MANAGEMENT RESEARCH PROJECT

Impact of Mergers & Acquisitions Announcements on Stock Price Return

Submitted to:Prof. Nikhil Rustogi (Faculty Guide)

Submitted by: Setu Sharda 08bshyd0738

Impact of Mergers & Acquisitions Announcements on Stock Price Return A report Submitted in partial fulfillment of the requirements of MBA Program of

ICFAI Business School

Submitted By Setu Sharda 08bshyd0738

Prof. Nikhil Rustogi (Faculty Guide)

ACKNOWLEDGEMENTS Any achievement does not come from ones contribution; it requires some support from the superior to make the task uncomplicated. I acknowledge my endeavor to my Faculty Guide Mr Nikhil Rustogi whose invaluable guidance and suggestion has helped me to complete this project. I would also like to thank my parents and friends whose constant support helped me to complete this project.

Setu Sharda

AUTHORIZATION

This is to authorize that this report has been submitted in partial fulfillment of the project on Impact of Mergers & Acquisitions on Stock Price Returns as per the requirements of two years Post Graduate Diploma in Business Management course at ICFAI Business School, Hyderabad.

Contents
ABSTRACT.................................................................................................................................................. 6 1.0 INTRODUCTION .................................................................................................................................. 7 1.1 Objectives ........................................................................................................................................... 7 1.2 Scope of the study ............................................................................................................................... 7 1.3 Background ......................................................................................................................................... 8 1.3.1 Event Study .................................................................................................................................. 8 1.3.2 Merger & Acquisition Event ........................................................................................................ 8 1.4 Structure of the Report ...................................................................................................................... 10 2.0 LITERATURE REVIEW ..................................................................................................................... 11 3.0 METHODOLOGY ............................................................................................................................... 14 3.1 Data Collection & description........................................................................................................... 14 3.2 Procedure .......................................................................................................................................... 15 3.3 Abnormal Return .............................................................................................................................. 16 4.0 Result and analysis ................................................................................................................................ 19 5.0 GRAPHS ............................................................................................................................................... 19 6.0 TABLE SHOWING ABNORMAL RETURN RESULTS ................................................................... 22 7.0 ANALYSIS ........................................................................................................................................... 27 8.0 CONCLUSION- ................................................................................................................................... 28 9.0 ANNEXURE......................................................................................................................................... 29 10.0 References ........................................................................................................................................... 30

ABSTRACT Event study is becoming popular among investment professionals. Event study measures security price changes in response to events. There can be lot of corporate events taking place every day, which creates opportunities for event driven investment. Event study thus has become an important tool for investors who intend to benefit out of such events. Merger and Acquisition is one such event that has significant impact in the life of a firm. The project attempts to cover the M&A in the year of 2007, 2008 and 2009 under S&P Cnx Nifty. The paper investigate the consequence of Merger and Acquisition as an event and its effect on stock price return in and around the M&A announcement. The Price returns are measured as abnormal return.. The estimation window is for the purpose of the study was Day-30-210. The estimation period is the period where we measured the relationship between the stock and variables. The event window considered for study was Day 10 to Day +20 for calculation of abnormal return. The project used a market model to predict the relationship between the announcement and returns. The findings of the project states that the M&A as event does generate an average abnormal on Day 0, the affect of the event is also seen on Day +1, however it is not significant on Day+1. The affect of M&A slows down once it is past one day old in the market. The event also generates a significant average trading volume on Day 0 and Day +1 until it tends to return to normal level of volume.

1.0 INTRODUCTION

1.1 Objectives The Project aims fulfill the following objectives related to Mergers & Acquisitions under S&P CNX Nifty on: To test if M&A as an event can generate abnormal returns for the shareholders. To predict the stock prices by studying the return behavior of companies after merger To understand the impact of M & A activities on the stock prices. To analyze event study process and their applicability in capital market.

