Creating or Destroying Value through Mergers and Acquisitions: A Marketing Perspective

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Title: Creating or Destroying Value through Mergers and Acquisitions: A Marketing Perspective
Authors: Rahman, Mahabubur
metadata.dc.contributor.advisor: Lambkin, Mary
Permanent link: http://hdl.handle.net/10197/7897
Date: Jun-2015
Abstract: The world has witnessed a major wave of mergers and acquisitions (M&A) through the1990s and up to 2007.A majority of these M&A deals are horizontal, involving thepurchase of another company in the same industry. Such acquisitions imply amotivation to increase revenues by expanding market scope and/or market share, and/orby adding new products to the portfolio. They also suggest a pursuit of cost efficienciesin various aspects of operations. Whether these benefits are actually realised is anempirical question that has attracted research in several disciplines, includingeconomics, finance and accounting. By now, there is a large body of research evidenceto indicate that M&As have a poor record of success, with the main beneficiaries beingthe sellers who reap a one-off gain from the premium paid to acquire their firm.The objective of this dissertation was to examine post-merger performance from amarketing perspective, a topic that has not been explored thus far. This study followeda multi-stage approach; in the first stage an exploratory case study was conducted toidentify the parameters of the research problem and to develop a set of hypotheses.Following this, a quantitative study of a sample of M&A transactions was carried out totest these hypotheses.The exploratory case study was based on Tata Motors, an Indian company whichacquired Jaguar and Land Rover from Ford Motors. This case investigation based onboth primary data collected through in-depth interview and a wide spectrum ofsecondary sources, showed that the acquisition had a significantly positive impact onTata Motors‘ marketing performance, with sales volume and revenue growingsignificantly in the post-acquisition years. However, these sales increases came at ahigh cost; the company invested a huge amount in new product development andmarketing communications, with the result that profit performance was negativelyaffected in the three years post-merger. Profit margins increased, however, in theseventh year 2014, suggesting that the reduction post-merger may have been atemporary effect.The quantitative study was based on a sample of forty-five M&A deals involvingninety US companies.This longitudinal study examined performance over six years,three before the merger, and three years after the merger. Four analytical tools wereused:a paired sample t-test, an analysis of effect size, an analysis of covariance(ANCOVA), and regression analysis, to examine post-merger performance. The resultsof both raw data and log-transformed data analyses showed that sales revenue increased significantly in the post-merger years compared to the pre-merger years. Moreover, the combined companies reduced their marketing and selling costs in proportion to sales revenue. However, there was a significant reduction in profit as measured by return onsales (ROS).Combining the findings from both the qualitative and quantitative studies, weconcluded that post-merger marketing performance improved, i.e. sales revenue andcost of marketing and selling, but that this did not follow through into improved returnon sales. These findings need to be validated over a longer time frame, and with largersamples drawn from a range of countries and industries.
Type of material: Doctoral Thesis
Publisher: University College Dublin. School of Business
Advisor: Ph.D.
Copyright (published version): 2015 the author
Keywords: Marketing effectiveness;Marketing efficiency;Marketing performance;Mergers and acquisitions;Post-merger performance
Language: en
Status of Item: Peer reviewed
Appears in Collections:Business Theses

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