By Taneesha Kulshrestha
New Delhi: The period between 2005 and 2008 saw hectic activity in the mergers and acquisitions (M&As) space with several high profile deals being concluded. But several of these deals are now at less than half their original value. An analysis of deals above $100 million, conducted by listed companies in the period, shows that while the M&As were worth $45 billion at the time of their conclusion, they now trade at $21 billion according to their current mark to market value.
Click here to watch video
The erosion in value could be seen most in sectors like auto, media, hospitality and aviation. Auto M&As saw a value erosion of 81.23% while those in media saw an erosion of 78.66%. Hospitality M&As now trade with a value erosion of 75.72%. Telecom has been the only exception to the trend with Vodafone’s investment into Bharti yielding healthy returns. Several high profile deals like Tata Motors-Jaguar&Land Rover, Suzlon-REPower have all seen significant wealth erosion.
Jagannadham points out that this has happened as several of these deals were done at the peak of their respective industry cycles. On the whole, there were 54 listed M&As between 2005-08. Of these, 85% are making a loss, causing massive wealth destruction for the small Indian investor.