1.2 Scope of the study The increased number of M&A raises the question about the outcomes of corporate mergers and acquisitions vis--vis the stockholders. A number of studies both, in the economics and strategic management literature, have attempted to identify the impacts of M&A on the financial performance of firms. Event study is one such tool that tries to find the price performance of the stock. The study considers the stock price and interprets the impact of the M&A to calculate the abnormal return around the announcement date. The abnormal return gives a fair understanding to the investors, as how the market reacts to the event. A positive or negative abnormal return is an indication of the gains and losses for an investor in relation to the happening of the event. The study also intends to find the variables which can affect the cumulative abnormal during the announcement period. Empirically it is found that the nature of the target has an effect on the stock price performance of the acquirer.

1.3 Background

1.3.1 Event Study An event study1 measures the impact of a specific event on the value of a firm. The importance of the study comes from the fact that, given the rationality of the market, the effect of a particular will be immediately on the security price. Event studies started as tests of the semi-strong form of market efficiency, which says that all publicly-available information gets impounded instantaneously into the stock price. Hence, an event study aims to measure the direction and magnitude of the impact an event would have on value based on its effect on the company's stock price after the event is announced. The Event Driven Investment Strategy is an important tool that aims to capitalize on the irrationality of investors. Investors react quite inconsistently based on events, before properly analyzing the event. During this period, the event-driven investor can trade on news. The event study has many applications. In accounting and finance research, event studies have been applied to a variety of firm specific and economy wide events. Some examples include mergers and acquisitions, earnings announcements, issues of new debt or equity, and announcements of macroeconomic variables. Event studies have a long history. The first paper published in this field was in year 1933 by James Dolley, where he studied the price effect of stock split. He used a sample of 95 stock splits from 1921 to 1931 and found that the price increased in 57 of the cases.

1.3.2 Merger & Acquisition Event Mergers & Acquisitions is one such event that has a profound impact on the companys stock price movements. It is a strategic move on parts of both the acquirer and the target company. It not only affects the financial performance of the company but also influences market price of the stock, which in turn affects shareholder wealth.

A. Craig mackinlay, Event studies in economics and finance, retrieved from http://yaya.it.cycu.edu.tw/course%5CEvent%20Studies%20in%20Economics%20and%20Finance.pdf

The recent surge of interest in M&A activities in the world gives us an impression that M&A market is starting to mature now. However the M&A market have been very active for more than a decade. The most striking features of todays M&A waves are the size of the deals and the speed at which these are growing. Competition for M&A has intensified over the past few years. The number of bidders per target and increase in transaction value has risen significantly at present. Despite the competitive pressure, investor still view deals favorable. This can be seen in low negative announcement effect on the acquirers stock price. In the year 2006 2 the stock market was more positive about M&A than at any point in the past few years. This can be because of the reason that higher proportion of the deals are paid in cash, as opposed to stock, indicating that acquirers are more serious about extracting value since real money is on line. The increased number of M&As raises the question about the outcomes of corporate mergers and acquisitions. A number of studies both, in the economics and strategic management literature, have attempted to identify the impacts of M&As on the financial performance of firms. Based on different indicators, the studies of post-acquisition performance can be categorized into two classes. Performance can be measured 3 by share price, Accounting measures of profitability can be used

Studies concentrating on the share price impacts often use the event study methodology. The aim is to measure the effect, i.e., the abnormal return on the stock value of an event. Hence, to quantify the effect of the event, one has to calculate the difference between the actual stock return and a benchmark of what would have been the expected return if the event had not happened. The Standard method to calculate the abnormal return (AR) is:

Kees Cools, Gell, Kengelbach & Roos, The Brave New World of M&A, P 15, retrieved from http://www.bcg.com/publications/files/Brave_New_World_MA_Aug_2007.pdf
3

Jyrki Ali- Yrkko, Merger and Acquisition-Reasons and Result, P 8, retrieved from http://www.etla.fi/files/614_dp792.pdf

1.4 Structure of the Report

The Report is divided into sections. The first section starts with Introduction about the project. The second section starts with literature reviews under taken in the field of M&A. The Third section is methodology. It explains how the data for the study was extracted and various assumptions for collection of data. It also establishes the procedure required to undertake an event study. This section also deals with the models that were considered during the source of the study This section also deals with the statistical tests that were performed to check the robustness of the model. The fourth section explains and interprets the results of abnormal returns. It also lays down the scope for further analysis that can be undertaken in future. The fifth Section last section shows the graphs. The sixth section shows the table of the companies showing abnormal return. The seventh section again analyzes the results obtained. The eight section concludes the study. The Annexure and the appendices contain the table of the list of the companies.

