Author : Hetanshi Shah 1
Date of Publication :13th February 2018
Abstract: To maximize the wealth of Shareholders, companies opt for either organic or inorganic expansion strategy. Prior to 1991, strict control regime compelled Indian companies to choose internal (or organic) growth strategy. However, with the onset of LPG (Liberalization, Privatization, And Globalization) policies, and amendments in MRTP(the Monopolies and Restrictive Trade Practices) Act, Income Tax Act, and Takeover Code, a paradigm shift was witnessed in external (or inorganic) growth strategies like Mergers and Acquisitions. This paper aims to identify the principal functioning of the waves of Mergers and Acquisitions in India post 1991 reforms. The primary focus is to review the trends of M&As in the light of pharmaceutical industry as it demonstrate innumerable Mergers and Acquisitions during the aforementioned period. Further, M&As in Pharmaceutical Sectors are classified on the basis of Ownership Pattern of Merged and Merging entity, Size of Acquirer and target firms, and Type of merger. Moreover, this paper also presents Case Studies of two renowned pharmaceutical Mergers, Sun Pharma-Ranbaxy and Lupin-Gavis, to discern synergy arising out of merger activity. By virtue of Merger, benefits like Tax Considerations, increased market penetration or diverse product portfolio, gained by acquiring and Target Firms, have also been enumerated. Lastly, a comprehensive Pre and Post merger Ratio analysis of the above mentioned companies have been conducted to identify the impact on the overall financial performance of the merged entity. Tools like mean, standard deviation and p-value have been used to conclude whether there is a significant or massive change in financial performance of a merged company due to merger
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