Role of Mergers in the Indian Private Corporate Sector

Abstract

The liberalised economic policies have exposed Indian Industry to several challenges. In response to this the Indian economy has witnessed a sharp increase in mergers and acquisitions. An attempt has been made in this paper to analyse the significance of such mergers and its characteristics. The stud y suggests that the acceleration of the merger movement in the early 1990s is accompanied by the dominance of mergers between firms belonging to the same business group or house with similar product lines. But, there are signs that mergers between unrelated firms, though numerically less significant, have been gaining ground. The study argues that though the merger movement in the early nineties might have contributed to an increase in product or asset concentration measured on a firm wise basis, it could not have contributed to an increase in concentration as measured by the relative shares of business groups. However, it is evident that mergers contributed significantly to asset -growth in only one-fifth of the sample firms studied. Most of the sample firms mobilised a large share of resources through capital markets, borrowing, and current liabilities to finance their expansion during 1989-90 to 1994-95. Therefore the study concludes that the merger wave in the early nineties were more a means of internal restructuring than an instrument of further product market or asset share.