weight transactions cost.

Historically, the foreign investment policy of the Indian Government (during the period from 1950 to 1990)
consisted of stringent foreign exchange controls and regulations including in the form of industrial licensing,
quota system, capital controls, a bar on free trade and control of the flow of funds to a very larger extent. As
early as 1984, India saw the failure of a takeover attempt of Escorts Limited and DCM by Swaraj Paul’s
Caparo Group, owing to the promoters using political clout against the uninvited acquirer.12 But with the
advent of liberalization in the FDI policies post-1991, M&As and alliance talks are heating up in India and
growing at a tremendous pace. The policy of opening the country for international trade and investment thus
allowing the investors across the globe to enter the Indian market has lead to unprecedented rise in M&A
transactions in India. Today the Indian market is witnessing lot of high value M&As like Bharti Airtel’s
acquisition of Zain Telecom of Africa for $10.7 billion. With this deal Bharti has acquired Zain’s African
mobile services operations in 15 countries with a total customer base of over 42 million. With this
acquisition, Bharti has become the world’s fifth largest wireless company with operations across 18
countries. Another prominent acquisition is that of India’s largest IT companies HCL Technologies Ltd
acquiring the British based Axon group Plc’s SAP consulting firm for $0.662 billion in all cash deal. The
deal has catapulted HCL into the top 15 global players in the enterprise applications services (EAS)
business.13 One of the largest deals in Indian M&A space is acquisition of majority stake in Cairn India
Limited by Vedanta Resources Plc. The deal marks the Vedanta group’s foray into the Oil and Gas space
with an access to a world class oil exploration asset having significant growth potential in the import reliant
Indian Oil and Gas market. Last but not the least, Tata’s acquisition of Corus Steel for 12.2 billion dollars.
Thus, the liberalization of foreign exchange policies coupled with rapid economic growth have driven Indian
companies to acquire softer targets in India or abroad.

Mergers, acquisitions and takeovers have become a major force in the financial and economic environment
all over the world. Essentially an American phenomenon till the mid-seventies, they have become a
dominant global business force since then. On the Indian scene, too, thanks to the liberalization of FERA,
MRTP Act and industrial licensing and the compulsion to be more competitive, corporates are looking
seriously at mergers, acquisitions and takeovers.14 The recent liberalization of the earlier state controlled,
sluggish Indian economy has made mergers more necessary and acceptable.15 A restructuring wave in the
form of mergers, takeovers and acquisitions activities is sweeping the corporate world. Indian corporate
sector could not have been left behind, that’s why from banking to oil exploration, telecommunication to
power generation, petro chemicals to aviation, companies are coming together as never before. The concept
has caught up like wild fire with a merger or two being reported every second day and this time Indian
companies are out to make a global presence. Close on heels of Tata-Corus acquisition, as discussed above,
came another acquisition i.e. acquisition by Hindalco, the flagship metal company of Aditya Birla Group of
Novelis Inc based in Atlanta at $6 billion. With this transaction, Hindalco has become world’s largest
aluminum rolling company and one of the biggest producers of primary aluminum in Asia. The other major
takeover making waves has been the acquisition of majority interest of Hutchison-Essar by Vodafone.
3
1.2.1. Evolution of Merger and Acquisition in India

The origin of mergers and acquisitions in India can be traced back to the 19th century which has evolved in
different phases. The three dominant phases are pre liberalization era that is before 1991 which followed the
anti-competitive mergers and later on mergers concentrated between oligopolies, second phase post
liberalization era from 1991-2000 and third phase present regime from 2000-till date.

1.2.2 Pre Liberalization Era:

Before 1991 India followed a strong regulatory regime before 1991.The control and command era before
1991 was restrictive in terms of expansion of business and size of operation. The Industrial Policy
Resolution, 1956, reserved certain industries for the public sector, by prohibiting the entry of private-sector
firms (examples include steel manufacture, aviation, petrochemicals). The Monopolies and Restrictive Trade
Practices (MRTP) Commission was created in 1969 to ensure restrictions of monopolies. MRTP was set up
to provide that the operation of the economic system does not result in the concentration of economic power
to the common detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive
trade practices and for matters connected therewith or incidental thereto. The year 1972-73 brought many
changes to the Indian financial system which aimed at curtailing the monopoly of the big business firms and
to deal with the consequences of the absence of price competition. These changes were abolition of the
managing agency system, the passage of the MRTP Act 1969, the nationalization of the banking system in
1969 and the announcement of new provisions granting tax relief in the Finance Bill for 1967. Before 1990,
an open offer was mandatory for acquiring 25 per cent stake in a company. In 1990, this threshold was
reduced to 10 per cent of a company’s capital. However, in case of MNE related acquisitions, provisions of
the Foreign Exchange Regulation (FERA) Act, 1973, also applied which imposed a general limit on foreign
ownership at 40 per cent (Kumar, 2000). All these measures affected the process of growth through mergers
as well. Yet both MRTP and non-MRTP companies used mergers and acquisitions as an important means of
growth (Beena, 2000) (Refer Table 1.2).

Table 1.1 Trend of Merger and Acquisition during 1972-73 to 1985-89

Mergers Takeovers
Year Non- Manufacturin Total Non- Manufacturing Total
Manufacturing g Manufactur
ing
1974-79 48 108 156 0 11 11
Average 10 22 31 0 2 2
1980-84 39 117 156 0 15 15
Average 8 23 37 0 3 3
1985-80 33 79 113 6 85 91
Average 10 23 35 2 17 18

4
1.2.3 Post Liberalization Era:

1991-2000 New Economic Policy (NEP) of 1991 abandoned formal licensing requirements in most but not
all industrial sectors. This policy removed import restrictions, brought in foreign competition led to
privatization of certain public sector industries, liberalized the FDI regime, improved infrastructure and led
to an expansion in the production of fast moving consumer goods. Post-liberalization, the Indian private
sector faced increased domestic and foreign competition due to removal of the restrictive provisions of the
Monopolies and Restrictive Trade Practices (MRTP) Act relating to licensing for expansion of enterprises,
Amalgamations and Takeovers of business enterprises, and Acquisition of foreign technology and foreign
investment. The Indian corporate sector witnessed substantial growth in mergers and acquisitions during
1990s. The total number of mergers and acquisitions rise up to 1034 during 1990- 2000 from the level of 268
during 1980-1990 (Refer Table 1.3).

Table 1.2 Trend of Merger and Acquisition during 1990 to 2000

Year Non-Manufacturing Manufacturing Total

1990-95 116 175 291
1995-2000 233 510 743
1990-2000 349 685 1034

According to Beena, 2004, 32 per cent of mergers and acquisitions during 1995-2000 were MNE-related
deals. A large share of mergers and acquisitions during this period were group-Mergers, i.e., between firms
belonging to the same business group (Agarwal, 2002). The deals relating to MNEs were predominantly
horizontal in nature. Two-fifths of them involved buying out the local partners in joint ventures set up in
India or raising the stake of MNEs

1.3 Concept of Merger and Acquisition

In the business language the word merger is generally observed along with another word, that is the
‘acquisition’. Since the 100% acquisition of a business is considered as merger. So, both words are used as
synonymous in many literatures. However, there lies a thin line difference between the two. Thus, it would
be appropriate to discuss the definitions of these two terms separately.

1.3.1 Concept of Merger

Merger is one of the most common forms, used in corporate restructuring across the globe. It is a strategy of
inorganic growth. To obtain the optimum utilization of resources, it involves combination of all the
competencies of two companies at a common platform. Even in India, thousands of companies got acquired
or merged into other companies in the past. Indian companies are aggressively following this path of
corporate restructuring. Concept of merger is also termed as amalgamation in India; however amalgamation
is a broader concept. It includes both merger and consolidation. Generally, mergers come through the way of
100% absorption of one company by another, where as consolidation paves the way for the emergence of a
new entity. One should understand that in India the legal frame work for mergers and consolidations is the
same. A comprehensive legislature is provided by India to deal with the various issues pertaining to the
5
merger deals The provisions for the same are given under chapter XV (Section 230 to 240) of Companies
Act, 2013.

1.3.2 Concept of Acquisition

Acquisition is also one of the most popular form of corporate restructuring. Through this way, a company or
a group acquires the control over another company and gets the right to control its management and policy
decisions. Unlike merger, the identity of acquired company remains intact and does not cease to exit. The
participation of acquirer company in the decision-making process of acquired company provides the scope
for timely and appropriate strategic moves. Along with the mergers, acquisitions are well adopted at
international level. Every day, one can come across five to seven acquisition announcements. Besides
domestic acquisitions, the companies are expanding their reach through cross-border acquisitions also.
Indian companies are also in race by indulging themselves into domestic as well as cross-border
acquisitions.

1.3.3 List of Mergers in India

Table No.1.3
Mergers In India
Sr. No. Name of the First Company Name of the Company Year in which it was
Merged with Merged
1 Indus Tower Bharti Infratel 2020
2 National Institute of Miner’s ICMR- National Institute 2019
Health of Occupational Health
3 Indiabulls Housing Finance Lakshmi Vilas Bank 2019
Limited (IBHFL) and Limited (LVB)
Indiabulls Commercial
Credit Limited (ICCL)

4 Bank Of Baroda Vidya Bank And Dena 2019

Bank
5 Induslnd Bank Bharat Financial 2019
6 NBFC Capital First IDFC Bank 2018
7 Vodafone India IDEA Cellular 2018
8 TATA Steel ThyssenKrupp 2018
9 Housing.com PropTiger.com 2017

10 State Bank Of India Bhartiya Mahila 2017

Bank ,SB Bank of
Bikaner and Jaipur, SB
of Patiala, SB of
Travancore
11 Flipkart E-Bay India 2017

6
1.3.4 List of Acquisitions in India

Table No 1.4
S.No. Acquiring Company Acquired Company Year of
Acquisition
1 Infosys Kaleidoscope Innovation 2020
2 Reliance Retail Future Group’s Retail Business 2020
3 Ola Etergo 2020
4 ITC Sunrise Foods 2020
5 Zomato Uber Eats 2020
6 HUL GSK Consumer 2020
7 Hindalco Aleris 2020
8 Ebix Yatra 2020
9 Advent International Enamor 2019
10 LIC IDBI bank 2019
11 Accenture Droga5 2019
12 Reliance Brands Hamleys Global Holdings (HGHL) 2019
13 India UPL Ltd. Arysta LifeScience Inc 2019
14 Silverpush BetterButter 2019
15 Power Finance Corporation Rural Electrification Corporation Limited 2019
16 OYO Rooms Europe’s Leisure Group 2019
17 InMobi Roposo 2019
18 Publicis Groupe Epsilon 2019
19 Famous Innovations Three Bags Full 2019
20 Havas Group Shobiz 2019
21 Martin Sorrell’s S4 Capital WhiteBalance 2019
22 Mortgage Lender HDFC Apollo Munich Health Insurance 2019
23 Disney 21st Century Fox 2019
24 Killer Jeans Desi Belle 2019
25 Bandhan Bank Gruh Finance 2019
26 Apple Intel’s Smartphone Modem 2019
27 Teleperformance Intelenet Global Services 2018
28 Flipkart Liv.Ai 2018
29 Tata Steel Bhushan Steel 2018
30 PVR SPI (Sathyam, Escape, Pallazo) 2018
31 Walmart Flipkart 2018
32 Tata AutoComp Systems Ltd TitanX 2017
33 Bharti Airtel Tikona 2017
34 Freshdesk Pipemonk 2017
35 BYJU’S Vidyartha 2017
36 ONGC (Oil and Natural Gas HPCL(Hindustan Petroleum Corporation 2017
Corporation Ltd) Limited)
37 WNS Global Services Denali Sourcing Services 2017
38 Aurobindo Pharma Part of business from TL 2017
Biopharmaceutical AG of Switzerland
39 Wipro Ltd InfoSERVER S.A. 2017
40 Bharti Airtel Telenor India 2017
41 Nuance Communications mCarbon Tech Innovations 2017
42 Axis Bank Freecharge 2017
43 Havells India Lloyd Electric’s Consumer Durable 2017
Business
7
44 Cyient Certon Software 2017
45 Dr. Reddy Laboratories Ltd Imperial Credit Private Ltd 2017
46 Cognizant Technology Solutions Brilliant Service Co. Ltd: 2017
47 Piramal Enterprises business from Mallinckrodt LLC 2017
48 Tech Mahindra Ltd CJS Solutions 2017
49 Taro Pharma Canada’s Thallion Pharmaceuticals 2017
50 WNS HealthHelp 2017
51 Cadila Healthcare Ltd Sentynl Therapeutics Inc 2015
52 Sony Corporation TEN Sports from Zee 2013

1.4 Theories of Mergers and Acquisitions

Whenever news comes regarding the M&A, the first question comes to the mind of the general public is the
reason of this particular activity, the financial arrangements, motive of management, the future prospect and
the benefits to shareholders. But, there is always some confusion, and questions remain unanswered or
unsolved. Over a period of time many of the theories are being developed to explain the justification for
M&As. These are summarized as follows:

Monopoly Theory

This theory explains the concentration of monopoly power through horizontal mergers and acquisitions. The
merger enables the company to achieve market strength, reduction in competition and a good access to the
market. The aforesaid initiative helps the acquirer to consolidate its strengths further. To enjoy the benefits
of monopoly position in the market, a company can obtain the same by rational use of subsidiaries of
acquired business lines and augmentation of entry barriers in specific markets. But such practices are strictly
prohibited in India by Monopolies and Restrictive Trade Practices Act, 1969

Valuation Theory

Valuation theory designates the acquirer as the only one, who can understand the target company better than
market, customers, stakeholders and company’s existing management itself. It is perceived in this theory that
acquirer has better information about the valuation of target company than the stock market. Under this
theory, the acquisition is purely termed as investment plan. Here, acquirer estimates the real intrinsic value
to be much higher than the present market capitalization of target company. From this perspective, the
decision to invest in or acquire other companies is a pure investment decision which must be reflected by an
increase in shareholder value (Ray, 2011).

Efficiency Theory

The efficiency theory moves around the synergic effect. In this theory, it is assumed that pooling of
resources will help them in achieving the overall efficiency in terms of cost reduction, optimum utilization of
resources and resource sharing. The synergic effect can be obtained by way of financial synergy. This move
helps the company in minimizing the risk and implementation of sound financial planning. Secondly,
operating synergy is the merger of production facilities. The kind of fusion gives birth to the generation of
quality product and cost reduction. Thirdly, the sharp skills and competencies of the management are the
best outcomes of management synergies.

8
Empire Building Theory

This theory is in the favour of show-business rather than the interests of shareholders. It has been proved to
be true in case of many acquisitions in all the economies of the world. The fact of the theory is tested
through several empirical studies. An examination of merger waves in US till the end of century and even
afterwards signals at the expansion of empire rather than creating wealth for shareholders. The negative
aspect of this show-case always leads to big and good organizations in conflicts at work, disinterest among
shareholders and time destruction in unethical issues

Process Theory

This theory is also known as indirect approach, where M&As are known for the outcome of complex
decision-making process. The kind of exercise is done at the level of decision-makers. This type of decisions
are not of routine kind and requires tedious mental exercise followed by number of tasks required to
accomplish in order to make this M&A activity happen. Here, this is not an end of the story. The decision-
makers always make an attempt to ensure the stakeholders regarding the success of this mega event and its
after effects. They generally project the picture, painted through their mental exercise.

Raider Theory

This theory is particularly in the context of private equity funds. This is done only for the motive of
satisfying the requirement of cash needy companies. This way acquirer gets the controlling stake at much
lower valuation than the actual or even the present valuation. This is broadly done for unlisted companies.
However, in the case of listed companies, price determination is calculated through the way suggested by the
SEBI in its (Disclosures and Investor Protection Guidelines, 2000). This theory is very narrow in terms of its
scope and exercise

Disturbance Theory

M&As are the outcomes of macro level events and trends. These mega changes in the economy aggravate
the decision-makers or entrepreneurs to think differently. The historical results support the same hypothesis.
Viewed historically, the first wave of M&As consisted primarily of horizontal merger; the second of
vertical; and third of conglomerate mergers. This unforeseen risk and uncertainty diverts the mind of
management towards different possible solutions, that is, either to act like a leader or to dispose of its stake
in another company

1.5 Types of Mergers

Mergers across the world are not of a single type. It has many variants and types; and companies follow the
same to fulfill their objectives. Sometimes the decision is based upon the choice of the company or trends
prevailing in the market. The different types of mergers are discussed as follows:

9
Horizontal Merger

Those companies which are producing same goods or offering similar services combine in a horizontal way.
If two very small companies merge with each other, the results are generally very minimal. When two major
companies proceed for the horizontal merger, it leads to the synergies at various levels and results in less
competition in the market. It has been observed that this kind of merger is the most common type of
corporate restructuring. The first merger wave of 1897-1904 is also known for horizontal mergers and its
role for creating huge monopolies. The acquisition of Parle products by Coke and the merger of Brooke
Bond India with Lipton India to form Brooke Bond Lipton India Ltd. are the examples of horizontal
combinations.

