AN ANALYSIS OF MERGERS IN THE PRIVATE CORPORATE SECTOR IN INDIA

The liberalised economic policies have exposed Indian industry \nto several challenges. In response to this, the Indian economy has \nwitnessed a sharp increase in mergers and acquisitions. An attempt has \nbeen made in this paper to analyse the significance of such mergers and \nits characteristics. The study suggests that acceleration of the merger \nmovement in the early 1990s is accompanied by the dominance of \nmergers between firms belonging to same business group or house with \nsimilar product lines. So it is argued that though the merger movement \nin the early 1990s might have contributed to an increase in product or \nasset concentration measured on a firm-wise basis, it could not have \ncontributed to an increase in concentration as measured by relative shares \nof business groups. But, there are signs that mergers between unrelated \nfirms, though numerically less significant, have been gaining ground. \nThis is especially true of mergers involving foreign-owned firms. The \nparticipation of foreign-controlled firms in the merger process has \nincreased significantly since 1992-93. However it is evident that mergers \ncontributed significantly to asset-growth in only one fifth of the sample \nfirms studied. Most of these firms mobilised a large share of resources \nthrough capital markets, to finance their expansion during 1989-90 to \n1994-95. Therefore the study argues that the merger wave in the early \n1990s was more a means of internal restructuring rather than an \ninstrument to further product market or asset share. \nJEL Classification : D43, G34, L41 \nKey Words: mergers and acquisitions; horizontal merger, vertical \nmerger, conglomeration, private corporate sector, India