2.0 LITERATURE REVIEW Announcement Effect & Price Pressure: An Empirical Study of Cross-Border Acquisition by Indian Firms by PengCheng Zhu & Shavin Malhotra4 (2008) examined the short-term stock performance of a sample of Indian firms acquiring U.S. firms in the period 1999-2005. The study showed that Indian market reacted positively to the acquisition announcement. The positive returns lasted for only three days, after which the returns became negative. The Study used Mean Adjusted method to calculated abnormal return in and around the announcement. The study also did cross sectional analysis using CAR as the dependent variable and Cash, Size, Private vs. Public & Related companies as independent variables. The study concluded that announcement effect in Indian cross-border M&A were mainly due to price pressure effect rather than informational effect.

Stock Returns in mergers and acquisition by Dirk Hackbarth And Erwan MorellecThis paper develops a model for the dynamics of stock returns in mergers and acquisitions, In which the timing and terms of takeovers are endogenous and result from value-maximizing decisions. The paper also empirically finds that how the beta of the firm changes at the time of takeover .The empirical study is done on publicly traded firms which constitute a sample of 1,086 takeovers with announcement dates ranging from January 1, 1985 to June 30,2002.The study first confirms the fact that the abnormal returns on announcement exhibit the same general patterns that have been reported previously in the literature. Their result proved that acquiring firms earn low or negative abnormal announcement returns, while target firms earn substantially positive abnormal returns around the announcement date of the takeover.

PengCheng Zhu & Shavin Malhotra, Announcement Effect & Price Pressure: An Empirical Study of Cross-Border Acquisition by Indian Firms retrieved from http://www.eurojournals.com/IRJFE%20ISSUE13%20peng.pdf

The Acquisition Performance Of S&P 500 Firms by Anand M. Vijh and Ke Yang 5 (2006), compared the acquisition performance of S&P 500 and non-S&P 500 firms after controlling for differences in firm characteristics. During 1980-2004, S&P 500 firms made a greater number and dollar value of acquisitions. 1) They more often used cash payment and tender offers. 2) The market reacted less negatively (more favorably) to the announcement of their acquisitions. 3) They were more likely to complete their deals. The target shareholders seemed to attach incremental value to joining with an S&P 500 firm and accepted a lower premium in stock deals. The S&P 500 acquirers also had stronger preacquisition operating performance, chose targets with stronger pre-acquisition performance, and realized significant gains in post-acquisition performance. We interpret the combined evidence as consistent with the efficiency hypothesis, which suggests that S&P 500 firms are more efficiently managed firms and make better acquirers.

Firm Size And The Gains From Acquisitions by Sara B. Moeller, Frederik P. Schlingemann

and Ren M. Stulzc6 (2003), says that small firms are profitable for their shareholders, but these firms make small acquisitions with small dollar gains. Large firms make large acquisitions that result in large dollar losses. Acquisitions thus result in losses for shareholders in the aggregate because the losses incurred by large firms are much larger than the gains realized by small firms. It examines possible explanations for this size effect, defined as the difference between the abnormal returns of small acquirers and large acquirers. First, roughly one quarter of the firms acquiring public firms are small whereas half of the firms acquiring private firms are small. Second, small firms are more likely to pay for acquisitions with cash than with equity. We find that the combined dollar return of the acquired and target firms for acquisitions of public firms is positive and significant for small firms but negative for large firms.

The Acquisition Performance Of S&P 500 Firms, retrieved from

http://www.fma.org/Orlando/Papers/AcquisitionPerformanceofSnP500Firms_FMA.pdf
6

Sara B. Moeller, Frederik P. Schlingemann and Ren M. Stulzc, Firm Size And The Gains From Acquisitions, retrieved from http://jfe.rochester.edu/03289.pdf

Long-Run Volatility And Risk Around Mergers And Acquisitions by Bharat & Guojun7 (2005)