Vertical Merger

It is a merger of two firms producing and offering same products and services but at different levels. This
kind of merger strengthens the supply line. Not only the supply side, where a company merges its supplier
with itself, it also comes as forward integration. Under this type of integration, producer integrates with the
distribution channel. The period of 1922-1929 (second wave) gained the recognition as vertical integration
horizon. The best example in this regard is acquisition of glass company, rubber plantation, steel mill, auto
ancillary unit by FORD Motors Ltd.

Conglomerate Merger

This is the merger of companies, producing totally unrelated products. Conglomerate merger can be further
divided into two parts, that is, pure and mixed. Pure merger deals purely with two different types of
companies. Mixed merger involves companies which are looking for products as well as market extensions.
This kind of merger leads the companies for diversifying their business in unrelated products. The basic
motive of these mergers is to reduce risk through diversification (Gupta, 2010).The third merger wave of
1965-1969 was devoted to conglomerate mergers. The merger of Alstom Transportation Ltd. and Alstom
System Ltd. with Alstom Power India Ltd. is an example of conglomerate merger

Triangular Merger

A triangular merger refers to the acquisition of a domestic company through a share swap with a subsidiary
which is wholly owned by a parent buyer company. This is a merger through subsidiary. Ultimately by this
way, acquisition takes place through the action of subsidiary. In simple words a subsidiary acquires the
target company; merges with the same; and finally, becomes the subsidiary of the acquirer. This deal is
termed as reverse triangular merger. In case of forward triangular deal, an independent company approaches
the subsidiary of another company for M&A.

Accretive Merger

Accretive merger occur when a company with a high price-to-earning ratio (P/E) purchases a company with
low P/E. As a result, the EPS of the acquirer company increases. Thus, accretion implies ‘value creation’
(Aurora et al., 2011). In an all-stock deal, if a company acquires a target with a lower P/E ratio, it must be
accretive to earnings. Similarly, when RIL approved the merger with IPCL, the swap-ratio was decided to be

10
one share of RIL for every five shares of IPCL. This was believed to be EPS accretive for the shareholders
of RIL.

Dilutive Merger

The word dilutive implies ‘destruction’ or ‘dilution’. A dilutive is one where the EPS of the acquirer
company falls after merger. Since the EPS declines, the acquirer company’s share price also declines, as the
market expects a decrease in the company’s future earnings. The expected decline could be because the
market forces feel the merger would destroy value and would not result in synergies post-merger (Aurora et
al., 2011). For example, copper mining company Phelps Dodge International Corporation entered into a
dilutive merger with Canadian Nickel Miners Inco and Falconbridge in 2006.
1.6 Difference between Merger and Acquisition

The terms mergers and acquisition are often used interchangeably (Chiplin and Wright, 1987) but there is
slight difference between the two. According to Kathy, 2005 merger entails the coming together of two or
more firms to become one big firm while acquisition is the takeover or purchase of a small firm by a big
firm; which are both pursuing similar motives. Motis (2007) state that the explicit difference of mergers and
acquisitions relies on the way transaction is announced to the target company and on how the new
corporation structure results affected. In mergers, the takeover bid is proposed to the representative manager
of the firm and in acquisitions directly to the owners of the firm (the shareholders). Due to this reason the
acquisitions are categorized under the head of tender offer, wherein, a takeover bid in the form of a public
invitation to shareholders to sell their stock. Sometimes, in acquisitions only part of the company is bought.
It refers to those deals in which the acquirer only buys minority shares or voting rights of the target. In
contrast, in mergers shareholders altogether vote to make a collective decision about the proposed bid.

Yet another point of difference has been explained in the context of negotiations that may or may not follow
during the restructuring. In a merger there is usually a process of negotiation involved between the two
companies prior to the combination taking place. In an acquisition the negotiation process does not
necessarily take place. In acquisitions the dominant company is usually referred to as the acquirer and the
lesser company is known as the acquired. The lesser company is often referred to as the target up to the point
where it becomes acquired (Roberts et al., 2010). In this thesis the term mergers and acquisitions has been
used interchangeably.

1.6.Motives of Merger and Acquisition

One important aspect of analyzing mergers and acquisitions is to examine the motives that drive the deals.
Most researchers agree that mergers are caused by a complex pattern of motives which sometimes overlap or
compete with each other. Merger and acquisitions are one of the major managerial decisions firms take in
their daily existence (Mitchell and Stafford, 2000; Khemani, 1991) and have significant effect on the
performance of the acquiring firms (Agrawal et al., 1992). Sudarsanarn (1995) states that all firm decisions
including mergers and acquisitions are made with the fundamental objective of enhancement of shareholders
wealth. Merger and acquisition activity results in overall benefits to shareholders when the consolidated
post-merger firm is more valuable than the simple sum of the two separate pre-merger firms (Pilloff and
Santomero, 1996). Soludo (2004) opined that mergers and acquisitions are aimed at achieving cost
efficiency through economies of scale, and to diversity and expand on the range of business activities for
improved performance.

11
According to Pautler (2001), firms undertake acquisitions when it is the most profitable means of enhancing
capacity, to obtain new knowledge or skills, enter new product or geographic areas, or reallocating assets
into the control of the most effective managers/owners. Mergers and acquisitions are sometime influenced
by external and internal environmental factors like government regulations, merger waves (Agarwal, 2002;
Kummer & Steger, 2008; Auster and Shirower, 2002) and firm’s strategy and position (Rui and Yip, 2008;
Elenurm, Terk, and Andresoo, 2008). Thus, many of the same factors that influence major investment
decisions would also influence merger activity.

Brouthers et al (1998) suggest that the merger motives can be combined in three generally accepted
categories: economic motives, personal motives and strategic motives. These categories are shown in Table
1.1.

Table 1.1 Motives for Merger and Acquisition

Table No 1.5

Economic Motives Personal Motives Strategic Motives

Marketing economies of scale Increase sales Pursuit of market power

Increase profitability Managerial challenge Acquisition of a competitor

Risk-spreading Acquisition of inefficient management Acquisition of raw materials

Cost reduction Enhance managerial prestige Creation of barriers to entry

Technical economies of scale

Differential valuation of target

Defence mechanism

Respond to market failures

Create shareholder value

12
1.7.Company profile of Flipkart: One of the leading online selling stores

Chart No. 1

Flipkart Private Limited

Flipkart's main office in India

Type Private, subsidiary

Industry E-commerce

Founded 2007; 14 years ago

Founder Sachin Bansal

Binny Bansal

Headquarte Bangalore, Karnataka, India (operational HQ)

rs
Singapore (legal domicile)

Area served India

Key people Kalyan Krishnamurthy (CEO)[1]

Services Online shopping

₹43,615 crore (US$5.8 billion) (FY 2019)[2]

Revenue

13
 Walmart (82.1%)[3]
Owner
Tencent (5.1%)
Tiger Global (4.87%)
Binny Bansal (3.25%)
Microsoft (1.46%)
QIA (1.43%)
Accel (1.32%)
Other (0.47%)

Number of employees 30,000 (2016)[4]

Parent Walmart

Myntra
Subsidiaries
PhonePe
Ekart
Jeeves
Cleartrip

Website www.flipkart.com

All of us love to do online shopping as in this tech world who does not want to get his/her work done while
sitting comfortably at home? Shopping and buying necessities have been made less time consuming, less
expensive and much easier and comfortable for us by online e-commerce platforms. It could not have been
possible if these e-commerce platforms were not available. One of these major platforms is Flipkart which is
grabbing a larger share of the e-commerce market. So let us now read some facts about the leading online
selling store Flipkart and its co-founders Sachin Bansal and Binny Bansal.

1.7.1 Company Introduction

Flipkart is one of India’s leading e-commerce marketplaces. It was founded in October 2007 and its
headquarters are in Bengaluru. It was founded by Sachin Bansal and Binny Bansal. This online venture was
initially started as an online bookstore and as the popularity of the company grew, it expanded and
diversified its operations.
It started selling other items such as music, movies, and mobile phones. As the revolution of e-commerce
gained momentum in India, Flipkart grew at an accelerated pace and added several new product lines in its
portfolio.

As of now, the company offers 80 million+ products spread across more than 80 categories such as mobile
phones & accessories, computers and accessories, laptops, books and e-books, home appliances, electronic
goods, clothes and accessories, sports and fitness, baby care, games and toys, jewelry, footwear, and the list
goes on.

14
Flipkart has 100 million registered users and more than a million sellers on its electronic commerce
platform. To ensure prompt delivery to its customers, the company has invested in setting up warehouses in
21 states.

This online platform attracts ten million page hits every day and around eight million shipments are
processed every month. Flipkart has also introduced its mobile application, which has become quite popular,
with 50 million+ app users. Flipkart is a billion dollar company and its valuation in 2016 was INR 15,129
crore (US$2.3 billion). It is also fulfilling its social responsibility by providing huge scale employments
(employs more than 33,000 people).

Flipkart is an Indian e-commerce company, headquartered in Bangalore, Karnataka, India, and incorporated
in Singapore as a private limited company.The company initially focused on online book sales before
expanding into other product categories such as consumer electronics, fashion, home essentials, groceries,
and lifestyle products.

The service competes primarily with Amazon's Indian subsidiary and domestic rival Snapdeal. As of March
2017, Flipkart held a 39.5% market share of India's e-commerce industry.Flipkart has a dominant position in
the apparel segment, bolstered by its acquisition of Myntra, and was described as being "neck and neck"
with Amazon in the sale of electronics and mobile phones. Flipkart also owns PhonePe, a mobile payments
service based on the UPI.

In August 2018, U.S.-based retail chain Walmart acquired a 77% controlling stake in Flipkart for US$16
billion, valuing Flipkart at around $20 billion

1.7.2 History of Flipkart

Flipkart was started by two friends Sachin Bansal and Binny Bansal. Flipkart was founded in 2007 in
Bangalore, India. An interesting fact is, they share the same surname but they are not actually related. Sachin
Bansal was born in 1981 in Chandigarh, India. In 2005, Sachin graduated from the Indian Institute of
Technology (IIT), Delhi, with a degree in Computer Engineering he met Binny Bansal, the other founder of
Flipkart. After graduation, Sachin joined Techspan and shortly after this, he joined Amazon Web Services in
2006 as a Senior Software Engineer.

Binny Bansal, on the other hand, was born in 1982 in Chandigarh, India. Along with Sachin, Binny also
graduated from IIT in 2005 with a degree in Computer Engineering. That’s where the friendship between
Binny and Sachin began. After graduation, Binny joined Sarnoff Corporation, but in 2007 he also joined
Amazon Web Services.

In 2007, Sachin and Binny first thought of creating a comparison search engine. At that time, they saw a
huge gap in the e-commerce sector in India and quit their job at Amazon Web Services to establish their e-
commerce site, Flipkart. Initially, they set up their venture with an investment of Rs 400,000 and Flipkart
started its journey by selling books. Because at that time it was not easy to find vendors of electronics,
fashion, or household items in India. Even book vendors could not completely put their trust in an Internet-
based service like Flipkart in the beginning. At that time Sachin Bansal took charge as the CEO of the
company. In 2008, the company started operating with an office in a two-room apartment in Bangalore and
gained popularity among book readers. Flipkart’s popularity began to catch the eye of investors and in 2009,
the company was able to secure a capital of $1 million capital investment from an investment firm, Accel
Partners. At that time, the company had a staff of over 150, and a total of three offices across India. At the
end of that year, they were able to sell books worth a total of Rs 40 million.

15
Although Indian consumers at that time did not feel comfortable shopping online, Flipkart was able to gain
the trust of customers by providing 24/7 customer support. In 2010, Tiger Global invested $10 million in
Flipkart, and the company acquired the Bangalore-based social book discovery service “WeRead“. After the
popularity of book sales picked up, Flipkart started selling mobiles under the electronics category. As the
company did not achieve the desired success in it, they implemented cash on the delivery system for the first
time in India. As a result, the company was able to gain the trust of consumers and Flipkart’s sales growth
continued to grow. At the beginning of Fiscal Year 2011, their revenue stood at Rs 750 million, and in the
same year, they acquired a digital content platform, Mime360. Flipkart, in the same year, officially
registered their company since at that time the regulations did not allow 100% Foreign Direct Investment
(FDI) to an online retail company providing multi-brand goods and services.

Flipkart was originally started as an online book store in October 2007. To start Flipkart, the founders Sachin
Bansal and Binny Bansal left their jobs at Amazon and took a huge risk to start a venture of their own. When
the founders thought of starting Flipkart as a company the market at that time was not so much vibrant and
was not adapted to the e-Commerce sector that much.

This means e-commerce in India was mostly non-existent at that time and there was no certainty about its
future. Still, the Bansals decided to take this risk and now it has turned out to be a huge success.

One of the major problems that Flipkart tackled during its initial years was online payments because at that
time, people in India were averse to make online payments to a virtual store, due to fear of frauds and loss of
money.

To deal with this issue, Flipkart launched its ‘Cash on Delivery’ service, which helped to build confidence
among online buyers. It also made significant efforts to improve the supply chain system, which helped the
company to ensure timely delivery to its customers.

Flipkart has received funds worth more than $ 4.5 billion, with the biggest funding in July 2014 worth $ 1
billion and in April 2017 worth $ 1.4 billion.
List of top investors in Flipkart includes Naspers, Steadview Capital, Tiger Global Management, DST
Global, Accel Partners, Dragoneer Investment Group, Baillie Gifford, GIC, Greenoaks Capital, ICONIQ
Capital, Microsoft, Morgan Stanley, Qatar Investment Authority, and Sofina.

16
1.7.3 Working of Flipkart

Here we’ll show you a comprehensive analysis of the functioning of Flipkart. This model is the brainchild of
Sachin Bansal and Binny Bansal who are the founders of Flipkart. They are an aspiration for young
entrepreneurs today who think of the ways how Flipkart works.
Chart No. 2

A. Flipkart’s sales channels

Therefore, for financial gains, Flipkart uses the model “X% commission on the entire sales worth given to
the vendor”.

Its sales take place via several channels as given below. For all the sales that Flipkart achieves– Flipkart can
charge a proportion (%) cut on the total sale quantity that doesn’t embrace taxes.

 Direct through an eCommerce website

 Direct through web App.

 Direct through e-commerce store mobile app (Android, iOS, etc.)

 Direct through Telesales (Customer calls and Place order – seldom happens now)

 Through Affiliate Networks (Coupon Websites, Review Websites, and Bloggers)

 Social Media Buying/Selling (selling on social media)

17
B. How does Flipkart make money?

The giant e-commerce marketplace creates revenue not solely by the sale of the product however conjointly
from totally different financial gain channels. Putting this into simple terms, it basically tells us the way how
Flipkart works.

C.The web portal

The basic supply of the financial gain is done by accumulating commission for the services from the vendors
who use Flipkart as their selling and business e-commerce marketplace. Flipkart allows multiple vendors to
sell via their site and in return take a commission on sales to cover the costs of managing the site while
vendors focus on their efforts on building a community.

D.Listing and convenience fee

The other manner of obtaining revenue for the corporation are inclusion and convenience fee. The listing fee
is collected from the vendors, and therefore the convenience fee is collected from the purchasers for faster
delivery. Convenience fee adds wrapping charges for the gifts; Billing includes the full financial gain of the
corporate Flipkart e-commerce marketplace.

