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Provided by the author(s) and University College Dublin Library in accordance with publisher policies. Please cite the published version when available. Title Creating or Destroying Value through Mergers and Acquisitions: A Marketing Perspective Authors(s) Rahman, Mahabubur Publication date 2015-06 Publisher University College Dublin. School of Business Link to online version http://dissertations.umi.com/ucd:10054 Item record/more information http://hdl.handle.net/10197/7897 Notes A hard copy of this thesis is available in UCD Library, thesis 13001 Downloaded 2021-09-23T11:22:56Z The UCD community has made this article openly available. Please share how this access benefits you. Your story matters! (@ucd_oa) © Some rights reserved. For more information, please see the item record link above. Creating or Destroying Value through Mergers and Acquisitions: A Marketing Perspective Mahabubur Rahman BSS, MSS, MBM, MSc Student number: 09274995 The thesis is submitted to University College Dublin in fulfilment of the requirements for the degree of Doctor of Philosophy Smurfit Business School, Department of Marketing Supervisor: Professor Mary Lambkin June 2015 Abstract The world has witnessed a major wave of mergers and acquisitions (M&A) through the 1990s and up to 2007.A majority of these M&A deals are horizontal, involving the purchase of another company in the same industry. Such acquisitions imply a motivation to increase revenues by expanding market scope and/or market share, and/or by adding new products to the portfolio. They also suggest a pursuit of cost efficiencies in various aspects of operations. Whether these benefits are actually realised is an empirical question that has attractedresearch in several disciplines, including economics, finance and accounting. By now, there is a large body of research evidence to indicate that M&As have a poor record of success, with the main beneficiaries being the 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 a marketing perspective, a topic that has not been explored thus far. This study followed a multi-stage approach; in the first stage an exploratory case study was conducted to identify 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 to test these hypotheses. The exploratory case study was based on Tata Motors, an Indian company which acquired Jaguar and Land Rover from Ford Motors. This case investigation based on both primary data collected through in-depth interview and a wide spectrum of secondary sources, showed that the acquisition had a significantly positive impact on Tata Motors‘ marketing performance, with sales volume and revenue growing significantly in the post-acquisition years. However, these sales increases came at a high cost; the company invested a huge amount in new product development and marketing communications, with the result that profit performance was negatively affected in the three years post-merger. Profit margins increased, however, in the seventh year 2014, suggesting that the reduction post-merger may have been a temporary effect. The quantitative study was based on a sample of forty-five M&A deals involving ninety US companies.This longitudinal study examined performance over six years, three before the merger, and three yearsafter the merger. Four analytical toolswere used:a paired sample t-test, an analysis of effect size, an analysis of covariance (ANCOVA), and regression analysis, to examine post-merger performance. The results of both raw data and log-transformeddata analyses showed that sales revenue increased significantlyin 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 asignificant reduction in profit as measured by return on sales (ROS). Combining the findings from both the qualitative and quantitative studies, we concluded that post-merger marketing performance improved, i.e. sales revenue and cost of marketing and selling, but that this did not follow through into improved return on sales. These findings need to be validated over a longer time frame, and with larger samples drawn from a range of countries and industries. i Statement of Original Authorship ―I hereby certify that the submitted work is my own work, was completed while registered as a candidate for the degree stated on the Title Page, and I have not obtained a degree elsewhere on the basis of the research presented in this submitted work‖. ii Acknowledgement Writing a PhD dissertation isa complex and multifaceted intellectual journey. I surely would not have been able to finish this journey without the help, cooperation and encouragement of a number of people and I would like totake this opportunity to thank these people and to acknowledge their contributionto this piece of work. First of all, I would like to thank my PhD supervisor, Professor Mary Lambkin, who has been my mentor throughout this journey. I would not have been able to finish my PhD without her constant academic and professional support. She has been a constant source of inspiration right from the first day of my PhD journey till the finish. I learned not only academic and professional subjects from her, but also how to develop qualities to be a responsible human being. I consider myself to be one of the most fortunate PhD students to have had Professor Lambkin as my supervisor. I am also looking forward to keeping on learning from her in days to come, not just how to be a good academic but also a good human being. I will remain indebted for her kindness and cooperation. Furthermore, I would also like to thank all the members of my PhD transfer panel for their invaluable suggestions. I would like to thank especially Professor Susi Geiger, Professor Damien McLoughlin and Professor Tony Meenaghan for their feedback on my PhD research proposal. I would also like to express my gratitude to Mrs. Nuala Doyle, the administrator of the Marketing department, for her kind, efficient and professional support for all sorts of administrative tasks. It would be very unkind of me not to express my gratitude to my fellow PhD students for their wonderful friendship and camaraderie during this arduous PhD journey. I would especially like to thank Loredana Dreptate, Tan Quan and Sen Xu. On a personal level, I am enormously grateful to my wife Lita, my sister Moni and my brother-in-law Hasan, as well as my mother for their constant encouragement and support. My beloved father who passed away some years ago has always been my source of inspiration. He would have been very proud of my achievement. iii Table of Contents Chapter One .................................................................................................... 1 INTRODUCTION: STATEMENT OF THE RESEARCH PROBLEM ............. 1 1.1 Introduction ................................................................................................... 1 1.2 Research Objectives ...................................................................................... 3 1.3 Research Question and Hypotheses .............................................................. 4 1.4 Research Approach ....................................................................................... 6 1.5 Organization of the Dissertation ................................................................... 9 Chapter Two ................................................................................................ 12 MARKETING AND MERGERS & ACQUISITIONS: A REVIEW ................. 12 2.1 Introduction ................................................................................................. 12 2.2 Motivations for Mergers and Acquisitions ................................................. 15 2.3 Prices Paid for Acquisitions and Brand Value ............................................ 16 2.4 Valuing Brand Equity in M&A ................................................................... 18 2.5 Conditions affecting Brand Value ............................................................... 21 2.6 Implementation Issues ................................................................................. 22 2.7 Measuring the Transfer of Marketing Assets and Skills ............................. 27 2.8 Summary and Conclusion ........................................................................... 32 Chapter Three ............................................................................................. 35 POST-MERGER PERFORMANCE AND POST-MERGER MARKETING PERFORMANCE ........................................................................... 35 3.1 Post-merger performance ............................................................................ 35 3.2 Post-merger Marketing Performance .......................................................... 36 Chapter Four................................................................................................. 45 POST-MERGER PERFORMANCE MEASUREMENT: A REVIEW OF METHODOLOGIES ......................................................................................... 45 4.1 Measurement of Firm Performance ............................................................ 45 4.2 Measurement of Firm Financial Performance ............................................. 46 4.3 Measurement of post-merger Firm Financial