Studies the changes in volatility and risk of acquirers around mergers and acquisitions and seek to understand the determinants of those changes. We find that there is a strong run-up in volatility and risk beginning four years before the merger. This pre-merger run-up is consistent with the hypothesis that M&As are a response to industry shocks. We find that for a period of about one year after the merger the average volatility measures continue to increase. Beyond that the systematic volatility and beta begin to decline. However, market-specific volatility continues to increase for the next two years. The volatility patterns are consistent with the risk of postmerger integration of the acquirer and the target firms that gets resolved slowly over time. The findings have important implications for understanding several issues, including the announcement effect of mergers, the diversification discount, and the long-run underperformance of acquirers in M&A transactions. The key insight is that as we understand the volatility and risk dynamics better, we will be able to compute risk adjusted returns more accurately.
Market Valuation And Merger Waves by Matthew Rhodes-Kropf, S. Viswanathan (2004),
8

private information on Acquiring and Target firms leads to increased stock merger activity that is correlated with market valuation. Managers of bidding firms have private information about the stand-alone value of their firms and the potential value of merging with a target firm. Managers of targets have private information about the stand-alone value of their company. Both bidders and targets have market values that may not reflect the true value of their companies which leads to mergers & acquisitions. The target has limited information about the components of the misevaluation, and therefore has difficulty in assessing the synergies. The rational target knows whether their own firm is overvalued or undervalued, so they are not easily fooled, but they cannot determine whether this mis-evaluation is a market effect, a sector effect, or a firm effect.

Bharat & Guojun, Long-Run Volatility And Risk Around Mergers And Acquisitions, retrieved from http://ccfr.org.cn/cicf2005/paper/20050201045025.PDF
8

Matthew Rhodes-Kropf, S. Viswanathan, Market Valuation And Merger Waves, retrieved from

http://www0.gsb.columbia.edu/faculty/mrhodeskropf/papers/joffinal3.pdf

3.0 METHODOLOGY

3.1 Data Collection & description The report took a sample of 30 M&A events happening recently. The tools used for data analysis will be Microsoft excel and spss.

The M&A data has been extracted from company press release and Security exchange board of India (SEBI) Databases like prowess, business beacon

The sample considered for the study include following criteria All M&A event related to time frame of Jan 2005 to Dec 2008 Companies having more than one M&A event during the event window i.e. (Day -10 to Day +20) will not be considered, to avoid the effect of the other event on the study. The events where the transaction value has not been disclosed has not been considered for the study. The acquiring firm is publicly listed. The transaction value is at least $10 million The sample mainly included the companies in which an open offer has been proposed to acquire the company.

3.2 Procedure

Event Date The date on which a company announces the M&A is the event date. This date can be any day of the week. The project ensured that the event date were accurate, any deviation in the event date can manipulate the actual results. The event date was extracted from metric4 database and was checked against the company press release. In case of any event date mismatch of the database date and company press release date, the earliest dates from either of the sources were given priority.

Trade Date Trade date is the trading day of the stock after announcement of the event. The event date and the trade date will be same, if the occurrence of the event is announced during the market hours of the trading session (i.e. between 10 am to 4 pm EST). If the event is announced after the trading hours (i.e. 4 pm EST) the trade date will be next immediate trading day.

Estimating Event Window Once events had been identified, we defined the Event Window for the purpose of the study. However for some clearly defined events, the length of the may not be defined easily. For example, information on a potential merger may have leaked out weeks prior to the formal merger announcement. Hence, the impact of the merger may not be fully-accounted for when only the event date is used. Therefore we have taken this into account and determine a number of days x prior to the event date to start the event window. It is also possible that the reaction of the event cannot be digested on the trade date. Hence it becomes necessary to add Y days to the event date. For the purpose of the study we have taken event window as Day-10 to Day +20.

Evaluating Estimation Window Once the event window was determined, we defined the Estimation Window necessary for the purpose of project. The estimation period is the period where we measured the relationship between the stock and variables. The project chooses an estimation window that does not overlap with the event window to prevent the effect of the event to influence the normal performance of the stock. The project selected the estimation window prior to the event window as the location for estimation period. The estimation window is assumed to be free from the influence of the event. The impact of M&A event can spread over a longer period of time because of the complexity involved in completing an M&A transaction which can run into years. An M&A passes through many stages before it is completed hence one M&A news can affect the relationship between price and other variable every time there is an announcement about that the same M&A event. Considering this fact, the estimation window for the project is taken as (DAY30-210). This means that to derive at the normal relationship between variables, we consider the period of 180 days from 30 days prior to the event date.

