Shareholder's Value Creation in M&A. A Case of Indian Construction Industry

The Indian Government has identified infrastructure as one of the key sectors for economic development. 45% investment of infrastructure goes towards construction, and it is the major employer also. The construction sector contributes around 10% to the Indian gross domestic product (GDP). The industry is growing at a high rate with 40% funding coming from private sector. India is poised to be the third largest construction market by 2025. The industry also has witnessed several business combinations small or big in the form of mergers and acquisitions (M&As) and is about to increase further. This study provides an overview of the most recent M&A in construction industry and expectations for the future. The data of the construction industry M&A have been collected from Centre for Monitoring Indian Economy (CMIE) database. The event study methodology has been used to find the abnormal return (AR) to the bidder shareholders and their expectations from the deal. It has been found that the M&A activity has increased the value to the shareholders of the bidder firm to an extent of 2.2% cumulative abnormal return (CAR) over a period of 180 days around the merger. This study helps to understand the rational of M&A in construction industry and guides the practice managers about M&A decisions. When M&A is mostly understood as value destroying for bidders, construction industry proves to be an exception.