Creating value through related and unrelated merger and acquisition: Empirical evidence

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Abstract

The main objective of this paper is to examine the impact of related/unrelated merger and acquisition (M&A) on value creation and research and development (R&D) of Indian non-financial sector companies. This study focuses on whether related M&A outperforms unrelated M&A in the context of value creation and R&D. The sample of the study includes 64 companies to evaluate the significance of relatedness and unrelatedness between target and acquiring companies of the Indian non-financial sector using panel data from the period from 2015 to 2020. The study employs a logistic regression model, which is a predictive model employed wherein the response variable is categorical. The idea of logistic regression is to establish a relationship between variables and the probability of a given outcome. The results of our outcome reveal that partner familiarity affects the post-acquisition value creation and R&D. Further, the findings of the study acclaim that related M&A outperform unrelated M&A. The study indicates that related M&A create positive value but influence negatively to R&D. The findings of the study have several implications for the managers and policymakers who need to understand the dynamics of related/unrelated mergers to take a valid judgment before making merger and acquisition decisions.

Keywords: Related/Unrelated Merger and Acquisition, Synergy, Research and Development, Value Creation, Logistic Panel Model

Authors’ individual contribution: Conceptualization — I.G. and T.V.R.; Methodology — I.G. and N.T.; Validation — N.T. and T.V.R.; Formal Analysis — I.G.; Investigation — I.G.; Writing — Original Draft — I.G.; Writing — Review & Editing — T.V.R. and N.T.; Visualization — I.G.; Supervision — T.V.R. and N.T.; Project Administration — T.V.R. and N.T.; Funding Acquisition — I.G. and N.T.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G34

Received: 21.03.2021
Accepted: 05.07.2021
Published online: 07.07.2021

How to cite this paper: Gupta, I., Raman, T. V., & Tripathy, N. (2021). Creating value through related and unrelated merger and acquisition: Empirical evidence. Corporate Ownership & Control, 18(4), 67–76. https://doi.org/10.22495/cocv18i4art5