3.3 Abnormal Return Abnormal return is defined as the extra return which an investor makes because of the event taking place. To calculate abnormal return, the project first calculated normal return. Using event and estimation window we compute the abnormal return. For firm i and event date t the abnormal return is

(
Where

(1)

= Abnormal Return of Stock i at time t, = Actual Return of Stock i at time t, ( | ) = Expected Normal Return of Stock i at time t. we first need to estimate the alpha () and beta () coefficient for individual

To calculate

stocks based on the market model.

(2)

Where the estimation period is event days -30 through -210. Based on the alpha ( ) and beta (

estimated obtained from equation 2, the expected returns

during the event window period of the acquiring firms are calculated on following model.

(3)

Where ( ) Is the expected stock return during Event Window (Day -15, Day +15)

Is the intercept of stock return and market return during the estimation window (i.e. Day-30210) Is the coefficient of stock return and market return during estimation window (i.e. Day-30210) Is market return during event window (Day -15, Day +15)

To calculate the average abnormal returns for each sub-sample j and time t, the abnormal returns of the individual stocks in sub-sample j, of size J, are averaged.

(4)

To calculate the cumulative abnormal returns (CAR) of the sample, we aggregate the daily sample abnormal return (AR) over a specified number of days in the test period.

(5)

Where t and T is specified to examine the cumulative effects of the event over a certain time period. The Project uses multiple event windows to check the robustness of the result.

3.4 Z - Test Z test was used to check if the abnormal return during the event window were significantly different. The test was done at 90% interval to check the significance of abnormal return during Day -15 to Day +15. Where, is the sample mean of abnormal return is the population mean and For Abnormal Return: Abnormal Volume: is considered zero (0) is considered zero (0) / n

is standard error of the mean i.e.

4.0 Result and analysis

The empirical test has to be still performed on the sample size of 30 companies that has been included to complete the research. The list of 30 companies are mentioned in the annexure 1. The company has been chosen on the basis of availability of their announcement date available on the sebi website and the data of the companies available on the NSE website. The companies mainly include midcap stocks. These are the companies which can be easily acquired as they have low capital base. These would term out to be good research material since they have the high potential to get effected by the change in ownership.

The general study of the data suggest that the prices have been quite volatile near to the date of announcement. Some stocks have advanced while some have declined too.

5.0 GRAPHS Below mentioned are the charts of the general change in the stock prices of the companies. CAMBRIDGE
120 100 80 60 40 20 0 25-Sep-07 14-Nov-07 3-Jan-08 22-Feb-08 12-Apr-08 1-Jun-08 21-Jul-08 9-Sep-08 29-Oct-08 18-Dec-08

SAHPETRO

40 35 30 25 20 15 10 5 0 14-Nov-07 3-Jan-08

22-Feb-08 12-Apr-08

1-Jun-08

21-Jul-08

9-Sep-08 29-Oct-08 18-Dec-08

TAIWAL CHEMICALS
1400 1200 1000 800 600 400 200 0 14-Nov-07 3-Jan-08 22-Feb-08 12-Apr-08 1-Jun-08 21-Jul-08 9-Sep-08 29-Oct-08 18-Dec-08 6-Feb-09

SPICE

35 30 25 20 15 10 5 0 12-Apr-08 1-Jun-08 21-Jul-08 9-Sep-08 29-Oct-08 18-Dec-08 6-Feb-09 28-Mar-09 17-May-09 6-Jul-09

6.0 TABLE SHOWING ABNORMAL RETURN RESULTS

CAMBRIDGE
Expected Stock Return -0.46336 -0.80802 -0.68671 -0.51593 -0.13538 0.057761 -0.3543 -0.47495 -0.10615 -0.08741 -0.57149 -0.54374 -0.69443 -0.40641 -0.83661 -0.46268 -0.30646 -0.64737 -0.34341 -0.80692 -0.38527 -0.38643 -0.25377 -0.03232 -0.22585 -0.41068 -0.21148 -0.02755 -0.15794 -0.27591 -0.46708

