Topics: Mergers and acquisitions, Merger integration Pages: 22 (2047 words) Published: January 28, 2014
IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 11, Issue 1 (May. - Jun. 2013), PP 41-47 www.iosrjournals.org

An Analysis of the Impact of Merger and Acquisition of Corus by Tata Steel
Manoj Kumara N V 1, Dr. Satyanarayana2

(Doctoral Student, Department of Post Graduate Studies in Management Sciences,Maharaja Research foundation. University of Mysore, India)
(HOD and Professor, Department of Post Graduate Studies in Management Sciences,Maharaja Institute of Technology. Mysore, India)

Abstract: Merger and Acquisition have became exclusive trend in steel industry globally since the beginning of the 21st century. Corporate integration in the corporate world is accomplishing significance and concentration especially with an exciting undertaking of intense globalization. This is the clear evidence from the importance and increasing growth of deal values and resulted with more corporate integration in recent times. These studies examine the key motive drivers and evaluate the impact of mergers and acquisition in steel industry on event study approach. This event study focused on Tata steel – Corus Acquisition during the year 2007. The study used a published financial statement which consists of secondary data. The financial statements are analysed and tested by using correlation co-efficient and t- test. The outcome of the analysis disclosed that there is a significant difference between pre – post merger and acquisition in capital base and level of returns. There is a significant difference between pre – post merger and acquisition EPS. The finding of this study evolves those synergies, increased capitalization with the proof of changes in returns, profitability based on the research findings. It can be summarized that the corporate integration has increase the organizational performance also contributed to the growth of the steel industry. Keywords – Mergers and Acquisitions, Profitability, EPS, Steel Industry, Key drivers I.


Tata being the winner. As driven by slow growth and substantial profits in the steel industry. Corus asset sale may lift the Tata steel earnings. Tata steel had acquired British largest steel maker Corus for 608 pence per share. It is one of the striking acquisition in 2006, to propose Tata steel from the 56 th to the 6th – largest steel maker in the world. A long term gap between their delivered performance of the firm and the strategic plan projected gap was in terms of size, sales and Income. Acquisition could fill the gap (J Fred Weston and Samuel C. Weaver 2002). However, companies can seek for genuine synergies through financial engineering.

Figure: 1 outbound acquisition since2005-dec2006 (USD Million)

The merger of Tata steel and Corus will result to a saving of $400 million to the company after 3 years of corporate integration.

Long term strategy
Strong base in India
De integrated manufacturing
Technology advantage
Economies of scale

41 | Page

An Analysis Of The Impact Of Merger And Acquisition Of Corus By Tata Steel  To enter European mature market
 Cost of acquisition is less than setting up a new industry  Acquiring the holding of Corus through patents and R & D facilities The main reasons for Corus to be sold
 Increase in cost of production
 Corus revenue was $18.06 billion, profit was only just $626 million but incase of Tata , the total revenue is $4.84 billion and profit was $824 million
 Target with low cost high quality raw material from India.  A chance to bailout of debt and financial distress(chapter 11) Figure: 2

Source: Thomson DataStream
To a large extent, corporate integration is based on a belief that earnings accrued through reduction cost, increase market share, reduction in earning volatility, and sale of economies. However, the main features of the compassionate of reforms inductive mergers and acquisitions of Tata and Corus...

References: Acharya,Ram,C, the impacts of merger and acquisition on firms profitability, a case study of Canadian firms. Journal of Finance ,,
volume 4, 2000, 1605-1621.
Hitt.M, Harrison.J and Best.A, attributes of successful and unsuccessful acquisition of US firms, British Journal of Management,9(2,
1998, 91-114).
Ross, Westerfield and Jaffee, Corporate finance (6th edition, Boston: Mcgraw-Hill/Ervin, 2002).
Harward Business Reviews , mergers and acquisitions(Boston, HB SchoolPress,MA02163)
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