E. Logistics

For delivering the products of the vendors; a fee is charged from them. It provides services to its vendors
like alternative delivery corporations. Charging services for delivery dissent from location to location
covering the gap. Today, there are e-commerce fulfillment distribution centers for distributing the products.
Logistics services include many aspects of warehousing, inventory management, billing, packaging,
labeling, shipping, cash on delivery, payment, product return & exchange, and much more.

F. Digital Media

As e-commerce grows and takes a greater share of total retail sales, digital media companies are increasingly
pursuing new sources of revenue growth by incorporating e-commerce into their platforms and businesses in
response to fundamental challenges they each face.

It conjointly sells ads and a totally different product like co-branding and co-advertising to the vendors or
brands via digital media. The ads are divided into 3 classes:

 Co-branding on Flipkart’s homepage via slippery banners that get more views and more sellers every
day

 Co-advertising products for publications in newspapers or magazines’ front page for common brands.

 Target search results wherever Flipkart decides that vendor’s product to be displayed at the highest
result.

In addition to the on top of the revenue model, Flipkart conjointly gets funding from many alternative
sources to upgrade their business. Flipkart corporations embrace the recent acquisition of alternative Indian
E-commerce stores like Myntra, Jabong, eBay India which are currently termed as the Flipkart Group!

18
1.7.4 Which E-Commerce Technology does Flipkart Use?

At present, the engineers of the functioning of Flipkart are clear that the positioning is currently high in its
responsiveness and is low with technical issues that assist the net store to stay up as an e-commerce store.

Computing technicals of Flipkart are-

 Code operates on the UNIX system – Debian and most alternative systems don’t seem to be designed
ever on Java. however, they take JVM for his or her use.

 For information storage, it uses MySQL, and for caching it uses Memcached. The corporation has
calculable massive NoSQL information stores to settle on the most effective for the assembly.

 Flipkart uses the Hadoop computer code and makes it easier for analysis and information
management.

The complete technical provides the explanation as to why it is one in every of the most effective commerce
brands and eCommerce stores in our country as well as around the globe!

1.7.5 The Business Model Of Flipkart

Flipkart, which has redefined shopping in India, works on a B2C (business to consumer model). Flipkart
started off with a direct-to-consumer model selling books and some other products, before turning to a
marketplace model which connect sellers and buyers and expanding its catalogue. Today, it sells everything
from smartphones to clothes to furniture refrigerators to FMCG goods — and yes, books too.

Flipkart claims to have lakhs of sellers on board from across India who list their products in over 80
categories. The average consumer might not care who the seller is and has a relationship with Flipkart,
whereas the seller who may not have reached the customer at all can now do so thanks to Flipkart’s
platform. To facilitate this transaction and fulfil the order, Flipkart charges a varying percentage as a
commission fee from the seller.

1.8 Flipkart - Mergers and Acquisitions

In 2011, Flipkart acquired the digital distribution business Mime360.com and the digital content library of
the Bollywood portal Chakpak.Following this acquisition, Flipkart launched their DRM-free online music
store Flyte in 2012. Because of competition from free streaming sites, the site was unsuccessful and shut
down in June 2013

With its eyes on India's retail market, Flipkart acquired Letsbuy, an online electronics retailer, in 2012, and
Myntra, an online fashion retailer, for $280 million in May 2014. Myntra continues to operate alongside
Flipkart as a standalone subsidiary focusing on separate market segments. In April 2015, Flipkart acquired
Appiterate, a Delhi-based mobile marketing automation firm. Flipkart stated that it would use Appiterate's
technology to enhance its mobile services. In December 2015, Flipkart purchased a minority stake in the
digital mapping provider MapmyIndia. In 2016, Flipkart acquired the online fashion retailer Jabong.com
from Rocket Internet for $70 million and the UPI mobile payments startup PhonePe. In January 2017,
Flipkart made a $2 million investment in TinyStep, a parenting information startup. Flipkart invested $35
million in Arvind Fashions Limited's newly formed subsidiary Arvind Youth Brands for a 27% stake in the
19
company. Arvind Youth Brands owns Flying Machine. Flipkart Wholesale recently launched a digital
platform for kiranas and MSMEs.In October 2020, Flipkart acquired a 7.8% stake in Aditya Birla Fashion
and Retail for $204 million.

Flipkart has acquired various organizations till date. Their most recent acquisition was 100% stake in
Walmart India in July 2020 and Upstream Commerce on Sep 9, 2018.

In 2014, Flipkart bought an online apparel retailer named Myntra which is currently one of the most
preferred online shopping portals for youth. The deal was closed for around $300 million. In 2016, Flipkart
bought another fashion retailer named Jabong for $70 million. In the same year, Flipkart bought a payment
startup company PhonePe. The company acquired eBay in 2017. In April 2017, eBay announced that it
would sell its Indian subsidiary eBay.in to Flipkart and make a US$500 million cash investment in the
company.

In April 2017, eBay announced that it would sell its Indian subsidiary, eBay.in, to Flipkart and invest $500
million in the company. While eBay suggested that the partnership would eventually allow Flipkart to access
eBay's network of international vendors, these plans never actually came to fruition. In July 2017, Flipkart
made an offer to acquire its main domestic competitor, Snapdeal, for $700–800 million. It was rejected by
Snapdeal, which was seeking at least $1 billion.

In August 2019, Flipkart entered into a partnership with Authentic Brands to license and distribute Nautica
in India. Flipkart invested $4 million in the customer engagement and rewards platform EasyRewardz on 19
November 2019.

Table No 1.6

Acquired Date

WeRead December 2010

Mime360 October 2011
ChakPak Digital Catalogue November 2011
LetsBuy.com February 2012
Myntra May 2014
ngpay September 2014
Jeeves November 2014
AdIQuity March 2015
Appiterate April 2015
FX Mart September 2015
MapMyIndia December 2015
PhonePe April 2016
Jabong July 2016
eBay India April 2017
F1 Info Solutions & September 2017
Services
Liv.ai August 2018
Upstream Commerce September 2018

20
On August, 2018, Walmart acquired a 77% stake in Flipkart which was the largest online e-commerce
acquisition in the world at that time. The deal was made for $16 Billion, which was increased to 81.3% later
on in the same year.

1.8.1. Acquisition by Walmart

On 4 May 2018, it was reported that the US retail chain Walmart had won a bidding war with Amazon to
acquire a majority stake in Flipkart for $15 billion.On 9 May 2018, Walmart officially announced its intent
to acquire a 77% controlling stake in Flipkart for $16 billion. Following the purchase, Flipkart co-founder
Sachin Bansal left the company. The remaining management team now reports to Marc Lore, CEO of
Walmart eCommerce US. Walmart president Doug McMillon cited the "attractiveness" of the market,
explaining that their purchase "is an opportunity to partner with the company that is leading transformation
of E-commerce in the market".Indian traders protested against the deal, considering the deal a threat to
domestic business.

In a filing with the U. S. Securities and Exchange Commission on 11 May 2018, Walmart stated that a
condition of the deal prescribed the possibility that Flipkart's current minority shareholders "may require
Flipkart to effect an initial public offering following the fourth anniversary of the closing of the transactions
at a valuation no less than that paid by Walmart".

Following the announcement of Walmart's deal, eBay announced that it would sell its stake in Flipkart back
to the company for approximately $1.1 billion and relaunch its own Indian operations. The company stated
that "there is the huge growth potential for e-commerce in India and significant opportunity for multiple
players to succeed in India's diverse, domestic market."Softbank Group also sold its entire 20% stake to
Walmart without disclosing terms of the sale.

The acquisition was completed on 18 August 2018. Walmart also provided $2 billion in equity funding to
the company.

On 13 November 2018, Flipkart CEO Binny Bansal resigned after facing an allegation of "serious personal
misconduct". Walmart stated that "while the investigation did not find evidence to corroborate the
complainant's assertions against Binny, it did reveal other lapses in judgment, particularly a lack of
transparency, related to how Binny responded to the situation.

1.8.2. 6 Famous Acquisitions By Flipkart Of All Times

Over the years, the online shopping industry has become a huge success along with all its major players.
Flipkart has emerged as one of the leading names when it comes to e-commerce companies in India.To keep
its stand strong in the market, Flipkart has acquired many companies over the years to minimize the
competition.

2012: Letsbuy.com

Letsbuy is an online electronics retailer of branded computer technology and digital lifestyle products with
more than 5000 products from top international and domestic brands. The company was founded in 2009 by
Hitesh Dhingra and Amanpreet Bajaj and in 2012 Flipkart acquired Letsbuy.com for $25 million.

21
2014: Myntra

Myntra is a fashion e-commerce company that was founded in 2007 by Mukesh Bansal, Ashutosh Lawania,
and Vineet Saxena. The company has been doing really well since its launch and it was in 2014 that Flipkart
acquired Myntra in a deal valued at ₹2,000 crores (US$280 million).

2015: FX Mart

FX Mart is a company that engages in electronic payments, remittance, foreign exchange, and travel-related
businesses. Founded in 2012, the company was acquired by Flipkart in a deal of Rs 45.4 crore ($6.8 million).

2016: PhonePe

PhonePe was founded in December 2015, by Sameer Nigam, Rahul Chari, and Burzin Engineer. The
PhonePe app went live in August 2016 and was the first payment app built on Unified Payments Interface.

2016: Jabong.com

Jabong.com was an Indian fashion and lifestyle e-commerce portal founded by Praveen Sinha, Lakshmi
Potluri, Arun Chandra Mohan, and Manu Kumar Jain in 2012. In July 2016 Flipkart acquired Jabong
through its unit Myntra for about $70 million.However, in February 2020, Flipkart formally shut down
Jabong to shift focus completely on its premium clothing platform Myntra.

2017: eBay

In April 2017, Flipkart had acquired eBay’s India operations in exchange for equity; eBay had then invested
$500 million in cash in Flipkart. However, in May 2018, after Walmart announced its decision to acquire a
77 percent stake in Flipkart, eBay sold its stake in the Indian e-tailer for about $1.1 billion.

22
 CHAPTER 2 – RESEARCH METHODOLOGY

Sr Figure Description Page No.

No. No.
1 2.1 Introduction 24
2 2.2 Problem Statement 25-26
3 2.3 Objective of Study 26-28
4 2.4 Scope of Study 28
5 2.5 Limitations of study 29
6 2.6 Sample Size 29
7 2.7 Data Collection Method 30-32
8 2.8 Hypothesis 33

23
This research paper is descriptive in nature and is based on the secondary data attained from the various
secondary resources such as old research papers various e-journals, books, websites, whitepapers,
newspapers and some of the governmental data etc. The data is compared with the previous data of Indian e-
commerce industry with respect to the world economy.

2.1 Introduction

Mergers and Acquisitions represent the ultimate in change for a business. No other event is more difficult,
challenging, or chaotic as a merger and acquisition. According to Oxford, the expression ‘Merger’ means
“Combining of two commercial companies into one”. The term "Acquisition" refers to the acquisition of
assets by one company from another company. In an acquisition, both companies may continue to exist. The
acquiring company will remain in business and the acquired company will be integrated into the acquiring
company and thus, the acquired company ceases to exist after the merger. Transfer of technology develop
prospects with multiple challenges for any enterprise. The prospects include access to new markets that were
previously closed due to cost, regulation, or indirect barriers, the ability to beat resources such as capital,
knowledge and labor. Challenges come from foreign competitors entering firms’ domestic markets, and from
domestic competitors reducing their costs through global sourcing, moving production offshore or gaining
economies of scale by expanding into new markets. Globalization challenges firms to become more
streamlined and efficient while simultaneously extending the geographic reach of their operations.

Moving over to the fastest growing and striking on the position of third largest economy, Indian e-commerce
has evolved significantly in the last decade, and there are many aspects of e-commerce like Tele shopping,
online shopping and mobile, which are all part of what is digital commerce followed by Flipkart.com,
Snapdeal.com, Jabong.com and Myntra.com; major players on the ground. eBay entered India nine years ago
through the acquisition of Baazee.com, and five years prior to that was the start of organized retail in India.
So, it is about 15 years old.

What is interesting though in India is that the entire evolution of e-commerce happened in over 15 years
whereas in advanced markets like the U.S., it took over 50-60 years. Flipkart, often termed as Amazon of
India acquires smaller e-commerce rival Myntra to combat threat of Amazon.com the world's biggest online
retailer, last year in June slashed prices and rolled-out next-day delivery in a bid to win market share of
ecommerce. The pillar of Indian e-commerce industry is its igniting internet user base as millions of new
users gain access through smartphones. India has an internet user base of over 200 million users as of 2013

Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. It
is per suit of truth with the help of study, observation, comparison and experiment.

24
2.2 Problem Statement

The main purpose of the problem statement is to identify and explain the problem. This includes describing
the existing environment, where the problem occurs, and what impacts it has on users, finances, and
ancillary activities . Additionally, the problem statement is used to explain what the expected environment
looks like. Defining the desired condition provides an overall vision for the process or product. It makes
clear the purpose for initiating the improvement project and the goals that it is meant to accomplish.

2.2.1. Lacking a good motive for the acquisition

Problems of mergers and acquisitions begin even before a deal takes place. In a previous article, we
discussed how each deal should have a good motive or a good ‘why’.As soon as you don’t have a good
answer to the question ‘why are we doing this?’ the merger or acquisition has just run into its first problem
and the chances of others arising are already higher as a direct consequence. A good way to avoid this issue
in mergers and acquisitions from happening is to spend time on strategic planning.Go back to basics;
establish what you want and whether M&A is even the way to go about it achieving it.

2.2.2. Targeting the wrong company

This may seem an obvious one, but for something which is supposedly so obvious, every year literally
thousands of companies fail to observe it when conducting mergers or acquisitions. This may be because
there’s a bias at the heart of M&A. As soon as we make the decision to acquire a firm, we’re wired to
believe that success means closing an acquisition.That’s simply not true, and therefore, targeting the wrong
company has become one of the key issues in mergers and acquisitions.Success in M&A is acquiring the
right firm.Overcoming this problem may require you to step away from the process entirely if you don’t
encounter the right company in your search.

2.2.3. Overestimating synergies

In the simplest terms, synergies occur when one plus one is greater than two. This usually means either
increased revenue or cost savings which are a consequence of the transaction. Unsurprisingly, these are a
strong motive for many deals, but they’re also commonly overestimated (sometimes by tens of millions of
dollars).This M&A issue is one that cannot be recovered from throughout the rest of the deal’s lifecycle.To
avoid overestimating synergies, conservatism is the best approach. For example, when it seems like you can
making savings of a million dollars, divide that number by two.If you still feel that’s a synergy that makes
the deal worthwhile, then it may be worth pursuing.

2.2.4. Overpaying

Without question, the most common problem that arises in mergers or acquisitions is overpaying for
companies. A large part of this is because the mergers and acquisition challenges on this list destroy
company value, making an overpayment inevitable.And there’s another universal problem which stalks
transactions - sellers only tell you when you’re not paying enough, but never when you’re paying too
much.A good way of avoiding overpayment is by looking at a suitable value for that firm as a limit, but not a

25
target.This small but important shift in thinking can end up saving you millions of dollars and overcome the
overpayment problem.

2.2.5. Exogenous risks

Economic, industry or technological shifts can mean that even the most well-planned deals can fail.For
example, a 2006 article in the Guardian claimed that Newscorp’s acquisition of MySpace for $580 million
looked like ‘the bargain of the century.’ It wasn’t the only one.But all of them failed to count on Facebook
overtaking it very shortly after. Unfortunately, this challenge of mergers and acquisitions often takes teams
by surprise. That’s why it’s a good idea to build conditions into the transaction contract to protect your firm
against downside risks such as falling sales, customer numbers or even the termination of important
contracts.

2.2.6. Losing the trust of important stakeholders

Human capital is a significant part of most modern businesses, and yet many acquirers pay this fact scant
attention, leading to more M&A challenges.Just because higher management is enthused about a merger or
acquisition, it doesn’t mean that the staff will be. This goes for people at the top of the company’s
hierarchical structure as well as those at the bottom.Losing the trust of either is a massive problem in
mergers and acquisitions.To avoid this, it’s not enough to be transparent; instead, they’ve got to see that
they’ll benefit from the transaction in some way too.

