Critical rating on M & A ; A in IT companies: A instance survey on Infosys Technologies Ltd.
The purpose of the research is to measure the activity of Amalgamations and Acquisitions every bit good as the consolidation that is taking topographic point in the IT sector of India with a particular accent on Multi National Enterprises. The research will concentrate on infering decisions on the corporate and concern degree schemes followed within Infosys Technologies Ltd and associate the instance to the Indian IT industry as a whole.
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To accomplish the above mentioned purpose, the undermentioned aims are formulated:
- To understand the current province and potency of the Indian IT industry by analysing its strengths and failings.
- To analyze the tendencies in outward foreign direct investing ( OFDI ) that is related to IT sector in India.
- To measure the public presentation of Indian IT companies ( MNC ‘s ) which are involved in international M & A ; A ‘s in the recent yesteryear.
- To throw visible radiation on the corporate and concern degree schemes implemented at Infosys Technologies Ltd and therefore associate the instance to a wider scenario.
The proposed research would be of involvement to the emerging corporate companies in the Indian IT industry as it would supply valuable penetrations into the tendencies and the procedure of Amalgamations and Acquisitions go oning at the international degree.
Infosys is an Indian based IT company which specializes in IT, BPO and Engineering services which cuts across many concern verticals. The company has been strategically switching its operations into engineering consulting and is straight viing with giants like Accenture India ( a subordinate of Accenture plc ) and IBM which have long been established in this sphere. With the entry of foreign companies into India, the market infinite for confer withing and IT services companies is going crowded and the companies are involved in a tough battle for market portion. On the other manus the IT sector is turning quickly with one-year grosss touching $ 70 billion. IT concern in India displayed a resiliency and doggedness to the planetary fiscal crisis and is non every bit much affected like in the US and Europe. Infosys is traveling planetary and is geting companies abroad and is besides acute towards strategic confederations and horizontal amalgamations ( Infosys, 2009 ) . With this scheme of spread outing globally it has late acquired, McCamish Systems LLC in USA and Mainstream Software Pvt Limited in Australia. It is besides rumored to purchase out few other companies in assorted locations besides in the list is Axon Group PLC, UK.
This portion of the research proposal gives a brief description on the research being carried out on the topic of M & A ; A in the Indian IT industry every bit good as the outward foreign direct investing by Multinational Companies in the IT sector.
Indian IT Industry and its footmark abroad
IT industry has been a growing engine for Indian economic system since the last decennary. In the last five old ages, IT exports have more than tripled with enhanced service offerings, diversified geographic base and concentrate on new verticals ( Ramachandran, 2006 ) . The affinity towards cross-border amalgamations and acquisitions by Indian IT houses is chiefly due to the deficiency of chances in the domestic market. The inactiveness in the private sector of India towards cybernation has led the package companies to supply services to international clients. The tendency of foreign direct investing both inward and outward began manner back in 1991 after the liberalisation of Indian economic system which provided a existent encouragement to the IT industry. Post liberalisation epoch proved to be really fruitful for the Indian economic system and for the IT sector in peculiar. Five old ages from so the package exports quintupled due to planetary deficit of package professionals. There was a dramatic addition of export gross from $ 128 million in 1990-91 to $ 700 million in 1995-96.
Infosys Technologies Ltd. was the first Indian IT company to be listed in the NASDAQ stock exchange. This measure by Infosys paved a aureate way for other companies which entered into the foreign markets subsequently on. The entire size in footings of grosss of Indian IT industry is estimated at $ 60bn as of 2009. A sum of 2.23 million people are straight employed whereas an extra 226,000 work force is employed indirectly in related services that depend on the IT sector. IT industry in India constituted for 5.8 % of the GDP in 2009 as against 1.2 % in 1998 ( NASSCOM, 2009 ) . The current temper of the IT sector is “ cautious optimism ” .
