Beta Adjusted Real Returns of Indian Acquirers: A Long-Term Perspective

We analyze long term performance of M&A deals in India in terms of growth of shareholder wealth of acquirers in real terms adjusted by beta value of the shares of acquirers. We use beta value to measure the returns per unit of systematic risk. Beta being a measure of systematic risk, will also consider the effects of entire economy on performance. This would enable us to know how M&A deals perform when their performance is measured in terms of growth in real wealth adjusted for systematic risk. Our research focuses on the returns from the perspective of investors who hold investments for a longer period of time i.e. for one year to three years. We develop a model (BARBHR) Beta Adjusted Real Buy and Hold Return based on Buy and Hold Return model. The study is performed for different sectors as well as all M&A deals together. We find that M&A deals overall and the IT Sector reduced Shareholder Wealth during all observation periods which were found to be statistically significant while the results for other sectors were varied. No sector reported significant positive performance. Wherever significance was observed, the returns were negative.