2.2.7. Inadequate due diligence

We discussed due diligence in a previous article, outlining the steps that need to be taken to ensure the M&A
transaction is a success.Almost everyone in M&A is aware that these steps should be taken, but shortcuts are
still common, therefore, the business community still sees it as one of the most common problems faced in
mergers and acquisitions.Bankers sometimes use the expression, ‘whatever drags get dirty’ around M&A,
believing that efficiency is key to successful deal-making.Efficiency means efficiency, not cutting corners.
This problem may be one of the easiest to avoid - there is simply no excuse for not conducting thorough due
diligence.

2.3 Objectives of study

The objective is to have an in depth study of the strategic e-commerce in the industry – both in the case of
Mergers & Acquisitions and in general, after which an evaluation will be conducted. Based on the findings,
a model/framework will be prepared, the main objective being – to help the strategic e-commerce integration
process.

A research objective is a clear, concise, declarative statement, which provides direction to investigate the
variables under the study. Research is an organized investigation of a problem where investigator attempts to
gain solution to a problem. In order to get the right solution a clearly defined objectives are very important.
26
A clearly defined objective directs a researcher in the right direction. A clearly defined objectives are
important feature of a good research study. A clear objective researcher is aimless and directionless in
conducting the study. Without focused objectives, no replicable scientific findings can be expected.
Research objectives focus on the ways to measure the variables, such as to identify or describe them. The
objectives of a research project summarize what is to be achieved by the study.

The main objectives of the study are:

 To understand the concept of Merger and Acquisition.

 To Analyze the importance of Merger and Acquisition in E-commerce
 To study the philosophy behind the acquisition of Flipkart and Myntra.
 To examine major challenges faced by Indian consumer while shopping online.
 To study the future of Indian e-commerce industry.

2.3.1 E-commerce ecosystem of India

The rapid growth of e-commerce in India is supported by an increasingly sophisticated ecosystem that
speeds consumer products makers’ goods to online shoppers. The sector is classified into four major types,
based on the parties involved in the transactions – Business-to-business (B2B), business-to-customer (B2C),
customer-to business (C2B) and customer-to-customer (C2C). The emergence of well-designed user-friendly
online trading, payment and delivery services.

Chart No. 3

2.3.2 Philosophy behind the acquisition

As India’s community of online shoppers grows, so will the traditional and online players that make smart
and strategic moves to enjoy the major share by optimizing operations for profit. The main idea behind any
merger and acquisition is to gain competitive advantage in global market and accelerate company’s growth
particularly when its growth is constrained due to paucity of resources. For entering in new product/markets,
the company may lack technical skills and may require special marketing skills and a wide distribution
network to access different segments of market. The joining or merging of the two companies creates
additional value which we call "synergy" value.

27
2.3.3 To examine major challenges faced by e- commerce industry of India

On most other dimensions, India’s Internet infrastructure and e-engagement levels are limited, and its
Internet foundations have significant scope to improve India’s low levels of user adoption and engagement
(ranked 49 out of 57 countries in Internet user engagement and accessibility) are due to the following
obstacles:

 Limited avialability of Internet infrastructure

 Poor distribution channel management
 High cost of access and usage
 Smal range of applications and services
 Lack of digital awarness

2.3.4 The future of Indian e-commerce industry:Attracting shoppers, investors and global player

One of the major catalysts for e-commerce is the breadth of Internet penetration in a country. The current
penetration rate in India is at 10.1 per cent penetration rate, India has a huge Internet consumer base of
around 125.0 million (as of 2011), the third largest in the world after US and China. By end-2012, the
number of Internet users is expected to increase to 150.0 million. A study conducted by IMRB and IAMAI
observed that of the total 99.0 million urban Internet users, 80.0 million were active compared to 31.0
million active users out of the total 38.0 million in rural areas as of June 2012.

At its current pace, this number could multiply three-fold to nearly 380.0 million by 2015, surpassing the US
and China. Notably, rural India has witnessed a significant increase in penetration of active Internet users –
from 2.1 per cent in 2010 to 3.7 percent in June 2012. By end- 2012, the number of active rural Internet
users would touch 38 million as against 24 million a year ago. However, even with its large consumer base,
just 1.0 per cent of the total (less than 10.0 million Internet users) is engaged in e-commerce activities, thus
reflecting a huge untapped opportunity. This number is expected to touch 39.0 million users by 2015 as
Internet penetration increases and ecommerce becomes more secured.

2.4 SCOPE of study

The study has a very wide scope. It is not only applicable to the e-commerce industry, but can also apply to
any industry where the human factor is involved. It covers major merger and acquisitions and specifically
looks into the human factor of these merger and acquisitions. Study and analyze the major mergers that have
taken place and correlate the same to the ecommerce industry. The study basically focuses on strategic e-
commerce integration in the case of mergers and acquisitions, spread across various industries and tries and
correlates the same to the ecommerce industry, so that when the same happens in the e-commerce industry
(as is happening now)

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2.5 Limitations of the study

The research has been done from 28 th December 2020 to 27 January 2022, therefore whatever data was
available in this period was utilized for this study. If there is variation in the data, then the result and
conclusion may not be same. All the conclusions are drawn on the basis of the data and information given by
online websites and survey done by people living in local. But because of the secrecy 100% correct data was
not given by them therefore data is inadequate and incomplete. There is a possibility of deficiencies in the
conclusions. However, researcher has tried at his level best to conduct correct and reliable data from the
respondents.

The data which is collected is before 5-6 years.

2.6 Sample Size

The sample size is a term used in market research for defining the number of subjects included in a sample
size. By sample size, we understand a group of subjects that are selected from the general population and is
considered a representative of the real population for that specific study. The sample size is the proportion of
the general population that are taking part in the study. In most cases, it’s important that the sample chosen is
representative of the wider population, so that any conclusions drawn from the study can be reasonably
extrapolated to individuals who did not directly take part.

The sampling size process involves several specific activities, namely:

* defining the population that is the object of the research;

* choosing the sampling size frame;

* choosing the sampling size method;

* establishing the modalities of the selection of the sample size units;

* determining the mother of the sample size;

* choosing the actual units of the sample size;

* conducting field activity.

Defining the target population must be done with great care to avoid either the tendency to choose an
unjustified large population or the inclination to select an unjustifiably narrow population. For example, for
companies that produce cars, the total population can be represented by the people of the whole country,
including children of different ages. But, the relevant population, which will be the subject of the research,
will be made up only of the population over 18 years old. No unjustifiably restricted population such as, for
example, the male population between the ages of 25 and 50 can be admitted. This can cover a large part of
the car market but excludes some essential segments.

In practice, in the case of random sampling, the sample will be chosen from a list of the population that often
differs, to some extent, from the population that is the subject of the research. This list represents the
sampling frame or the sampling base because it contains the elements from which the sample is to be
constituted.

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2.7 Data Collection Method

Data collection is defined as the procedure of collecting, measuring and analyzing accurate insights for
research using standard validated techniques. A researcher can evaluate their hypothesis on the basis of
collected data. In most cases, data collection is the primary and most important step for research, irrespective
of the field of research. The approach of data collection is different for different fields of study, depending
on the required information.The most critical objective of data collection is ensuring that information-rich
and reliable data is collected for statistical analysis so that data-driven decisions can be made for research.

Statistics, data collection is a process of gathering information from all the relevant sources to find a solution
to the research problem. It helps to evaluate the outcome of the problem. The data collection methods allow
a person to conclude an answer to the relevant question. Most of the organizations use data collection
methods to make assumptions about future probabilities and trends. Once the data is collected, it is necessary
to undergo the data organization process.The main sources of the data collections methods are “Data”. Data
can be classified into two types, namely primary data and secondary data. The primary importance of data
collection in any research or business process is that it helps to determine many important things about the
company, particularly the performance. So, the data collection process plays an important role in all the
streams. Depending on the type of data, the data collection method is divided into two categories namely,

 Primary Data Collection methods

 Secondary Data Collection methods

1. Primary Data Collection Method

Primary data or raw data is a type of information that is obtained directly from the first-hand source through
experiments, surveys or observations. The primary data collection method is further classified into two
types. They are

 Quantitative Data Collection Methods

 Qualitative Data Collection Methods

A . Quantitative Data Collection Method

It is based on mathematical calculations using various formats like close-ended questions, correlation and
regression methods, mean, median or mode measures. This method is cheaper than qualitative data
collection methods and it can be applied in a short duration of time.

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B. Qualitative Data Collection Method

It does not involve any mathematical calculations. This method is closely associated with elements that are
not quantifiable. This qualitative data collection method includes interviews, questionnaires, observations,
case studies, etc. There are several methods to collect this type of data. They are

a) Observation Method
Observation method is used when the study relates to behavioural science. This method is planned
systematically. It is subject to many controls and checks. The different types of observations are:

 Structured and unstructured observation

 Controlled and uncontrolled observation
 Participant, non-participant and disguised observation

a) Interview Method
The method of collecting data in terms of oral or verbal responses. It is achieved in two ways, such as

 Personal Interview – In this method, a person known as an interviewer is required to ask questions
face to face to the other person. The personal interview can be structured or unstructured, direct
investigation, focused conversation, etc.
 Telephonic Interview – In this method, an interviewer obtains information by contacting people on
the telephone to ask the questions or views orally.

a) Questionnaire Method
In this method, the set of questions are mailed to the respondent. They should read, reply and subsequently
return the questionnaire. The questions are printed in the definite order on the form. A good survey should
have the following features:

 Short and simple

 Should follow a logical sequence
 Provide adequate space for answers
 Avoid technical terms
 Should have good physical appearance such as colour, quality of the paper to attract the attention of
the respondent

b) Schedules

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This method is similar to the questionnaire method with a slight difference. The enumerations are specially
appointed for the purpose of filling the schedules. It explains the aims and objects of the investigation and
may remove misunderstandings, if any have come up. Enumerators should be trained to perform their job
with hard work and patience.

2 . Secondary Data Collection Method

Secondary data is data collected by someone other than the actual user. It means that the information is
already available, and someone analyses it. The secondary data includes magazines, newspapers, books,
journals, etc. It may be either published data or unpublished data.

A . Published data are available in various resources including

 Government publications
 Public records
 Historical and statistical documents
 Business documents
 Technical and trade journals

B . Unpublished data includes

 Diaries
 Letters
 Unpublished biographies, etc.

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2.8 HYPOTHESIS

A hypothesis states your predictions about what your research will find. It is a tentative answer to
your research question that has not yet been tested. For some research projects, you might have to write
several hypotheses that address different aspects of your research question.A hypothesis is not just a guess
— it should be based on existing theories and knowledge. It also has to be testable, which means you can
support or refute it through scientific research methods (such as experiments, observations and statistical
analysis of data).

Types of HYPOTHESIS

1. Null hypothesis (H0)

2. Alternative hypothesis (H1)

The null hypothesis is a general statement that states that there is no relationship between two phenomenon
under consideration or that there is no association between two groups. A hypothesis, in general, is an
assumption that is yet to be proved with sufficient pieces of evidence. A null hypothesis thus is the
hypothesis a researcher is trying to disprove. A null hypothesis is a hypothesis capable of being objectively
verified, tested, and even rejected. If a study is to compare method A with method B about their relationship,
and if the study is preceded on the assumption that both methods are equally good, then this assumption is
termed as the null hypothesis. The null hypothesis should always be a specific hypothesis, i.e., it should not
state about or approximately a certain value.

An alternative hypothesis is a statement that describes that there is a relationship between two selected
variables in a study. An alternative hypothesis is usually used to state that a new theory is preferable to the
old one (null hypothesis).This hypothesis can be simply termed as an alternative to the null hypothesis. The
alternative hypothesis is the hypothesis that is to be proved that indicates that the results of a study are
significant and that the sample observation is not results just from chance but from some non-random cause.
If a study is to compare method A with method B about their relationship and we assume that the method A
is superior or the method B is inferior, then such a statement is termed as an alternative hypothesis.
Alternative hypotheses should be clearly stated, considering the nature of the research problem .

Hypothesis of the study

(H0 ): Merger and Acquisition not creates any impact on growth of Flipkart.
(H1 ): Merger and Acquisition impacts on growth of Flipkart.

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 CHAPTER–3 REVIEW OF LITERATURE

Sr No. Figure No. Description Page No.

1 3.1 Introduction 35
2 3.2 Importance of Review of Literature 35
3 3.3 Types of Sources of Review 35
4 3.4 Review 36
5 3.5 Indian Review 37-41
6 3.6 Foreign Review 41-48
7 3.7 Conclusion 48

34
3.1 Introduction

A literature review is an overview of the previously published works on a specific topic. The term can refer
to a full scholarly paper or a section of a scholarly work such as a book, or an article. Either way, a literature
review is supposed to provide the researcher/author and the audiences with a general image of the existing
knowledge on the topic under question. A good literature review can ensure that a proper research question
has been asked and a proper theoretical framework and/or research methodology have been chosen. To be
precise, a literature review serves to situate the current study within the body of the relevant literature and to
provide context for the reader. In such case, the review usually precedes the methodology and results
sections of the work.

Various studies have been conducted with respect to mergers and acquisitions by various eminent
researchers over the past few decades and they have come up with varied theories relating to mergers and
acquisitions. In order to progress on the path of success, a firm has to focus both on internal growth as well
as external growth. Internal growth is when the key focus is on the expansion and diversification of
operations and external growth may take the shape of foreign collaborations, mergers and acquisitions. The
key objective has always been to ascertain whether an acquired firm has attained the performance goals or
not. A sudden spurt in M&A in recent times attracted the attention of planners, policy makers,
administrators, researchers, econometricians and economists. This Chapter presents a brief review of earlier
studies related to motives for M&A, impact of policy changes on growth and operational performance of
Indian industries

A literature review can be a type of review article. In this sense, a literature review is a scholarly paper that
presents the current knowledge including substantive findings as well as theoretical and methodological
contributions to a particular topic. Literature reviews are secondary sources and do not report new or original
experimental work. Most often associated with academic-oriented literature, such reviews are found
in academic journals and are not to be confused with book reviews, which may also appear in the same
publication. Literature reviews are a basis for research in nearly every academic field.

3.2 Importance of Review of Literature

Literature reviews constantly feed new research, that constantly feeds literature reviews…and we could go
on and on. The fact is, one acts like a force over the other and this is what makes science, as a global
discipline, constantly develop and evolve. As a scientist, writing a literature review can be very beneficial to
your career, and set you apart from the expert elite in your field of interest. But it also can be an
overwhelming task, so don’t hesitate in contacting Elsevier for text editing services, either for profound
edition or just a last revision. We guarantee the very highest standards. You can also save time by letting us
suggest and make the necessary amendments to your manuscript, so that it fits the structural pattern of a
literature review. Who knows how many worldwide researchers you will impact with your next perfectly
written literature review.

3.3 Types of Sources of Review

1) Primary review: Usually a report by the original researchers of a study (unfiltered sources).
Letters/correspondence, diaries, memoirs, autobiographies, official or research reports, patents and designs,
and empirical research articles.

35
2) Secondary review: Description or summary by somebody other than the original researcher, e.g. a review
article (filtered sources) academic journal articles (other than empirical research articles or reports),
conference proceedings, books (monographs or chapters’ books), documentaries.

3) Conceptual/theoretical review: Papers concerned with description or analysis of theories or concepts

associated with the topic.

3.4. Review

An understanding of mergers and acquisitions as a discipline is increasingly important in modern business.

A glance at any business newspaper or business news web page will indicate that mergers and acquisitions
are big business and are taking place all the time [Roberts, Wallace, Moles 2003, 2010]. Competitive
pressure has been identified through numerous studies as an important determinant of IT adoption, whether
it is EDI diffusion [Banerjee & Golhar, 1993; Ramamurthy et al., 1999; Webster, 1995], adoption of IT
innovations [Gatignon & Robertson, 1989; Grover, 1993], degree of computerization [Dasgupta et al., 1999]
or e-business adoption [Zhu et al., 2002]. Outstanding planning and execution are essential for a successful
strategic alliance. Integration is reached only after mapping the process and issues of the companies to be
merged. Even then just 23% of all acquisitions earn their cost of capital. When M&A deals are announced, a
company’s stock price rises only 30% of the time. In acquired companies, 47% of executives leave within
the first year, and 75% leave within the first three years. Synergies projected for M&A deals are not
achieved 70% of the time. Productivity of merged companies can be affected by up to 50% in the first year
and financial performance of newly merged companies is often lacking [Practical guide for Merger and
Acquisition, 2009]. Using the Internet for transactions and coordination can save time and money on
delivery of goods by using rich information flows to simplify and streamline the flows of physical goods in
the supply chain [Dedrick & Kraemer, 2002; Sturgeon, 2002].