Amalgamations and Acquisitions by Indian Firms
Research in the section of OFDI ( Outward Foreign Direct Investment ) suggests that the Amalgamations and Acquisitions go oning in the place state ( within India ) are harvesting more consequences than the one taking topographic point outside the state. The ground for this phenomenon might be the advantage of consolidation efficiencies and investor assurance ( Forbes, 2008 ) . The above statement is besides backed up by the fact that the Indian companies which are doing cross boundary line acquisitions in developed states like the Unites States and United Kingdom are underachieving in overall market returns. In malice of this hapless public presentation, Indian houses have continued to venture abroad with $ 23bn worth of acquisitions in the last decennary. The tendency of cross-border acquisitions is interestingly more dominant in the smaller houses which are non listed Forbes. Harmonizing to Anushri Bhandari of Watsonwyatt.com, acquirers in the high-tech sector are at a higher hazard of failure when compared to the other sectors. In the IT industry which is a portion of the high-tech sector, extra returns after the acquisition is reduced by 33 % on an norm at the terminal of one twelvemonth after the trade. Due to heavy atomization in the high-tech sector, most acquirers are non able to accomplish extra returns even after few old ages of the trade because of seeking expertness in an unrelated section.
Why Indian Companies venture abroad? This inquiry is answered in the literature with adequate empirical informations. The literature says, cross-border acquisitions are due to several grounds out of which few are:
Economic Factors: The growing in international M & A ; A by Indian IT houses can be attributed to the overall strength and prosperity of the Indian economic system. Increase in the value of Rupee backed up by the public presentation of stock markets every bit good as the high involvement rates abroad have boosted M & A ; A activity for old ages.
Competitiveness: Many Indian houses are embarking abroad to research new markets and get expertness in research and development. Other striking for cross-border acquisitions is to construct a planetary trade name image ( Banerjee, 2005 ) . This factor of fight is act uponing more of the companies in IT sector than any other sector as the companies enter new markets in hunt of ‘domain expertness ‘ ( Sengupta, 2006 ) .
The methodological analysis followed for carry oning research Acts of the Apostless as a foundation to the full procedure of research and will find the agencies for making at the decisions. The methodological analysis as understood by the research worker describes the manner in which the research is carried out and trades with the techniques employed to roll up informations from primary and secondary beginnings. It besides deals with how the information has been processed and furnished to obtain valuable decisions and findings at the terminal of the research.
Harmonizing to Dash ( 1993 ) , academic research is about researching and understanding societal phenomena which are educational in nature, in this procedure academic research trades with inquiries that can be investigated in a satisfactory mode, and the methods which enable such satisfactory probe.
The research paradigm adopted in the thesis will be a blend of both positivism and anti-positivism ( phenomenology ) . In position of the fact that the proposed research needs quantitative methods of analysis which follow the rules of empiricist philosophy like that of studies, Positivist paradigm is followed. Anti-positivist or Phenomenological paradigm is used because a Case survey is being carried out which involves observation and firsthand sing than merely trusting on secondary informations.
The research Design and Approach is based on the Saunders Onion Model which suggests the bed wise attack ( Saunders, 2000 ) . This theoretical account advocates the top down attack of research get downing from the outer bed of onion i.e. , holding a clear research doctrine, which is holding positivism, interpretative, and pragmatism doctrine and so traveling inside the onion to hold a sensible research attack which may be deductive or inductive, like wise traveling to the interior nucleus of the onion for the aggregation of informations through sampling, interviews, secondary informations, questionnaires etc.
Well conducted chance samples provide the research worker with the ability to garner information from a comparatively little figure of members of a big population and accurately generalise the consequences to the full population. In add-on, chance samples enable the research worker to cipher statistics that indicate the preciseness of the informations ( Fairfax, 2003 ) .
