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Crompton Greaves' Mergers and Acquisitions: Evidence from Indian Manufacturing Company

CASE STUDY, FINANCIAL MANAGEMENT
ET Cases, 30 pages

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Crompton Greaves’ Mergers and Acquisitions: Evidence from Indian Manufacturing Company

 

Incorporated in the year 1937, Crompton Greaves is engaged in designing, manufacturing and marketing high technology, electrical products and services related to power generation, transmission, distribution and execution of turnkey projects. Crompton Greaves focus on three business groups, namely, Power Systems, Industrial Systems and Consumer Products. The company manufactures a wide range of products such as power & industrial transformers, HT circuit breakers, LT & HT motors, DC motors, traction motors, alternators/generators, railway signaling equipment, lighting products, fans, pumps and public switching, transmission and access products. In addition, the company also undertakes turnkey projects from concept to commissioning. With manufacturing plants across Gujarat, Maharashtra, Goa,  Madhya Pradesh and Karnataka, Crompton Greaves and a strong presence in the domestic market it has also spread its business in the Southeast Asian and Latin American markets. It has joint ventures and technological tie-ups with W. Lucy & Co. of the UK and the Danish company Brook Hansen. It comes under the ownership of Avantha Group whose focus is on strategic acquisitions and financial structuring. Currently, Mr. Gautam Thapar is the Chairman of the company.1

Crompton Greaves’ Mergers & Acquisitions (M&As)

Crompton Greaves made several M&As since 1990 till date. Crompton Greaves carried out seven merger deals and eleven acquisition deals. It adopted an  inorganic growth strategy for survival and success. Exhibit I shows the various M&As done by Crompton Greaves....................

 



1 Crompton Greaves, Anon., http://www.msepower.com/frontend/ProductList.aspx?cnl2=HPy+Z1dmHJY=&lang=en_us&output=json, 2012 (accessed date: November 16th 2012)

Teaching Note Preview

Crompton Greaves’ Mergers and Acquisitions: Evidence from Indian Manufacturing Company

 

Synopsis

This case study is based on survey results through a questionnaire, which is prepared, based on review of literature to elicit responses regarding different aspects of M&A in Crompton Greaves. The respondent in the survey is the General Manager – Mergers & Acquisitions division of Crompton Greaves Ltd., Mumbai. The financial performance of Crompton Greaves is evaluated specifically after 2000 since the company has gone for more number of M&A deals. Therefore, Crompton Greaves which has made several M&A deals is considered as a case. The company has made ten acquisition deals since 2005. Today these target companies are contributing more than 40 percent of consolidated revenues of the company. The case study analyzes both financial and non-financial factors that could affect M&A performance.

Prerequisite Conceptual Understanding

Students should have prior knowledge on the concept of Merger and Acquisition.

Expected Learning Outcomes

  • • Understand various strategic motives behind the M&A deals by Crompton Greaves
  • • Evaluate and ascertain the impact of M&A on Crompton Greaves’ financial performance
  • • Explore the factors influencing post M&A performance of Crompton Greaves
  • • Understand the issues and the challenges faced by Crompton Greaves, while carrying out M&A deals

 

Case Positioning and Setting

This case study can be used in MBA Program/Executive MBA/ BBA – Finance Management course – Merger and Acquisition

Assignment Questions

After studying this case study, the students can be able to understand the following questions:

  • I. What are the motives of companies behind going for M&A deals?
  • II. What are the significant factors that influence the M&A deals in Indian manufacturing sector?
  • III. Discuss the various failure factors of M&A deals.
  • IV. What are the key motives for the merger deals done by Crompton Greaves?
  • V. .....................

 

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Abstract

This case study on Crompton Greaves is meant to enable students to understand what makes Merger and Acquisition (M&A) successful. The objective is to analyze the non-financial factors affecting post-M&A performance along the financial factors for a specific company that has gone for M&A. In this case study, an attempt is made to analyze the M&A strategy of Crompton Greaves and post-M&A performance by applying different financial metrics. This case study focuses on Crompton Greaves' historical background, M&A deals done by the company, the motives behind the M&A strategy of Crompton Greaves, merger and acquisition benefits and factors that influenced the Crompton Greaves success in M&A. It also deals with the pre- M&A activities influencing the execution of M&A deals. Thus, the case study would bring more clarity to the various issues of M&A performance and improve the research findings. Crompton Greaves is one of the largest manufacturers of Electrical and Industrial Equipment machinery in India. This case study shows the survey results of the M&A of Crompton Greaves which was conducted through a questionnaire to elicit responses regarding different aspects of M&A in Crompton Greaves.



Pedagogical Objectives
In view of the context as above, the pedagogical objectives of this case study are:

  • To understand various strategic motives behind the M&A deals by Crompton Greaves
  • To evaluate and ascertain the impact of M&A on Crompton Greaves’ financial performance
  • To explore the factors influencing post M&A performance of Crompton Greaves
  • To understand the issues and the challenges faced by Crompton Greaves, while carrying out M&A deals

Case Positioning and Setting
This case study can be used in MBA Program/Executive MBA/BBA - Finance Management course - Merger and Acquisition



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