Finally, firms that buy and sell in international markets are under pressure from trading partners to adopt e-
commerce (especially B2B) to improve coordination with other members of the value chain. Subsequently
Indian e-commerce has grown at a swift pace in the last 5 years from around 15 billion revenues in 2007-
2008 to 139 billion in 2012-2013, translating into a compound annual growth rate [CAGR] of over 56
percent [CRISIL, 2014]. One of the biggest names in the Online Retail Industry and a leading e-Commerce
player in the Country; Founded by Sachin Bansal & Binny Bansal in Bangalore, Karnataka in 2007.Which
was started with initial capital of 4 lakh contributed by the founders, warehouses, offices and delivery
centers across India. With over 17.5 million book titles listed, 16 different categories, more than 4 million
registered users and sale of 55000 items a day their operations are simply huge. Had 8600+ employees till
December 2013. Had a massive revenue of around 6,100 Crores [Raman, 2014]. On the other hand India’s
largest fashion e-tailer Myntra is aiming for a valuation of 2,400 cr

36
3.5 Indian Review

1. Yadav, Jain and Jain's Study (1994) 1Yadav, Jain and Jain analysed the role of profitability of mergers
by looking at the merger synergy. The sample size of the study consisted of four Indian companies of which
two merged with Indian companies and·the other two merged with multinationals. Pre and Post merger
performance of these companies was analysed over a period of years before and 3 years after the merger. An
in depth empirical investigation was carried out with the help of statistical techniques like trend analysis and
financial tools like ratio analysis. The hypothesis tested concluded that the merger with multinational was
more successful than with Indian companies. The study also concluded that growth had been achieved by all
the companies involved in mergers. Looking at earning per share, it was found that post merger BPs in
MNCs was more. than the Indian companies. Regarding the dividends, percentage increase was more in
MNCs, while Indian companies had maintained a constant dividend rate.

2. Mandai's Study (1998)2Mandai critically examined merger gains that emerged out of the horizontal, ·;r
vertical, congeneric .and conglomerate type of mergers. The study also examined the qualified tax benefits
arising out of a corporate merger to the acquiring company by acquiring a sick company. A sample of 19
merger cases was taken for the study. The study investigated into the mattes like, merger motives, means of
payment, exchange ratio, success or failure of merger and the quantum of tax benefits. The following
conclusions were drawn from the study

I. Equity based merger 1s an essential product of management strategy to grow without embarking on
cash reserve.
II. 11. Conglomerate merger helped to reduce business risk
III. 111. In India merger was an easy way for corporate growth by acquiring sick companies.
IV. Revival of financial health of a sick company was possible only through merger with a financially
valuable company.

3. Kang,J,Shivdasani [2000]3 assessed the effect of corporate restructuring on financial results of Indian
manufacturing firms which have undergone Mergers and Acquisitions from 2004-2010.The sample set is of
12 banks, having 3 years of pre and post-Mergers of firms. Parameters used in the study are various
accounting ratios like liquid ratio, working capital ratio,and operating ratio. t-test was used to attain the
desired objectives. The conclusion of the study shows a substantial improvement in accounting ratios and
financial position..The efficiency of acquiring firms had also improved.

4. Kumar (2000)4 investigate mergers and acquisitions by MNE’s patterns and implications during 1993 to
2000 using secondary data covered most of deals associated with MNE’s in India. The researcher concluded
M&A increases and the green field investment generally reduce competition, the absence of an antitrust
regulation in India in 1990 has allowed MNE or their Indian affiliates acquiring their domestic rivals despite
their market dominance. Therefore a competition policy need to be so designed to deal with possible
antitrust implications of overseas mergers for India besides dealing with M&A of Indian enterprises.

37
5. Beena's Study (2000)5 the study attempted to analyse the nature of mergers that took over during the
period 1990-95. On a selected sample of 45 merger cases, the result showed that there were 31 horizontal, 7
vertical and 7 conglomerate mergers. It also suggested that the merger movement during early 1990s
revealed the dominance of horizontal mergers.

The study also analysed some of financial motives for mergers by using a sub sample of 33 out of 45 sample
cases. Statistical test of Wilcoxon - rank paired test was conducted to see if there was any significant
difference in the financial characteristics of acquiring and acquired firms. The results did not suggest any
significant difference.

Another issue analysed on a sub-sample of twenty-five merger cases was the extent of changes in the equity
shareholding in the acquired firm as a result of mergers. Of the twenty five acquiring firms, 11 firms were
foreign owned and the balance were domestic. As a result of these mergers, the share of major controlling
block increased in the merged company as compared with the acquiring firm in eighteen out of twenty five
cases. But there was reduction in shareholding of major controlling block for the remaining sample merger
cases. The evidence suggested that one of the financial motives for mergers was to increase its controlling
block in order to guard against a takeover.

6. Beena (2001)6examined the role of mergers in the private corporate sector during the period 1972-73 to
1994-95. The study identified the characteristics and causes of mergers and also to evaluate the impact on
the post-merger performance of the firms. The study concluded that a substantial growth of M&A has
witnessed since 1990s. But the trend has been sharper since the latter half of 1990s.

7. SurjitKaur's Study (2002)7 the study examined the mergers and acquisitions activities in India during the
post liberalization period in general and takeover code period T' in specific. Another objective of the study
was to test the usefulness of select financial ratios to predict corporate takeovers in India. Further, the study
also evaluated the post takeover corporate performance of select sample companies.

Convenient sampling method was used in the study. Financial data were collected from SBBI's web site.
Discriminate analysis was used to discriminate target and non target firms. 20 sample companies targeted
between 1997 and 1998 to determine post takeover performance. The study concluded that the corporate
sector increasingly restored to mergers .and acquisitions was due to significant gain they entailed in a terms
of , synergy, economics of scale, better financial and marketing advantages, diversification and reduced
earnings volubility.

8. Muralidhar's Study (2002)8Mtiralidhar's study was conducted to analyse whether mergers were
beneficial to the shareholders of both the companies? For this, sample of five big mergers during 2001-2002
was taken. The sample merger cases are Reliance Industry and Reliance Petroleum merger, ICICI Bank and
ICICI merger, Glaxo and Smithkliile Beecham Pharamceuticals merger, ITC Ltd. and ITC Bhadrachalam
merger and AbanLoyd Cities Offshore and Hitech Drilling Merger. BPS, market capitalization; percentage
changes in share price and percentage changes in BSB sensex were compared for both the pre· and post
merger periods of all the five mergers cases especially a year after the merger actually took place. The study

38
finally concluded that mergers were not beneficial to the share holders of both the companies because BPS,
market capitalization, etc were less in the post merger period when compared to pre merger period.

9. Manikandan (2004)9 had done his M&A on performance of foreign and domestic companies in India
during 1991-2004. The study concluded that there was no significant difference between foreign and
domestic companies during post-merger period in the financial and technological performances at the
aggregate and disaggregates level.

10. RashmiBanga (2004)10 analyzed that impact of M&A on total productivity growth of firms during the
period 1993-2000. The study concluded that post-merger period, domestic firms have experienced both
technological progress and efficiency growth

11. Tambi M.K (2005)11 evaluated the impact of mergers and acquisitions in Indian corporates on
profitability and return using PBITDA, PAT and ROCE for any change, by using t-test. The outcome of his
study showed that mergers and acquisitions failed to contribute positively in the sample of companies
selected by him.

12. .KavitaPathak's Study (2006)12This study attempted to trace some of the mergers & acquisitions in the
Indian 'Cement industry in order to capture the operating synergy accruals. A sample of 10 Indian Cement
companies merger with cements companies were taken for the study. The financial data of both target and
acquiring companies were used for the analyses. The empirical results of the analysed data partially
supported synergy accruals for the target and acquiring companies in the Indian Cement industry There is
glut of research literature on mergers and acquisitions in developed markets like U.S.A. and U.K. In India
only a very limited research has been done on this T. contemporary topic. Theory based books are available
in plenty. None of the few studies conducted in India have explored the financial performance of mergers
and acquisitions empirically, particularly in terms of Profitability, Liquidity, Asset Utilization,
Debt .Utilization, Cost Utilization and Capital Structure for both pre and post mergers and acquisitions
periods. The present study also makes an attempt to investigate the financial performance of mergers and
acquisitions that took place during the year 1999-2000 both ' on industry wise and category wise of mergers
and acquisitions. The subsequent chapters ofthe present study are devoted to the achievement of these
objectives.

13. .PromodMantravadi and Co-workers (2007)13 identified relative size in mergers and operating
performance in India during 1991 to 2003. The study has been adopted the methodology of comparing pre
and post-merger performance of acquiring firms using financial ratio, net profit margin, return on net worth,
return on capital employed and debt equity ratio. The study identified post-merger performance was
negatively associated with relative target size and that larger relative sized acquisitions resulted in poorer
post-merger performance than acquisition of smaller firms.

39
14. Mantravadi and Reddy [2007]14, conducted a study on the effect of mergers on the operating
performance of acquiring corporate. Authors examined the financial ratios of the pre and post-Mergers
periods of the firms, which are mainly traded companies or a public limited company during the time span of
1991-2003. Authors observed that operating performance following the Mergers is varied in a small amount.
This has been observed when acquiring firms, as well as acquired firms, are of different size. Size of firms is
measured by the market value of the equity.

15. PromodMantravadi and Vidyadhar Reddy (2008)15 studied the post-merger performance of acquiring
firms from different industries in India. The researcher concluded that merger seems to have had a slightly
positive impact on profitability of firms like banking, pharmaceuticals but textile sector has a marginal
negative impact on its performance.

16. Awadhesh K. Tiwari and Megha Grover (2010) 16 studied the financial performance of the banking
industry on post merger period in India. The researchers concluded that M&A is the only way of gaining
competitive advantage domestically and internationally, and the acquirer firms resulted on positive growth
prospects.

17. Allirani (2013)17, studied the impact of M&A on growth and cost functions in Indian machinery industry
during 1992 to 2012. For the purpose of the analysis 25 samples were taken and the data was obtained from
Prowess Database CMIE. The researcher concluded the mergers and acquisitions strategy not helped on
growth of these firms in technical efficiency but allocative efficiency has been improved positively on post-
merger period. On the other hand, the proportion of labour cost to total cost and total revenue has increased
after M&A.

18. Verma&Sharma(2013)18 The pre and post-merger performance of these companies have been
compared to indicates that though an increase in PAT, CR and IER allows for an increase in Return on
shareholder’s funds (ROSF) before the mergers and acquisitions but due to some reasons it leads to a
decrease in Return on shareholder’sfunds (ROSF) after the mergers and acquisitions. The analysis of the
study indicated that though companies may have been able to leverage the synergies arising out of the
merger or acquisition, but they unable to improve their financial and operating performance.

19. Mishra &Kotkar(2015)19by developing B2C e-commerce in “A Study on Current Status of

E-Com/merce in India: A Comparative Analysis of Flipkart and Amazon” with establishment in the mid
1990s through the arrival of matrimonial and job portals. However, due to limited internet accessibility,
weak online payment systems and lack of awareness, due the slow moving progress, Indian B2C e-
commerce industry got augment in mid 2000s with the expansion of online services to travel and hotel
bookings which continue to be major contributors even today

20. Viji (2015)20, studied the impact of mergers and acquisitions on growth and operational performance in
Indian chemical industry during 1991 to 2013 using Prowess Database CMIE and 35 samples were taken for
his analysis. The researcher found that after M&A the production efficiency of the majority of firms had
40
declined especially in technical efficiency scores. Therefore the final conclusion was that the majority of the
firms the impact of mergers and acquisitions has been mixed and not categorical.

21. BeenaSaraswathy (2015)21 studied production efficiency of firms with mergers and acquisitions in India
during 1978 to 2007 using translog production function and generalized likelihood ratio tests (LR Statistic)
also be tested.. The study identify technical efficiency of domestic firms increased during post-merger period
for 1997 deals, but in the case of 2004, decline in technical efficiency after getting into M&A due to
production possibility frontier that is no expansion in production after merger and also profitability ratio
declined for majority of the years due to the acquisition of loss making or less efficient firms and finally the
study suggest that competition enhancement strategy adopted by government will turn lead to enhance
market power of firms.

22. .Agarwal Meghan, Singh Sheikh [2015]22carried research on the effect of Mergers on the financial
performance of Kingfisher Airlines. The main aim of the research is to examine the pre-& post-Mergers
financial performance of KFA (Kingfisher Airlines). The main parameters of analysis of the pre and post-
merger are profitability, liquidity, earning per share and leverage. Authors concluded that no improvement
has been observed in return on equity and earning per share after Mergers.

3.6. Foreign Review

1. Franks, Broyles and Hecht's study (1977)1 used market models to establish whether abnormal gains or
losses had enjoyed by merger participants. The study investigated the breweries and distilleries industry
during 1955-72 on a working sample of seventy events. The study summarized their conclusions are under:
(I) Share holders in acquired companies enjoyed abnormal returns averaging 26% during four months prior
to competition of merger. (ii) During the same period prior to merger, shareholders in acquiring firms
enjoyed small positive abnormal returns. (iii) Gains on combined shareholders m acqumng and acquired
companies reflected net gains from mergers within the industry. (iv) Evidence suggested that market began
to anticipate mergers at least three months in advance before merger were announced.

2. Beckette's Study (1986)2 used quarterly data on the number and value of mergers from 1960 to 1985.
Using ordinary least square regression is us~d for analysis r and it emphas~zed on lagged values of
explanatory variables. The study found that . mergers and acquisitions were in general influenced, positively
by shares prices, negatively by real interest rates, positively by general level of debt of the economy and
negatively by real Gross National Product (GNP). However, the statistical influences of these were not
strong, except for the influence on GNP.

3. Globe and White's Study (1988)3 empirically examined the determinants of -~· merger activity over the
past thirty-five years. The study evolved hypothesis concerning the economic factors that explained the
pattern of mergers and acquisitions. The econometric tests were done on post-war merger data. The results
were consistent with the earlier empirical findings that security prices had positive effect on mergers. The
study also offered a more specific test of wave hypothesis for time series merger activity. Contrary to the

41
previous studies, it concluded that time series pattern of mergers was consistent with a wave
characterization.

4. Rau and Vermaelen (1998)4 investigated the controversial issue of under performance after mergers and
over performance after tender offers through examining the effect of firm size and low book-to-market value
on the post- acquisition performance to pinpoint reasons behind underperformance in mergers and over-
performance in tender offers if any. They also investigated the effect of the payment method (Cash/Stock) on
the post-acquisition performance. The study employed a sample of 3169 mergers and 348 tender offers and
concluded that after adjusting for firm size and book-to-market ratio, acquirers in mergers under perform by
a significant 4% over three years, while acquirers in tender offers earn a significant positive abnormal return
of 9% on average. A fact that destroys the belief that under-performance is due to un-adjusting for book-to-
market ratio. The study has interpreted under-performance as a result of decision makers’ actions, where
they over extrapolate the past performance of the bidder with low book-to-market ratios "glamour firm" and
overestimate its abilities and hence approve the acquisition. On the other hand, value bidders companies with
poor track record or with high book-to-market ratio tend to be more prudent and are not motivated by hubris
when approving an acquisition. The study failed to interpret the effect of methods of payment in cases where
the long-run abnormal return is negative in share-financed acquisition and positive in cashfinanced
acquisition. However, the study did not provide interpretation for the over-performance of tender offers
compared to mergers.

5. Laurence Capron's Study (1999)5 it was conducted to analyse the impact of post-acquisition asset
divestiture and resource redeployment on the long term performance of horizontal acquisitions. A sample of
253 horizontal mergers and acquisitions that were initiated by European and U.S. firms in manufacturing
industry for the period 1988-1992 was taken for the study. This sfudy also utilizes the cost-efficiency and
resource-based theories to propose a model of the effects of asset divestiture and resource redeployment on
long term performance of mergers and acquisitions. The empirical results of the study showed that both asset
divestiture and resource ·redeployment could contribute to acquisition performance.