Close Date Price srl no 6-Nov-08 71.05 -20 5-Nov-08 70.6 -19 4-Nov-08 70.3 -18 3-Nov-08 68.6 -17 31-Oct-08 68.1 -16 29-Oct-08 66.4 -15 28-Oct-08 66.2 -14 27-Oct-08 65.2 -13 24-Oct-08 66.15 -12 23-Oct-08 68.25 -11 22-Oct-08 68.15 -10 21-Oct-08 68.6 -9 20-Oct-08 68.1 -8 17-Oct-08 68.05 -7 16-Oct-08 68.9 -6 15-Oct-08 68 -5 14-Oct-08 68 -4 13-Oct-08 66.1 -3 10-Oct-08 8-Oct-08 7-Oct-08 6-Oct-08 3-Oct-08 1-Oct-08 30-Sep-08 29-Sep-08 26-Sep-08 25-Sep-08 24-Sep-08 23-Sep-08 22-Sep-08 66.7 68.85 65.55 62.4 59.4 56.55 53.85 48.95 44.5 40.45 42.05 42.05 43.6 -2 -1 0 1 2 3 4 5 6 7 8 9 10

Abnormal Stk return 1.10075036 1.23476477 3.16484205 1.25014323 2.69562086 0.24435357 1.88804665 -0.9611772 -2.9707752 0.2341437 -0.0844863 1.27795221 0.76790421 -0.8272596 2.16014275 0.46267881 3.18089442 -0.2521849 -2.7793211 5.84124943 5.43334309 5.43693726 5.29355424 5.04624452 10.2360612 10.4106756 10.2238394 -3.7774481 0.15794357 -3.2791351 1.62717274

SAHPETRO

Date 20-Nov-08 19-Nov-08 18-Nov-08 17-Nov-08 14-Nov-08 12-Nov-08 11-Nov-08 10-Nov-08 7-Nov-08 6-Nov-08 5-Nov-08 4-Nov-08 3-Nov-08 31-Oct-08 29-Oct-08 28-Oct-08 27-Oct-08 24-Oct-08 23-Oct-08 22-Oct-08 21-Oct-08 20-Oct-08 17-Oct-08 16-Oct-08 15-Oct-08 14-Oct-08 13-Oct-08 10-Oct-08 8-Oct-08 7-Oct-08 6-Oct-08

Close srl no 33.85 -20 33.95 -19 33.75 -18 33.55 -17 33.35 -16 33.35 -15 33.2 -14 33.3 -13 33.15 -12 32.3 -11 32.55 -10 33.6 -9 33.65 -8 32.05 -7 30.5 -6 27.7 -5 25.15 -4 22.85 -3 20.75 -2 18.85 -1 17.1 0 14.25 1 11.85 2 10.3 3 11.35 4 12.1 5 10.7 6 9.25 7 9.6 8 9.9 9 9.6 10

Expected Stock Return Abnormal Stk return 0.021139 -0.31568998 0.810223 -0.21763084 -3.19243 3.78855885 -2.32625 2.92594702 -0.73411 0.73410625 -0.67352 1.12532703 -1.57442 1.27411661 -1.18862 1.64110829 -1.10874 3.74031644 -0.54322 -0.22482991 -0.62443 -2.50056647 -0.51577 0.36718621 -1.12593 6.11812642 -0.94425 6.02621889 -0.88845 10.9967499 -0.81458 10.9537463 -1.58162 11.6472696 -0.77721 10.8976882 -0.63707 10.7166425 -0.49953 10.7334461 -0.80446 20.8044613 -1.05823 21.3113964 -0.81584 15.8643808 -0.73389 -8.51721299 -0.97832 -5.2200317 -0.38042 13.4645302 -0.96753 16.6432031 -0.75555 -2.89028132 -0.83328 -2.19702058 -0.86414 3.98914228 -0.64309 -18.3442544

TAIWALCHEM

Date 29-Sep-08 26-Sep-08 25-Sep-08 24-Sep-08 23-Sep-08 22-Sep-08 19-Sep-08 18-Sep-08 17-Sep-08 16-Sep-08 15-Sep-08 12-Sep-08 11-Sep-08 10-Sep-08 9-Sep-08 8-Sep-08 5-Sep-08 4-Sep-08 2-Sep-08 1-Sep-08 29-Aug-08 28-Aug-08 27-Aug-08 26-Aug-08 25-Aug-08 22-Aug-08 21-Aug-08 20-Aug-08 18-Aug-08 14-Aug-08 13-Aug-08