The sampling processs for this survey would be a mixture of both Probabilistic and Non-Probabilistic sampling methods. The methods would be, Judgmental Sampling and Convenience sampling in the Non-Probabilistic methods because the survey demands understanding the tendencies in international coup d’etats by Indian IT industry with an accent on the schemes followed by assorted corporate houses. Convenience trying would be the most preponderantly used trying process in this research as the research worker is traveling to take the individuals to interview based on his convenience. In the Probabilistic methods of sampling, the research worker would use, simple random sampling and bunch sampling in position of their relevancy and propensity to the research.
Data aggregation Methods
As the survey is dependent largely on secondary beginnings of informations like research documents, the resources needed are uninterrupted entree to e-sources which is available from the University digital library. At times when the Primary research is carried out as a portion of the instance survey, the research worker can do agreements to set up the communicating channel between the resource individuals via telephone, electronic mail and direct meetings whenever necessary. Apart from this, there are no particular resources required for the survey.
The proposed survey will take into history the secondary informations available on the topic and so shall trust on the Primary informations by analyzing an organisation keenly as a portion of the instance survey. The research methodological analysis comprises of questionnaires and in-depth interviews which provide necessary qualitative informations for transporting out the research. The type of methodological analysis being employed is Grounded theory and a bottom-up attack would be followed in accomplishing the research objectives. The information obtained from questionnaires and interviews is eventually analyzed and appropriate decisions are made. The findings are presented in the signifier of a study and are delivered as recommendations.
To analyse the information collected through primary and secondary beginnings, the research worker employs assorted mathematical and logical techniques available for simplifying and synthesising the information. The methods of informations analysis in this research include qualitative analysis every bit good as quantitative analysis. In qualitative analysis, Grounded Theory is used dominantly over other techniques because of its robust pertinence and dependability. Analytic Induction and Logical Analysis which involves pictural representation of informations like flow charts, matrices, graphs and charts will besides be an appropriate informations analysis technique for transporting out the proposed research. Microsoft Excel would be strictly used to construct the graphs, saloon charts and pie charts consequently.
Validity and Reliability
The research conducted utilizing primary beginnings of informations is prone to mistakes particularly trying mistakes and dependability issues. At each phase of the research while roll uping informations every bit good as analysing it, the research worker demand to take due attention of these crawling mistakes and should get at unfailing decisions.
To avoid dependability issues which arise due to participant prejudice which is the most common signifier of trying mistake, simple random trying technique will be used. In this technique, the research worker would foremost fix an thorough list of all members from the involvement group and from this list the sample is drawn giving equal opportunity for each member of the list to be drawn for carry oning interview.
Ethical Considerations and Access Negotiation
The research worker would wish to use strictly ethical agencies of informations aggregation with due permissions and front door entree to the informations required from the organisation being examined. As the principle of the research justifies the manner how the research is utile for the organisation, the research worker can negociate just agencies of entree to the organisation to make instance survey.
- Read Literature
- Finalise Aims
- Draft Literature Review
- Read Methodology Literature
- Devise Research Approach
- Draft Research Strategy and Method
- Develop Questionnaire
- Pilot Test and Revise Questionnaire
- Administer Questionnaire
- Enter Data into Computer
- Analyse Data
- Update literature read
- Complete staying chapters
- Submit to coach and await feedback
- Print, bind
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- Banerjee, G, ( 2004 ) , ‘Mergers and Acquisitions: Year of trades ‘ , Business World.
- Dash, N.K. ( 1993 ) . Research Paradigms in Education: Towards a Resolution. Journal of Indian Education 19 ( 2 ) , pp1-6.
- Fairfax County Department ( 2003 ) , Overview of Sampling Procedures. Alexandria: American Statistical Association. [ Online ] Available at: hypertext transfer protocol: //www.fairfaxcounty.gov/demogrph/pdf/samplingprocedures.pdf [ Accessed on 10th March, 2010 ]
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- “ Technology: IT Services ” , Goldman Sachs Global Investment Research, September 2004
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