6. Tina Weber (2000)6 has produced a paper on the impact of mergers and acquisitions on the European
banking and insurance sector to complement its own internal survey. The main aim of the paper was to look
at the impact of mergers and acquisitions on employees. The paper discusses the impact of the general global
restructuring process and the impact of mergers and acquisitions in the financial services. The paper further
highlights how these processes are interlinked, how recent changes in the service sector have affects on
occupational and skill profile of the jobs. Data from the Eurostat Labour Force Survey showed that a
significant decline in the employment in the EU financial services sector between 1992 and 1998. The paper
concluded that, there were significant difficulties in distinguishing between the precise employment impact
of a merger and that of the process of global restructuring. It is analyzed that there was a significant
pressures on employment in the financial services sector.

7. Hans Schenk (2000)7 has focused on the merger performance indirectly by analyzing the reactions of the
stock market to merger announcements and to analyze the effects of mergers on real firm performance.

42
Around 54 large European mergers were undertaken during 1988-1997. The paper concludes that too many
mergers, inside as well as outside the banking industry has to be qualified as economic failures.

8. Yeh and Hoshino (2002)8 examined the effects of mergers on the firms' operating performance using a
sample of 86 Japanese corporate mergers between 1970 and 1994. The successfulness of mergers was tested
based on their effects on efficiency, profitability, and growth. The study uses total productivity as an
indicator of the firm's efficiency or productivity, return on assets and return on equity as indicators of the
firm's profitability, and sales and growth in employment to indicate the firm's growth rate. The results reveal
insignificant negative change in productivity, significant downward trend in profitability, significant
negative effect on the sales growth rate, and downsize in the workforce after mergers. In general, the results
concluded that mergers have a negative impact on firm performance in Japan. However, further research is
required to determine factors that are behind M&A failure in the Japanese context.

9. Ramaswamy and Waegelein (2003)9 tested the long-term post-merger financial performance of merged
companies in Hong Kong to determine relationships between post-merger performance and firm size, the
compensation plan, method of payment, and industry type. The study sample consists of 162 merging firms
from 1975 to 1990 and the analysis covers the five years pre and post-mergers (using operating cash flow
returns on market value of assets as the measure of performance). The results have concluded that there is a
positive significant improvement in the post-merger performance. There is a significant association between
post-merger performance and differences in the relative sizes of the combining firms. Firms acquiring
relatively larger firms have a more difficult time digesting those firms and in effectively assimilating them
into the company's operation. Firms with long-term compensation plans have more positive post-merger
financial performance. Firms in dissimilar industries "conglomerate mergers" experienced better post-merger
financial performance than firms in similar industries. Mergers during the years 1983 to 1990 experienced
poor post-merger performance in comparison to those before 1983. It can be noted that the study is an
extensive one that not only determines the effect of mergers on long-term performance but pinpoints factors
behind such performance. It employed a financial performance measure that is considered as an effective
measure in evaluating the long-term financial performance.

10. Gugler et al. (2003)10 examined and analyzed the effects of mergers around the world over the past 15
years. The study was carried out to determine the effects of mergers on corporate performance across
national, international, and sector levels. The study tested a sample of 45,000 completed merger transactions
across the world over the period from 1981 to 1998, where 50% of the sample is located in the United States.
The effects of mergers were analyzed using profitability and sales, then, the results are compared with the
performance of control groups of non-merging firms. The statistical analysis of the total sample revealed that
profitability is positive in all five years after mergers and is significant in every year at 10% level. Unlike
profitability, the mean difference in sales was negative in every year and increased in absolute value through
the fifth year, where most mergers led to higher actual profits than projected and lower sales. On country
level, the results suggest that the U.S., the United Kingdom, Continental Europe, Australia, New Zealand
and Canada have the same pattern regarding the increase in profits and decrease in sales. In Japan, the results
were somewhat different as three of the five profit comparisons were negative, while sales were greater than
projected in two of the five post- merger years. Conducting the analysis to account for sector impact and
category of merger; horizontal, conglomerate, and vertical mergers, reveal that (i) mergers in the

43
manufacturing sector tend to be less profitable than in the service sector, (ii) horizontal mergers in
manufacturing are the most significantly profitable type of mergers, (iii) in the service sector, all the three
categories of mergers seem to be equally profitable. The mean difference in service sector is more significant
than that of the manufacturing sector, (iv) actual sales are below of projected sales in all of three categories
in the manufacturing sector, but the short fall is considerably smaller in the horizontal merger, and (v) within
the service sector, vertical mergers exhibit the best performance in terms of sales. The results of comparing
mergers on both the domestic and cross-border levels have suggested that no significant difference can be
observed on cross-border mergers than those domestic ones. Successful mergers resulting from efficiency
power (increases in both profits and sales) were greater than those resulting from market power (increases in
profit and decreases in sales). The study is considered as a world wide comprehensive one, but did not
provide justifications for cases, where mergers increase sales and reduce profit. Furthermore, the study
ignores the effects of industry changes before merger, where it focuses on comparing the post-merger
profitability and sales with the industry median and does not consider pre-merger performance.

11. The study of Andre et al. (2004)11 examined long-run performance of mergers and acquisitions in
Canada and investigated the main determinants of post-acquisition abnormal performance to determine the
sources of value creation or value destruction in Canadian M&A. The study’s sample comprises 267 events
of mergers and acquisitions between 1980 and 2000 making up 176 companies to investigate the effects of
(i) method of payment, (ii) book-to-market value of the bidder, and (iii) local and cross-border deals on the
long-run performance. The analysis covered three years after the transaction using mean calendar-time
abnormal returns to measure the magnitude and reliability of abnormal returns. The results have shown that
Canadian acquirers significantly under-perform over the three-year post-event period. After examining
possible explanations for the long-run performance of M&A, the study found that the method of payment
where stock-financed M&A under-perform relative to cash-financed M&A, glamour acquirers under
perform relative to value acquirers, and finally, crossborder deals perform poorly in the long- run. The study
did not compare post-merger performance with a benchmark or control group of similar industries to account
for industry effects, and this was the main drawback. Therefore, the negative abnormal returns could be due
to industry conditions.

12. Yook (2004)12 tested the impact of acquisition on the acquiring firm’s financial performance by
comparing pre and post-acquisition Economic Value Added (EVA) relative to the industry average. The
study based on a cross-sectional variation in EVA performance according to the following transaction
characteristics: (i) types of acquisition, (ii) methods of payment, and (iii) business similarity. The sample
comprises 75 of the largest acquisitions occurring during 1989 to 1994 in the United States. The results have
concluded that acquiring firms experience significantly deteriorating financial performance after the
acquisitions. When calculating industry-adjusted EVA, the difference is indiscernible, hence, the decline in
raw EVA is grounded by industry effects. Tender offers consistently earn larger EVA than do mergers.
However, there is no difference if EVA is calculated without adjusting the premium. Hence, larger
premiums paid in tender offers can be justified by higher operating performance. Unfortunately, the study
failed to find a relationship between industry-adjusted EVA and types of acquisition, methods of payment,
and business similarity. However calculating EVA is a difficult process and still has a dispute in the
accounting literature.

13. Megginson et al. (2004)13 aim at investigating the relationship between the long-term postmerger
performance and the following factors: (i) the degree of corporate focus, (ii) method of payment, (iii) the
44
impact of target management attitude, (iv) the impact of time period of the merger, and (v) the impact of
(glamour/value) acquirers. The sample consists of 204 strategic mergers completed in the period 1977-1996.
In examining the long-term performance, the study carried out three tests; first, comparing the long-term
stock performance; abnormal returns, of merging firms with a portfolio of firms, second, comparing pre and
post-merger operating cash flows to the same control group, and finally, comparing sample and control pre-
merger and post-merger discounts and premiums in market-to-book values. The results have indicated that
the primary determinant of long-term performance is the degree of change in corporate focus. On average,
10% decline in the focus results in (a) 9% loss in relative stockholder wealth, (b) 4% discount in firm value,
and (c) 1.2% decline in operating cash flow by the third post-merger year. Cash-financed mergers
outperformed stock-financed mergers in the operating performance. There is no significant relationship
between managerial resistance and long-term performance. Time period has no effect on the long-term post-
merger performance. No evidence was found to support that glamour outperform value acquirers.

14. King et al. (2004)14 investigated the findings of published research on post- acquisition performance and
employ a meta-analysis technique to assess the impact of the addressed variables in the literature on the
performance of the merged firms. The study concluded that M&A do not lead to superior financial
performance. It can be argued that M&A has a modest negative effect on long-term financial performance of
acquiring firms. The results reveal no evidence to support and explain changes in post-mergers and
acquisitions performance using the factors that were supported by the literature to have an effect on post-
merger performance such as: method of payment, relatedness of industry, prior acquisition experience, and
conglomerate acquisition. It should be noted that King et al. (2004) do not consider the impact of other
factors as firm size and compensation plan on corporate performance which have been discussed in the
literature.

15. Coontz [2004]15 conducted a study on ‘Economic Impact of Corporate Mergers and Acquisitions on
Acquiring Firm Shareholder’. The researcher concluded that companies are not able to perform better after
Mergers and Acquisitions (M&A) in every aspect. The observed performance varies from industry to
industry. The performance is solely dependent on the type of industry in which Mergers and Acquisitions
(M&A)take place.

16. Feroz (2005)16 analyzed the effect of mergers and acquisitions on the financial performance of US firms
and found that efficiency in the management of 82% of the sampled firms improved after merger and
acquisitions.

17. Yuce and Ng (2005)17 investigated the effect of merger announcements of Canadian firms on the
abnormal returns. The sample consists of all Canadian mergers that occurred between 1994 and 2000
making up 1361 acquirer companies and 242 target companies representing industrial product companies, oil
and gas companies, consumer product sectors and the rest of the sample is scattered over 38 industries.
Abnormal returns have been used for both the acquiring and target companies in an effort to support or reject
the results of American studies that report negative abnormal return for acquiring firms and positive
abnormal return for target firms. The results have indicated negative results in contrast to U.S. studies (for
example; Andre et al., 2004). Yuce and Ng (2005) argued that both the target and the acquiring company
45
shareholders earn significant positive abnormal returns, but it is lower than what had reported in previous
study of Megginson et al. (2004) on Canadian companies. This means that abnormal returns appear to be
decreasing through time. The results of Yuce and Ng (2005) suggest that (i) there are significant and positive
cumulative abnormal returns to acquirers buying private firms with stock rather than public ones, (ii) no
significant difference is found between public and private targets when paid in cash, (iii) there is higher risk
for acquiring private firms than public ones, (iv) firms tend to pay less in stocks for private firms, and (v)
differences in Canadian industry, capital markets, and regulations may justify the difference in the Canadian
experience. It can be argued that the study did not test the effect of industry type on the acquisition price.
Additionally, the study examined the performance for a period of 40 days which is a very short period to
examine the performance; therefore the results have lack of generalization. Accordingly, an investigation
over a long-run is needed to determine whether the positive abnormal returns in the shortrun would reverse
in the long-run or continue as positive.

18. Kling (2006)18 carried out a study to judge the successfulness of the mergers wave in Germany and to
analyze the effect of mergers on the macro level taking into consideration variables that might drive mergers
such as: economics of scale, macro economic conditions, success of former mergers and market structure.
The study choose a sample of 35 leading German companies that experienced mergers over the period from
the early 1870s to the beginning of the First World War in 1914 covering a period of 44 years. The results
reveal that the first German wave of merger started around 1898 accompanied by the introduction of the new
exchange law in 1896. The vector regression model used was unable to find out that mergers were not
successful through the whole period albeit periods of successful mergers, hence, this issue has been
identified using rolling regressions. From 1898 to 1904, mergers affected total stock returns positively in all
industries except for banks. Despite this fact, managers imitated the merger wave in the industrial companies
without assessing the successfulness of this activity on the banking sector. The study has cons and pros;
where the period covered in the study was long enough to conclude considerable results. Moreover,
categorizing the sample according to industry type provides insights on the effects of mergers across sectors
rather than generalizing results with no evidence. On the other hand, the study is based on the macro level
which in turn might affect results of analyzing mergers on a micro level of corporate performance.

19. Waddock and Graves (2006)19 gave the opinion that employee diversity was a possible source of
strategic advantage for US companies in the post-merger and acquisition phase and they also resulted that
post-merger and acquisition efficiency did not impacted the management and union relationships, employee
involvement and retirement benefits issues. There was no differences between the acquiring and merged
organisations regarding employee polices in the pre and post-merger period. They resulted that the acquirer
fiiTns often impose their policies on the merged firm, which eventually damages the organisational culture
of the new entity.

20. Malhotra and Zhu (2006)20 organized a research on post-merger and acquisition for the financial
performance of Indian firms engaged in acquisition of US based firms. They studied the post-merger and
acquisition impact on the financial performance of the acquiring US firms. The results of the research
depicted that hidian international acquisitions under- performed with respect to long-term announcement.
However, net sales to growth and foreign export sales increased after the acquisition while other financial
ratios decreased post-merger and acquisition.

46
21. Cabanda and Pajara-Pascual (2007)21 examined the financial and operating performance of
Philippines shipping companies resulting from the merger event based on the economic-finance perspective.
The test covers three periods of analysis: (i) three years prior to merger, (ii) three years immediately after
merger for the short-run analysis, and (iii) seven years after the merger for the longrun analysis. The study
covers the period from 1994 to 2003. The study applies the conventional accounting and financial
approaches in analyzing the effects of merger on firm performance. Empirical results showed that pre and
post-merger values obtained mixed results. Some measures of firm performance such as acid test ratio, total
asset turnover, and net revenues suggest statistically significant gains in the long-run. Other performance
variables such as net income, return on asset, return on sales, return on equity, net profit margin, capital
expenditure, capital expenditure/sales, and capital expenditure/total asset did not show significant gains after
mergers in the short run. The study concluded that mergers in the Philippine shipping industry do not lead to
improved performance in both the short-run and the long- run.

22. Mantravadi and Reddy (2008)22 tested whether the relative size of target and acquiring firms has an
impact on the post-merger operating performance in India. The sample consists of all the acquiring
transactions occurred in the period from 1991 to 2003. The financial ratios employed cover a period of three
years pre-merges and five years post-mergers are: operating profit margin ratio, gross profit margin ratio, net
worth, return on capital employed, and debt equity ratio. The analysis of pre and postmerger operating
performance ratios for the acquiring small size firms has indicated that relative size does make difference to
post-merger performance. For firms with relative medium size, there were a decline in net profit margin ratio
and return on capital employed along with an increase in financial leverage after merger. For firms with
relative large size, there was no difference in pre and post-merger performance. For firms where relative size
of the target firms was greater than that of the acquiring firm, there was a significant decline in returns on net
worth and capital employed and marginal increase in financial leverage.

23. Hoang, Thuy Vu Nga and Lapumnuaypon, Kamolrat, (2008)23 have examined the critical successive
factors for merger and acquisitions projected in the view of merger and acquisitions advisory firms. Their
thesis signifies the services of professional advisor in the process of merger and acquisition. They
highlighted the need of guidance for completing the clear objectives, goals and scope of the project. The
factors like client consultation and acceptance, project manager's competence and commitment, team
members' competence and commitment, communication and information sharing and exchange, project plan
development, resource planning, time management, tight secrecy, price evaluation and financing scheme,
risk management. They used citation index number method and five point likert scale method for data
analysis.

The data was gathered through a semi-structured interviews and selfcompletion questionnaire method with
six respondents working in three organizations which has provided the professional services related to
merger and acquisitions projects. They have conducted the sample survey of 325 merger and acquisitions
advisory firms. They finally concluded that the services related to merger and acquisitions projects covering
all functional areas that potential clients may need advice.

24. S. Revathy (2011)24 has explained the key issues of merger and acquisitions based on secondary data
highlighting the motives behind Merger and acquisitions that have occurred in India post 2000 period. She
has explored the benefits and costs to both parties involved in the merger and acquisitions process. The
47
article concludes that banks could work towards a synergy-based merger plan that would take shape latest by
2009 with minimization of technology-related expenditure as a goal.

It was also concluded that large size was just a facilitator, but no guarantee for improved profitability on a
sustained basis. Hence, the thrust should be on improving risk management capabilities, corporate
governance and strategic business planning.