Close Expected Stock Abnormal Stk price srl no Return return 15.25 -20 0.408177 -2.0210798 15.5 -19 -0.1523 2.801304802 15.1 -18 2.948354 -11.4332022 16.5 -17 -1.53768 4.662676638 16 -16 -0.82061 0.199489175 16.1 -15 -0.38708 1.012083456 16 -14 -1.58847 1.588465714 16 -13 -1.17202 2.118395406 15.85 -12 2.038885 -7.41201918 16.75 -11 -1.36866 8.740449964 15.6 -10 -0.38138 -6.48429074 16.75 -9 1.678695 -0.47023551 16.55 -8 0.781357 -3.141239 16.95 -7 -0.68362 5.637181423 16.15 -6 -1.61194 -1.39106571 16.65 -5 0.943064 1.834713913 16.2 -4 -2.94397 -0.62745851 16.8 -3 -2.41015 1.81843183 16.9 -2 -1.98238 1.394147011 17 -1 0.396113 -0.10112755 16.95 0 -0.0887 4.07643087 16.3 1 -1.71982 -3.2364529 17.15 2 -0.56904 6.433241697 16.2 3 0.163153 6.415793927 15.2 4 0.543858 6.122808278 14.25 5 0.434543 -7.9020756 15.4 6 -1.22236 7.796757034 14.45 7 -2.66764 -5.87666152 15.8 8 0.804667 2.801890224 15.25 9 0.751677 -1.40314236 15.35 10 -0.66343 2.996765952

BRFL

Abnormal Date Close no Normal Stk return 6-May-09 170.5 -20 73.34522 -74.1885 5-May-09 171.95 -19 7.770671 -7.15628 4-May-09 170.9 -18 3.521597 -3.43375 29-Apr-09 170.75 -17 8.393034 -5.90204 28-Apr-09 166.6 -16 26.32826 -21.6471 27-Apr-09 159.15 -15 -24.7238 23.05555 24-Apr-09 161.85 -14 18.04139 -18.0414 23-Apr-09 161.85 -13 3.748512 -2.3705 22-Apr-09 159.65 -12 18.64846 -19.61 21-Apr-09 161.2 -11 6.496478 -6.83651 20-Apr-09 161.75 -10 -16.388 17.04138 17-Apr-09 160.7 -9 -16.2188 16.6563 16-Apr-09 160 -8 40.55097 -41.9073 15-Apr-09 162.2 -7 48.46887 -44.7273 13-Apr-09 156.35 -6 8.494265 -7.97996 9-Apr-09 155.55 -5 7.127498 -8.58458 8-Apr-09 157.85 -4 17.27849 -15.044 6-Apr-09 154.4 -3 9.457931 -9.10044 2-Apr-09 153.85 -2 13.25762 -11.1674 1-Apr-09 150.7 -1 11.94165 -10.426 31-Mar-09 148.45 0 -13.4505 16.32649 30-Mar-09 144.3 1 -9.58318 9.237881 27-Mar-09 144.8 2 6.101438 -7.05903 26-Mar-09 146.2 3 31.48026 -31.651 25-Mar-09 146.45 4 57.44652 -51.973 24-Mar-09 138.85 5 39.14799 -43.1577 23-Mar-09 144.65 6 45.70687 -39.7362 20-Mar-09 136.5 7 5.349386 -3.36956 19-Mar-09 133.85 8 38.2896 -37.9146 18-Mar-09 133.35 9 4.255003 -2.34442 17-Mar-09 130.85 10 22.42484 -26.247

MAYTAS INFRA

Date 6-Oct-09 5-Oct-09 1-Oct-09 30-Sep-09 29-Sep-09 25-Sep-09 24-Sep-09 23-Sep-09 22-Sep-09 18-Sep-09 17-Sep-09 16-Sep-09 15-Sep-09 14-Sep-09 11-Sep-09 10-Sep-09 9-Sep-09 8-Sep-09 7-Sep-09 4-Sep-09 3-Sep-09 2-Sep-09 1-Sep-09 31-Aug-09 28-Aug-09 27-Aug-09 26-Aug-09 25-Aug-09 24-Aug-09 21-Aug-09 20-Aug-09

