Abstract:
The corporate sector in India has witnessed a substantial growth
of Mergers and Acquisitions (M&As) during the 1990s, facilitated by
the policy-shift under Structural Adjustment Program. During the first
wave (i.e., 1990-95), the Indian corporate houses seem to have been
bracing up to face foreign competition while the second wave (i.e.,
1995-2000) experienced a large presence of multinational firms. M&As
also determined, to a large extent, the nature of foreign investment in
the country during this period. A large share of these M&As were between
firms belonging to the same business groups with a view to increase
their respective controlling blocs in order to guard against a Takeover.
However, the study could not find any evidence of efficiency-related
factors influencing M&As. It is rather growth of the firm in terms of their
asset-size and market share that have been noticed. There are indications
that one of the main motives could have been financial, that is, to increase
the equity size, which can be further used to borrow resources for
modernization. It is indeed a matter of grave concern that with the end
of licensing policies, not even a reliable list of MNEs in India could be
located from a publicly available source, not to speak of reliable
information about their operations in the country. The behaviour pattern
of Acquiring firms alerts us to the importance of working towards a
desirable and workable competition policy and an appropriate corporate
governance regime for the country. This is to be done keeping in view
the need to develop productive capacities and generate employment
within the country, providing for adequate ‘promotional measures’ and
safeguards to the small and medium entrepreneurs.