3.7 Conclusion

From the existing literature, it is clear that, studies on the economic impact of M&A in the Indian context is
very few and scanty. Moreover, most of the studies were focused on financial parameters of the
firms/industries (i.e., profitability, liquidity, asset value, shareholder’s wealth and stock value etc.) and no
operational parameters were discussed in detail.

48
 CHAPTER – 4 DATA INTERPRETATION

Sr No. Figure Description Page No.

No.
1 4.1 Introduction 50
2 4.2 Methods of Data Interpretation 50-51
3 4.3 Importance of Data Interpretation 52
4 4.4 Questionnaire 53-78

49
4.1. Introduction

Data interpretation refers to the process of using diverse analytical methods to review data and arrive at
relevant conclusions. The interpretation of data helps researchers to categorize, manipulate, and summarize
the information in order to answer critical questions.

The importance of data interpretation is evident and this is why it needs to be done properly. Data is very
likely to arrive from multiple sources and has a tendency to enter the analysis process with haphazard
ordering. Data analysis tends to be extremely subjective. That is to say, the nature and goal of interpretation
will vary from business to business, likely correlating to the type of data being analyzed. While there are
several different types of processes that are implemented based on individual data nature, the two broadest
and most common categories are “quantitative analysis” and “qualitative analysis”.

Yet, before any serious data interpretation inquiry can begin, it should be understood that visual
presentations of data findings are irrelevant unless a sound decision is made regarding scales of
measurement. Before any serious data analysis can begin, the scale of measurement must be decided for the
data as this will have a long-term impact on data interpretation ROI. The varying scales include:

 Nominal Scale: non-numeric categories that cannot be ranked or compared quantitatively. Variables are
exclusive and exhaustive.

 Ordinal Scale: exclusive categories that are exclusive and exhaustive but with a logical order. Quality
ratings and agreement ratings are examples of ordinal scales (i.e., good, very good, fair, etc., OR agree,
strongly agree, disagree, etc.).

 Interval: a measurement scale where data is grouped into categories with orderly and equal distances
between the categories. There is always an arbitrary zero point.

 Ratio: contains features of all three.

4.2.Methods of Data Interpretation

Data interpretation methods are how analysts help people make sense of numerical data that has been
collected, analyzed and presented. Data, when collected in raw form, may be difficult for the layman to
understand, which is why analysts need to break down the information gathered so that others can make
sense of it.

50
For example, when founders are pitching to potential investors, they must interpret data (e.g. market size,
growth rate, etc.) for better understanding. There are 2 main methods in which this can be done,
namely; quantitative methods and qualitative methods.

4.2.1 Qualitative Data Interpretation Method

The qualitative data interpretation method is used to analyze qualitative data, which is also known as
categorical data. This method uses texts, rather than numbers or patterns to describe data.

Qualitative data is usually gathered using a wide variety of person-toperson techniques, which may be
difficult to analyze compared to the quantitative research method.

Unlike the quantitative data which can be analyzed directly after it has been collected and sorted, qualitative
data needs to first be coded into numbers before it can be analyzed. This is because texts are usually
cumbersome, and will take more time and result in a lot of errors if analyzed in its original state. Coding
done by the analyst should also be documented so that it can be reused by others and also analyzed.

There are 2 main types of qualitative data, namely; nominal and ordinal data. These 2 data types are both
interpreted using the same method, but ordinal data interpretation is quite easier than that of nominal data. In
most cases, ordinal data is usually labelled with numbers during the process of data collection, and coding
may not be required. This is different from nominal data that still needs to be coded for proper interpretation.

4.2.2. Quantitative Data Interpretation Method

The quantitative data interpretation method is used to analyze quantitative data, which is also known as
numerical data. This data type contains numbers and is therefore analyzed with the use of numbers and not
texts.

Quantitative data are of 2 main types, namely; discrete and continuous data. Continuous data is further
divided into interval data and ratio data, with all the data types being numeric.

Due to its natural existence as a number, analysts do not need to employ the coding technique on
quantitative data before it is analyzed. The process of analyzing quantitative data involves statistical
modelling techniques such as standard deviation, mean and median.

Some of the statistical methods used in analyzing quantitative data are highlighted below:

 Mean

The mean is a numerical average for a set of data and is calculated by dividing the sum of the values by the
number of values in a dataset. It is used to get an estimate of a large population from the dataset obtained
from a sample of the population.

 Standard Deviation
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This technique is used to measure how well the responses align with or deviates from the mean. It describes
the degree of consistency within the responses; together with the mean, it provides insight into data sets.

 Frequency Distribution

This technique is used to assess the demography of the respondents or the number of times a particular
response appears in research. It is extremely keen on determining the degree of intersection between data
points.

4.3. Importance of Data Interpretation

The purpose of collection and interpretation is to acquire useful and usable information and to make the most
informed decisions possible. From businesses to newlyweds researching their first home, data collection and
interpretation provides limitless benefits for a wide range of institutions and individuals.

Data analysis and interpretation, regardless of the method and qualitative/quantitative status, may include the
following characteristics:

 Data identification and explanation

 Comparing and contrasting data
 Identification of data outliers.
 Future predictions.

Data analysis and interpretation, in the end, help improve processes and identify problems. It is difficult to
grow and make dependable improvements without, at the very least, minimal data collection and
interpretation. What is the keyword? Dependable. Vague ideas regarding performance enhancement exist
within all institutions and industries. Yet, without proper research and analysis, an idea is likely to remain in
a stagnant state forever (i.e., minimal growth). So… what are a few of the business benefits of digital age
data analysis and interpretation?

1) Informed decision-making: A decision is only as good as the knowledge that formed it. Informed data
decision-making has the potential to set industry leaders apart from the rest of the market pack. Studies have
shown that companies in the top third of their industries are, on average, 5% more productive and 6% more
profitable when implementing informed data decision-making processes. Most decisive actions will arise
only after a problem has been identified or a goal defined. Data analysis should include identification, thesis
development, and data collection followed by data communication.

If institutions only follow that simple order, one that we should all be familiar with from grade school
science fairs, then they will be able to solve issues as they emerge in real-time. Informed decision-making
has a tendency to be cyclical. This means there is really no end, and eventually, new questions and
conditions arise within the process that needs to be studied further. The monitoring of data results will
inevitably return the process to the start with new data and sights.

2) Anticipating needs with trends identification: data insights provide knowledge, and knowledge is
power. The insights obtained from market and consumer data analyses have the ability to set trends for peers
within similar market segments. A perfect example of how data analysis can impact trend prediction can be
evidenced in the music identification application, Shazam. The application allows users to upload an audio
52
clip of a song they like, but can’t seem to identify. Users make 15 million song identifications a day. With
this data, Shazam has been instrumental in predicting future popular artists.

When industry trends are identified, they can then serve a greater industry purpose. For example, the insights
from Shazam’s monitoring benefits not only Shazam in understanding how to meet consumer needs, but it
grants music executives and record label companies an insight into the pop-culture scene of the day. Data
gathering and interpretation processes can allow for industry-wide climate prediction and result in greater
revenue streams across the market. For this reason, all institutions should follow the basic data cycle of
collection, interpretation, decision making, and monitoring.

3) Cost efficiency: Proper implementation of data analysis processes can provide businesses with profound
cost advantages within their industries. A recent data study performed by Deloitte vividly demonstrates this
in finding that data analysis ROI is driven by efficient cost reductions. Often, this benefit is overlooked
because making money is typically viewed as “sexier” than saving money. Yet, sound data analyses have the
ability to alert management to cost-reduction opportunities without any significant exertion of effort on the
part of human capital.

A great example of the potential for cost efficiency through data analysis is Intel. Prior to 2012, Intel would
conduct over 19,000 manufacturing function tests on their chips before they could be deemed acceptable for
release. To cut costs and reduce test time, Intel implemented predictive data analyses. By using historic and
current data, Intel now avoids testing each chip 19,000 times by focusing on specific and individual chip
tests. After its implementation in 2012, Intel saved over $3 million in manufacturing costs. Cost reduction
may not be as “sexy” as data profit, but as Intel proves, it is a benefit of data analysis that should not be
neglected.

4) Clear foresight: companies that collect and analyze their data gain better knowledge about themselves,
their processes, and performance. They can identify performance challenges when they arise and take action
to overcome them. Data interpretation through visual representations lets them process their findings faster
and make better-informed decisions on the future of the company.

4.4. Questionnaire

A questionnaire is a research instrument consisting of a series of questions (or other types of prompts) for
the purpose of gathering information from respondents through survey or statistical study. The questionnaire
was invented by the Statistical Society of London in 1838.

Although questionnaires are often designed for statistical analysis of the responses, this is not always the
case.

Questionnaires have advantages over some other types of surveys in that they are cheap, do not require as
much effort from the questioner as verbal or telephone surveys, and often have standardized answers that
make it simple to compile data.. However, such standardized answers may frustrate users as the possible
answers may not accurately represent their desired responses. Questionnaires are also sharply limited by the
fact that respondents must be able to read the questions and respond to them. Thus, for some demographic
groups conducting a survey by questionnaire may not be concretely feasible.

53
 The main purpose of a questionnaire is to extract data from the respondents.It’s a relatively inexpensive,
quick, and efficient way of collecting large amount data even when the researcher isn’t present to collect
those responses first hand.But an important factor to note is that a questionnaire isn’t the process of
analyzing the responses. The process is surveying.

A questionnaire just a set of questions used to gather statistically useful information from the respondents.
It’s often considered as an important tool used in the survey process.

A survey, on the other hand, is a process which includes using a questionnaire to ask the questions, collect
responses, and analyse them to get to a result. Analyzing and appraising are important aspects of a survey
which makes it different from a questionnaire.

4.4.1. Types of Questions in Questionnaire

You can use multiple question types in a questionnaire. Using various question types can help increase
responses to your research questionnaire as they tend to keep participants more engaged. The best customer
satisfaction survey templates are the most commonly used for better insights and decision-making. Some of
the widely used types of questions are:

 Open-Ended Questions: Open-ended questions help collect qualitative data in a questionnaire where the
respondent can answer in a free form with little to no restrictions.

 Dichotomous Questions: The dichotomous question is generally a “yes/no” close-ended question. This
question is usually used in case of the need for necessary validation. It is the most natural form of a
questionnaire.

 Multiple-Choice Questions: Multiple-choice questions are a close-ended question type in which a

respondent has to select one (single-select multiple-choice question) or many (multi-select multiple choice
question) responses from a given list of options. The multiple-choice question consists of an incomplete
stem (question), right answer or answers, incorrect answers, close alternatives, and distractors. Of course,
not all multiple-choice questions have all of the answer types. For example, you probably won’t have the
wrong or right answers if you’re looking for customer opinion.

 Scaling Questions: These questions are based on the principles of the four measurement scales
– nominal, ordinal, interval, and ratio. A few of the question types that utilize these scales’ fundamental
properties are rank order questions, Likert scale questions, semantic differential scale questions,
and Stapel scale questions.

 Pictorial Questions: This question type is easy to use and encourages respondents to answer. It works
similarly to a multiple-choice question. Respondents are asked a question, and the answer choices are
images. This helps respondents choose an answer quickly without over-thinking their answers, giving you
more accurate data.

4.4.2. Questionnaire Plan

Researcher has collected the primary data through the contacts. Researcher has collected the response to
understand the thinking of people. In this research, researcher collected data with the help of Questionnaire
and which interpreted below;
54
Place of Domicile of Respondent

Table No. 1.7

India Maharashtra Vashi Airoli Bhiwandi Kalyan Mumbai Thane

2 3 6 2 2 2 15 5

Chart No.4

Interpretation:

From the above Column Chart the researcher observed that from 37 respondent 2 respondent live in India, 3
respondents live in Maharashtra ,6 respondents live in vashi, in Airoli 2 respondents live, in Bhiwandi 2
respondents live, 2 respondents live in Mumbai and 5 respondents live in Thane.

55
Age group of Respondent

Table No.1.8

Age 18 Age 19 Age 20 Age 21 Age 22 Age 23 Age 461

1 8 12 12 2 1 1

Chart No. 5

Interpretation:

From the above Column Chart researcher observed that there are different age of 37 respondents who took
place in this survey . Age group starting from 18 years there is 1 respondent from group of 19 years there are
8 respondent, 12 respondent are from group 20 years, 12 respondent are from the group of 21 years. There
are 2 respondents in each group 22 ,23 and 46 years.

56
Education of Respondent

Table No. 1.9

Graduated Pursuing 12th Pass PhD

Graduation
9 26 1 1

Chart No. 6

Interpretation:

From the above Column Chart researcher has observed that out of 31 respondents 9 respondents are
graduated, 26 respondent are pursuing graduation, 1 Respondent is 12th pass and 1 respondent is PhD holder.

57
Do you know what Merger and Acquisition means?

Table No. 1.10

Yes No Total
36 1 37

Chart No.7

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 97.3% i.e.36 people know about
merger and acquisition and 2.7% i.e. 1 person is not aware about merger and acquisition. Hence researcher
conclude that most of the people known about merger and acquisition.

58
Do you know different types of Merger and Acquisition ?

Table No. 1.11

Yes No Total

30 7 37

Chart No.8

Interpretation

From the above Pie Chart researcher has observed that out of 37 respondents 83.3% i.e. 30 persons know
about merger and acquisition and 16.7% i.e. 7 persons are not aware about merger and acquisitions. So here
researcher conclude that most of the people know the types of merger and acquisition.

59
Is Merger or Acquisition only option left when company faces crisis.

Table No. 1.12

Yes No Total

13 24 37

Chart No.9

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 64.9% i.e. 24 people have
opinion that merger and acquisition is not the only option left when company faces crisis but 35.1% i.e. 13
people have opinion that merger and acquisition is the only option left after company faces crises. Hence
researcher conclude that merger and acquisition is not only the option left when company faces crisis.

60
How comfortable are you with shopping online?

Table No. 1.13

Extremely Quite Moderately Not at all Total

Comfortable Comfortable Comfortable Comfortable
11 16 10 0 37

Chart No.10

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent, 29.7% i.e. 11 people are saying
that they are extremely comfortable while doing online shopping other than 43.2% i.e. 16 people are saying
that they are quite comfortable while doing online shopping, 27% i.e. 10 people are saying that they are
moderately comfortable while doing online shopping and out of 37 respondent no one is saying that they are
not at all comfortable while doing online shopping. From the above researcher has conclude that all the
people are comfortable while doing online shopping.

61
Do you know Walmart Company?

Table No. 1.14

Yes No Total

18 18 36

Chart No.11

Interpretation:

From the above Pie Chart researcher has observed that out of 36 respondent 50% i.e. 18 people are known
about Walmart Company and 50% i.e. 18 people are not known about Walmart Company. That means half f
of the people are known about Walmart Company and half of the people are not known.

62
Do you know E-bay Company?

Table No. 1.15

Yes No Total

18 18 36

Chart No.12

Interpretation:

From the above Pie Chart researcher has observed that out of 36 respondent 50% i.e. 18 people are known
about E-bay Company and 50% i.e. 18 people are not about E-bay Company. That means half of the people
are aware about E-bay company but at the same time half of the people are unaware about E-bay company.

63
Do you know about Myntra ?

Table No. 1.16

Yes No Total

25 12 37

Chart No.13

Interpretation:

From the above researcher has observed that out of 37 respondent 66.7% i.e. 25 people known about Myntra
and 33.3% i.e. 12 people are not known about Myntra. From this researcher has concluded that most of the
people are aware about Myntra Company.

64
Do you know that Flipkart Merged with Walmart ,Ebay and Myntra?

Table No. 1.17

Yes No Little bit Total

23 7 7 37

Chart No.14

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 62.2% i.e.23 people are known
that Flipkart is merged with Walmart, E-bay and Myntra.18.9% i.e. 7 people are not known that Flipkart is
merged with Walmart, E-bay and Myntra and 18.9% i.e. 7 people are known a little bit that Flipkart is
merged with Walmart, E-bay and Myntra. From this researcher has concluded that most of the people are
aware that Flipkart is merged with Walmart, E-bay and Myntra.

65
Do you do Online Shopping?

Table No. 1.18

Yes No Total

37 0 37

Chart No.15

Interpretation:

From the above Pie Chart researcher has observed that our of 37 respondent 100% i.e. 37 people do online
shopping. Not a single person is there who not do online shopping. From this researcher has concluded that
all the people do online shopping.