Expected Abnormal Stk Close srl no Stock Return return 132.7 -20 -0.41906 5.40324 126.4 -19 -0.70691 -1.87498 129.75 -18 0.971838 -3.3053 132.85 -17 -0.83614 1.403887 132.1 -16 0.158151 -2.3063 135 -15 0.003211 5.014292 128.55 -14 -0.31364 -1.9297 131.5 -13 -0.53505 -3.47955 137 -12 -1.09566 3.449038 133.85 -11 0.303063 -1.55721 135.55 -10 0.293014 -2.77503 139 -9 -0.78115 -1.33153 142 -8 0.974442 4.055144 135.2 -7 -0.17471 5.184421 128.75 -6 -0.32835 -2.09681 131.95 -5 0.205314 -3.07613 135.85 -4 0.452288 -3.72748 140.45 -3 0.870287 -3.36942 144.05 -2 -0.24375 5.274742 137.15 -1 -0.64572 5.661036 130.6 0 0.559051 4.467085 124.35 1 0.093138 4.932199 118.4 2 0.576081 4.435005 112.75 3 0.531544 4.498731 107.35 4 -0.23336 5.2725 102.2 5 0.477682 4.558289 97.3 6 0.707426 3.245566 93.6 7 0.625037 4.425468 89.1 8 -0.65065 5.659491 84.85 9 -0.68133 1.453297 84.2 10 0.106934 -0.7559

7.0 ANALYSIS

After seeing the performance of stock prices movement at the end of the chart which suggest that the period in which in the mergers took place we can conclude that mergers had a positive impact on the stock prices of the companies. But just by observation, one cannot infer the results so , empirical study has been conducted. The event study process 1st phase has been done in which all the companies intercept and slope has been found out. And on the basis of that companies abnormal return has been found out. As per our study we can see that Cambridge industries have resulted in substantial price movement and its effect is shown through high abnormal return of 5.43%Similarly results for other companies have also been found out. Few companies result have been mentioned below suggesting high abnormal returns in wake of m&a event . Sahpetro resulted into very sharp rise in stock price and its abnormal return has been registered to be around 20.80%. Taiwal Chemicals has resulted into abnormal return of 4.07%. BRFL has resulted into abnormal return of 16.32%. Maytas Infra has resulted into abnormal return of 4.467%.

8.0 CONCLUSION-

By seeing the first phase of the study we can conclude that in most of the instances , The M&A event brings substantial hike in the prices of the target company. The graphs and the table showing abnormal returns substantiate our point. But to make an inference on the basis of only one phase of event study would be too early. There are some case where the stock prices have declined too. So the conclusion is still in the half way the result of the full analysis will be presented in the next report.

9.0 ANNEXURE

List OF COMPANIES
Cambridge melstar sahpetro shriram tainwalchen alfalevel brfl gtoffshore spicemoblie goldentobaco maytas uttam boc utv aztecsoft basf broadcast genesys hindoil investmart thomascook zandu SIEMENS HCL Technologies csoft softpro

10.0 References
1. http://www.eventvestor.com/index.php 2. PengCheng Zhu & Shavin Malhotra, Announcement Effect & Price Pressure: An Empirical Study of Cross-Border Acquisition by Indian Firms http://www.eurojournals.com/IRJFE%20ISSUE13%20peng.pdf 3. Dirk Hackbarth & Erwan Morellec Stock Returns in Mergers and Acquisitions retrieved from http://www.vgsf.ac.at/activities/morellec.pdf 4. Sara B. Moeller, Frederik P. Schlingemann and Ren M. Stulzc Firm size and the gains from acquisitions retrieved from http://jfe.rochester.edu/03289.pdf 5. Anand M. Vijh and Ke Yang The Acquisition Performance of S&P 500 Firms retrieved from http://www.fma.org/Orlando/Papers/AcquisitionPerformanceofSnP500Firms_FMA.pdf retrieved from