Prediction of Inbound & Domestic Takeover Candidates from Indian Market - Pre and Post Global Crisis

Sheeba Kapil, Gaurav Barick

Abstract


M&As are the key drivers for economic growth in developing countries, specifically with respect to India. In the view of proliferating inbound acquisitions and thereby enhancing the FDI of the country, many governmental policies are also implemented. Though a substantial literature is available towards various aspects of M&As in developed countries, only a very few works deal with respect to developing countries and further only a very minimal research is done with special attention to India. Again, there has been very limited amount of work in the context of predicting inbound target determinants, separately from that of the domestic target determinants. Further, models built and inferences drawn for developed countries vary with that of India, thereby adding more emphasis on studying M&A with specific attention to India. Moreover, the global financial crisis has had a great impact on all the nations with India being no exception. The global crisis has taught many financial lessons to firms of all sectors. Hence, there is a necessity to analyse if there is any change in the determinants of targets pre- and post-crisis.

This work focuses on predicting the inbound takeover targets in India through logistic regression models on 527 Indian target firms over the period of 2005-2015. The time frame chosen for the groundwork also comprises Global Financial Crisis, which is one of the most significant financial events in the history of world economics. Thus, this work also provides an analysis of impact of this event considering an emerging market like India.

The outcomes reveal that firms dealing with feasible products, excellent networking and distribution, huge assets with low cash in hand have the high probability of being predicted as inbound targets. On the contrary, firms with high public shareholdings and that involve in the production of superior products when compared to that of their peers yet find it difficult to make profit are preferred as targets by the domestic acquirers. It has been interesting to note that the financial crisis did not have any significant impact with respect to the determinants of the inbound and domestic targets in Indian context. The outcomes provide significant insights to various stakeholders such as acquirers, the targets themselves, investment bankers and the policy makers involved in M&A.

Keywords: Logistic Regression, Inbound Acquisition, Domestic Acquisition, Target firms, M&A in India, Non-Target firms.


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References


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