66
Do you think Online shopping is better than Offline shopping?

Table No. 1.19

Yes No Total

18 18 36

Chart No.16

Interpretation:

From the above Pie Chart researcher has observed that out of 36 respondent 50% i.e. 18 people think that
online shopping is better than offline shopping on the same side 50% i.e. 18 people think that online
shopping is not better than offline shopping. From this its observed that half of the people think that online
shopping is better than offline shopping and half of the people think that offline shopping is better than
online shopping.

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What benifits you received while doing Online Shopping?

Table No. 1.20

Time Saving No Physical Variety at one Save energy Total

person required place
13 6 13 6 37

Chart No.17

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 33.3% i.e.13 people think that
Time saving is the benefit they received while doing online shopping.16.7% i.e. 6 people think that No
physical person required is the benefit they received while doing online shopping. 16.7% i.e. 6 people think
that that online shopping saves energy.33.3% i.e. 13 people think that benefit they received is they get
variety of product at one place.

68
Do you like the service provided by Flipkart?

Table No. 1.21

Yes No Best Worst Total

30 2 4 1 37

Chart No.18

Interpretation:

From the above Pie Chart it is observed that out of 37 respondent 81.1% i.e. 30 people like the service
provided by Flipkart. 5.4% i.e.2 person not like service provided by Flipkart. 10.8 i.e. 4 people thinks that
the service provided by Flipkart is best and 2.7% i.e. 1 person thinks that service provided by Flipkart is
worst. From the above researcher has concluded that most of the people means 91.9 % people love the
service provided by Flipkart.

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The quality of product purchased from Flipkart is highly satisfactory

Table No.1.22

Strongly Agree Neutral Disagree Strongly Total

Agree Disagree
4 14 15 4 0 37

Chart No.19

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 10.8% i.e. 4 people are strongly
agree that the quality of product purchased from the Flipkart is highly satisfactory. 37.8% i.e. 14 people
agree that the quality of product purchased from the Flipkart is highly satisfactory. 40.5% i.e. 15 person’s
thinking is neutral that the quality of product purchased from the Flipkart is highly satisfactory. 10.8% i.e. 4
people disagree with the statement that the quality of product purchased from the Flipkart is highly
satisfactory that means they are not satisfied with the quality of product provide by Flipkart and no one is
strongly disagree with the statement that the quality of product purchased from the Flipkart is highly
satisfactory. That means most of the people agree with the statement that the quality of product purchased
from the Flipkart is highly satisfactory.

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Do you prefer Flipkart among all other shopping sites of apps?

Table No. 1.23

Yes No Total

25 12 37

Chart No.20

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 66.7% i.e. 25 people prefer
Flipkart among all other shopping sites of applications and 33.3% i.e. 12 people not prefer Flipkart among
all other shopping sites of applications. From this researcher has concluded that most of the people prefers
Flipkart among all other shopping sites of application.

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Which of the following features do you like about Flipkart?

Table No. 1.24

Ease of Discounts Customer Delivery Cash on Exchange Packaging I have

searching Service Time Delivery Offer never
the item shopped
you are at
looking Flipkart
for
20 12 15 8 17 8 8 2

Chart No.21

Interpretation:

From the above Bar researcher has observed out of all the respondents most of the people preferred Ease of
searching the item you are looking for feature of Flipkart i.e 54.1%. The second most preferred feature of
Flipkart is Cash on Delivery i.e.45.9%. The third preferred feature of Flipkart is customer service i.e.40.5%.
The fourth preferred feature of Flipkart is 32.4% and other feature of Flipkart which are preferred that are
Delivery Time, Exchage Offer and Packaging i.e. 21.6% each and 5.4% people have never shopped at
Flipkart. From the above researcher has concluded that Ease of searching the item you are looking for is
most preferred feature of Flipkart.

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How do you rate your overall Flipkart Experience?

Table No. 1.25

Poor Average Good Very Good Excellent Not Total

Applicable
3 4 16 11 2 1 37

Chart No.22

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondents 43.2% i.e. 16 people rated
Good as their overall experience while shopping through Flipkart. 29.7% i.e. 11 people rated Very Good as
their overall experience while shopping through Flipkart. 5.4% i.e. 2 people rated Excellent as their overall
experience while shopping through Flipkart. 10.8% i.e. 4 people rated Average Excellent as their overall
experience while shopping through Flipkart. 8.1% i.e. 3 people rated Poor as their overall experience while
shopping through Flipkart and 2.7% i.e. 1 person rated Not Applicable as their overall experience while
shopping through Flipkart. From the above researcher has conluded that most of the people rated Good.

73
Is Merger or Acquisition affects consumer?

Table No. 1.26

Yes No Total

18 18 36

Chart No.23

Interpretation:

From the above Pie Chart researcher has observed that out of 36 respondent 50% i.e. 18 people thinks that
merger or acquisition affects consumer and 50% i.e. 18 people thinks that merger or acquisition not affects
consumer. From this researcher has concluded that half of the people thinks merger or acquisitions affects
consumer and half of the people thinks that merger or acquisition not affects consumer.

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Do you think that after Merger or Acquisition company's environment change?

Table No. 1.27

Yes No Maybe Total

18 13 6 37

Chart No. 24

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 50% i.e. 18 people thinks that
after merger and acquisition company’s environment changes. 33.3% i.e. 12 people thinks that there is no
change after merger and acquisition on company’s environment. 16.7% i.e. 6 people thinks that maybe after
merger and acquisition company’s Environment change. From this researcher has concluded that most of the
people thinks that after merger and acquisition company’s environment change.

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Do you think that Merger or Acquisition helps company to grow?

Table No. 1.28

Yes No Total

31 6 37

Chart No.25

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 83.8% i.e.31 people thinks that
merger and acquisition helps company to grow. From among 16.2% i.e. 6 people thinks that merger and
acquisition not helps company to grow. From above it observed most of the people thinks that merger and
acquisition helps company to grow therefore researcher concluded that merger and acquisition helps
company to grow.

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Do you think it is risky to do merger or acquisition with corporate?

Table No.1.29

Yes No Maybe Total

7 12 18 37

Chart No. 26

Interpretation:

From the above Pie Chart researcher has observed that out of 37 respondent 18.9% i.e. 7 people thinks that it
is risky to do merger and acquisition with corporate. 32.4% i.e. 12 people thinks that it is not risky to do
merger and acquisition with corporate and 48.6% i.e. 18 people thinks that it maybe risky to do merger and
acquisition with corporate. From the above researcher has concluded that it is risky to do merger and
acquisition with corporate.

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Do you think that Merger and Acquisition of the company affects shareholders wealth?

Table No. 1.30

Yes No Total

25 12 37

Chart No. 27

Interpretation:

From the above Pie Chart it is observed that out of 37 respondent 66.7 % i.e. 25 people thinks that merger
and acquisition of the company affects shareholders wealth and 33.3% i.e. 12 people thinks that merger and
acquisition of the company not affects shareholders wealth. From above researcher has concluded that
merger and acquisition of the company affects shareholders wealth.

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 CHAPTER 5 – CONCLUSION

Sr No. Figure No. Description Page No.

1 5.1 Conclusion 79-81

79
5.1. Conclusion:

There are numerous reasons why companies decide for strategic alliances. Some studies indicate that
companies merge for improving efficiencies and lowering costs. Other studies show that companies acquire
to increase market share and gain a competitive advantage. The ultimate goal behind a merger and
acquisition is to generate synergy values. Good strategic planning is the key to understanding if synergy
values do in fact exist. A well-researched and realistic plan will dramatically improve the chances of
realizing synergy values.

The strategic partnership of Myntra and Flipkart will provide a guidance for traditional players. They’ll
leverage existing capabilities and platforms by pursuing adjacent growth. They can expand to vertical
segments, collaborate with brands by designing their websites and open offline stores to grow their customer
base. The rapid growth of Indian e-commerce (especially eretail) are attracting global players and increasing
investors’ interest. India needs to extend the benefits of the Internet into sectors of the economy that have so
far not been touched. Strong internet infrastructure need to be extended beyond the top cities into Tier 2 and
Tier 3 cities, and deeper into the semi-urban and rural parts of the country, that are home to 70 percent of the
population and represent an estimated 50 percent of total household consumption.

The Indian government has restricted foreign companies from selling their products in India through the
online medium. This regulation safeguards Indian companies against competition from global leaders such
as eBay and Amazon. Currently, 100 per cent FDI is allowed in business-to-business (B2B) e-commerce in
India, but when it comes to business-to-consumer (B2C), it is prohibited. Besides, there is a mandatory 30
per cent local sourcing norm for foreign players. According to a recent report by IAMAI-KPMG, Indian
inventory-based e-commerce sector failed to grow as much as international counterparts that have FDI
support despite having one of the largest internet populations. While B2C players have been in conversation
with the government from the beginning of 2013. However, new government might allow FDI in e-
commerce. Government should provide legal framework and guidelines in ecommerce to expand companies’
horizons, basic rights such as intellectual property, prevention from fraud, consumer protection,
confidentiality, and etc. through which they can expand their businesses by lowering cost and can contribute
maximum to the progression of Indian economy.

Experts say that investors will have a tough time justifying deploying fresh capital into the other players—
besides Flipkart and Snapdeal—as the gap between the three leaders and the rest is increasing tremendously.
Backing these players will be very difficult going forward. Amazon may look to grow here through
acquisitions, a strategy it has implemented in its home market US. China boasts of big e-commerce players
like Alibaba and Tencent while the US is a two way fight between Amazon and Ebay. Two other Bangalore
based e-commerce companies Mu-Sigma and InMobi, have been eyeing similar valuations as they explore
fresh fund raising or listing plans in the near future. These advancements in span of less than three months
had proved that mergers and acquisitions can be best tool for growth in this competitive and dynamic
business environment. The implementation of M&A needs to be done properly and in a well planned
manner, in order to attain the aim. Hence, we can safely conclude that M&A had always been and will be the
most commonly used growth strategy in future too.

One size doesn't fit all. Many companies find that the best way to get ahead is to expand ownership
boundaries through mergers and acquisitions. For others, separating the public ownership of a subsidiary or
80
business segment offers more advantages. At least in theory, mergers create synergies and economies of
scale, expanding operations and cutting costs. Investors can take comfort in the idea that a merger will
deliver enhanced market power. M&A comes in all shapes and sizes, and investors need to consider the
complex issues involved in M&A. The most beneficial form of equity structure involves a complete analysis
of the costs and benefits associated with the deals.

The rationale behind mergers and acquisitions is that the two companies are more valuable, profitable than
individual companies and that the shareholder value is also over and above that of the sum of the two
companies. Despite negative studies and resistance from the economists, M&A's continue to be an important
tool behind growth of a company.

Reason being, the expansion is not limited by internal resources, no drain on working capital - can use
exchange of stocks, is attractive as tax benefit and above all can consolidate industry increase firm's market
power.

Hence researcher has concluded that from the above findings it was proved that Null Hypothesis (H0)
rejected and Alternative Hypothesis (H1) accepted means Merger and Acquisition impacts on growth of
Flipkart.

81
 CHAPTER 6 – BIBLIOGRAPHY

RESEARCH PAPERS/ARTICLES

Aggarwal, R. (2009), “Economic Development, Business Strategy and Corporate Restructuring in

India”, Journal of Indian Business Research, Vol. 1, No. 1, pp. 14-25.

Anand, M. and Singh, J. (2008), “Impact of Merger Announcements on Shareholders’ Wealth:

Evidence from Indian Private Sector Banks”, Vikalpa, Vol. 33, No. 1, pp. 35-54.

Bedi, H.S. (2010), “Merger & Acquisition in India: An Analytical Study”, Presented at: National
Conference on Business Innovation, Apeejay Institute of Management, Jalandhar, Punjab, Dated: 27
February 2010.

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Performance (A Case Study of Standard Chartered BankPakistan)”, Interdisciplinary Journal of
Contemporary Research in Business, Vol. 3, No. 1, pp. 804-812.

Kumar, S. and Bansal, L.K. (2008), “The Impact of Mergers and Acquisitions on Corporate
Performance in India”, Management Decision, Vol. 46, No. 10, pp. 1531-1543.

Kumar, R. (2009), “Post Merger Corporate Performance: An Indian Perspective”, Management

Research News, Vol. 32, No. 2, pp. 145-157.

Pawaskar, V. (2001), “Effect of Mergers on Corporate Performance in India”, Vikalpa, Vol. 26, No. 1,
pp. 19-32.

A Sarangapani and Mamathaa (2008) “Strategic Mergers and Acquisitions in Indian Firms – A Study”
ICFAI READER (Special Issue) Mergers & Acquisitions June 2008 PP.42-60.

Ajay Pandey (2001). “Takeover Announcements, Open Offers, and Shareholders‟ Returns in Target
Firms”, Vikalpa The Journal for Decision Makers,(July- September) .Vol.26. No.3. pp.19-30.

Beena.P.L. (2000). “An Analysis of Mergers in the Private Corporate Sector in India” (working paper
No.301). Centre for Development Studies, Thiruvananthapuram.
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Jayakumar.S. (1999). “Mergers and Acquisitions: An Evaluation Study”, M.Phil. Dissertation
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Pramod Mantravadi & A. Vidyadhar Reddy (2008)50 “Post-Merger Performance of Acquiring Firms
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WEBSITES

1. www.cmie.org

2. www. sebi.gov.in

3. www. bseindia.com

4. www.rbi.org

5. www. indiainfoline.com

6. www.ssrn.org

7. www.nseindia.com

8. www.skriec.com

9. www.scribd.com

10. www. ijrcm.org.in

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 APPENDIX
( Questionnaire )

FLIPKART MERGER & AQUISITION SURVEY

Hello Dear Friends I am Akshata Sandeep Patil Studying in TYBAF. I am doing research on "THE
EFFECTS OF MERGERS AND AQUSITIONS ON THE GROWTH OF FLIPKART" Please fill this form
as a research as it is used for academic purpose so I assure you that data will kept confidential.

I. Name of Respondent

II. Place of Domicile

III. Age

IV. Mobile Number

V. Email Id

VI. Qualification

1 . Do you know what Merger and Acquisition means?

o Yes
o No

2. Do you know different types of Merger and Acquisition?

o Yes
o No

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3 . Is Merger or Acquisition only option left when company faces crisis?

o Yes
o No

4 . How comfortable are you with shopping online?

o Extremely comfortable
o Quite comfortable
o Moderately comfortable
o Not at all comfortable

5. Do you know Walmart Company?

o Yes
o No

6. Do you know E-bay Company?

o Yes
o No

7. Do you know about Myntra ?

o Yes
o No

8. Do you know that Flipkart Merged with Walmart ,Ebay and Myntra?

o Yes
o No
o Little bit

9 . Do you do Online Shopping?

o Yes
o No

10 .Do you think Online shopping is better than Offline shopping?

o Yes
o No

11. What benifits you received while doing Online Shopping?

o ime Saving
o No Physical person required
o Variaty at one place
o Save Energy

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12. Do you like the service provided by Flipkart?

o Yes
o No
o Best
o Worst

13. The quality of product purchased from Flipkart is highly satisfactory

o Strongly agree
o Agree
o Neutral
o Disagree
o Strongly Disagree

14. Do you prefer Flipkart among all other shopping sites of apps?

o Yes
o No

15. Which of the following features do you like about Flipkart?

o Ease of searching the item you are looking for

o Discounts
o Customer Service
o Delivery Time
o Cash on Delivery
o Exchange Offer
o Packaging
o I have never shopped at Flipkart

16. How do you rate your overall Flipkart Experience?

o Poor
o Average
o Good
o Very Good
o Excellent
o Not Applicable

17. Is Merger or Aquisition affects consumer?

o Yes
o No

18. Do you think that after Merger or Aquisition company's environment change?

o Yes
o No
o Maybe
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19 . Do you think that Merger or Aquisition helps company to grow?

o Yes
o No

20. Do you think it is risky to do merger or aquisition with corporate?

o Yes
o No
o Maybe

21. Do you think that Merger and Acquisition of the company affects shareholders wealth?

o Yes
o No
o Maybe

Thank You!

Google Form Link:

https://forms.gle/etKj984CbogYxvEaA

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