The break out of Industrial revolution in the late 18th century, manual labor and animalbased economy was replaced by machine-based manufacturing. The emphasis on human capital and intellectual capital is gaining importance in any business model in the present knowledge economy .The sustenance and development of intellectual capital is closely related to the creation and maintenance of competitive advantage in the knowledge economy. This has led many organizations to consider mergers and strategic alliances to strengthen their intellectual capital and resources. In India recent trends in the mergers and acquisitions show that major companies are constantly on prowl for small companies with good intellectual capital that will enhance their intellectual capital. This is operation in all the sectors. The paper focuses on the recent trends in the mergers that took place in India, where the business models are restructured in accordance with the emerging knowledge economy demands.

1. Mergers and Acquisitions in pace with emerging knowledge
Economy
Kishan .A
Dhruva College of Management
Email id: kishan_aditya@yahoo.co.in, Ph no: (M) 09966250809
Megha Bassi
Dhruva College of Management
Email id: megs_best2004@yahoo.co.in, ph no: (M) 09885515525
Abstract
The break out of Industrial revolution in the late 18th century, manual labor and animal-
based economy was replaced by machine-based manufacturing. The emphasis on human capital
and intellectual capital is gaining importance in any business model in the present knowledge
economy .The sustenance and development of intellectual capital is closely related to the
creation and maintenance of competitive advantage in the knowledge economy. This has led
many organizations to consider mergers and strategic alliances to strengthen their intellectual
capital and resources.
In India recent trends in the mergers and acquisitions show that major companies are
constantly on prowl for small companies with good intellectual capital that will enhance their
intellectual capital. This is operation in all the sectors.
The paper focuses on the recent trends in the mergers that took place in India, where the
business models are restructured in accordance with the emerging knowledge economy
demands.
Introduction
After an era of seclusion and isolation India opened its arms to the world in 1991 though
it’s revised economic policies, since then the country is in continues stride towards being a more
open economy, and it is increasingly integrating with the global economy. The concept of

2. globalization has been well equipped in economic policies of the country for revamping the
country’s image on the globe. With a rapid development in Manufacturing, services and
Research & Development the country’s future prospects look inevitable.
Globalization blessed India with a worldwide presence, let it be in the areas of
Commodities market, FMCG, pharrma, Information Technology, or in Telecommunications.
Globalization bought in new insights of different markets worldwide, in a global marketplace
where consumers are overwhelmed by choice, as markets emerging with vanishing boundaries
among the different markets on the globe. Products and services of customer choice are available
at finger click with the outbreak of Internet and in vogue technologies assisting it. Utilizing the
trends tactically India is emerging as a powerful nation, in the world.
The nation is in a transformation where in there is a shift in focus towards production and
management of knowledge and building in-house knowledge and capabilities that would serve
the requirements of emerging Knowledge Economy.
The Emerging Knowledge Economy
The phrase knowledge economy was coined by Peter F. Drucker in the year 1966 in his
book “Age of Discontinuity”. Knowledge economy refers to an economy of knowledge focused
on production and management of knowledge in creation of value. It refers to the use of
knowledge technologies such as knowledge engineering and knowledge management to produce
economic benefits. In a knowledge economy, knowledge is a product, knowledge is a tool, and
the key stress is on creating knowledge that would lead to a value creation. The implication of
the knowledge economy is that there is no alternative way to prosperity than to make learning
and knowledge-creation of prime importance. The break out of Industrial revolution in the late

3. 18th century, manual labor and animal-based economy was replaced by machine-based
manufacturing. The emphasis on human capital and intellectual capital is gaining importance in
any business model in the present knowledge economy.
“The concept supports creation of knowledge by organizational employees and helps and
encourages them to transfer and better utilize their knowledge that is in line with organizational
goals”
In a knowledge economy the organization’s emphasis is on human capital and intellectual
capital where in developing and sustenance of intellectual capital is closely related to the creation
and maintenance of competitive advantage in the knowledge economy. Drucker in his book
described the difference between the traditional Manual worker and the knowledge worker, a
manual worker who works with his hands and produces goods or services. In contrast, a
knowledge worker works with his or her head not hands, and produces ideas, knowledge, and
information for organizations success.
Knowledge has become a valuable asset A firm's intellectual capital i.e. Employees'
knowledge, brainpower, know-how, and processes, as well as their ability to continuously
improve those processes has become a source of gaining competitive advantage.
Over the last decade we have seen the emergence of an economy in which the digital component
has become a constant presence in all areas of knowledge. In the digital world, characterize and
dominated by a complex connectivity, value assumes a complex meaning, which is strongly
distinct from that used in the traditional economy. There are new business concepts, new

4. strategies based on innovation, new mechanisms to create value, with more of human resource
involvement and intellect adding to it.
The various driving forces that are changing the rules of business and national
competitiveness are,
 Globalization markets and products are more global.
 Information technology which is related to the following
 Information/Knowledge Intensity: Efficient production relies on information and
know-how; over 70 per cent of workers- in developed economies are information
workers many factory workers use their heads more than their hands.
 New Media: New media increases the production and distribution of knowledge
which in turn, results in collective intelligence. Existing knowledge becomes much
easier to access as a result of networked data-bases which promote online interaction
between users and producers.
 Computer networking and Connectivity : Developments such as the Internet bring
the "global village" ever nearer.
It can be argued that the knowledge economy differs from the traditional economy in several key
respects:
 The economics are not of scarcity, but rather of abundance. Unlike most resources that
deplete when used, information and knowledge can be shared, and actually grow through
application.
 The effect of location is either

5. o Diminished, in some economic activities: using appropriate technology and
methods, virtual marketplaces and virtual organizations that offer benefits of
speed, agility, round the clock operation and global reach can be created.
o By the creation of business clusters around centers of knowledge, such as
universities and research centers. However, clusters already existed in pre-
knowledge economy times.
 Laws, barriers, taxes and ways to measure are difficult to apply on solely a national basis.
Knowledge and information "leak" to where demand is highest and the barriers are
lowest.
 Knowledge enhanced products or services can command price premiums over
comparable products with low embedded knowledge or knowledge intensity.
 Pricing and value depends heavily on context. Thus the same information or knowledge
can have vastly different value to different people or even to the same person at different
times.
 Knowledge when locked into systems or processes has higher inherent value than when it
can "walk out of the door" in people's heads.
 Human capital — competencies — are a key component of value in a knowledge-based
company, yet few companies report competency levels in annual reports. In contrast,
downsizing is often seen as a positive "cost cutting" measure.
 Communication is increasingly being seen as fundamental to knowledge flows. Social
structures, cultural context and other factors influencing social relations are therefore of
fundamental importance to knowledge economies.

6. India the Emerging Knowledge Hub
In the year 2008 India with a staggering 51 percent of its population of 1.1 billion people
below the age of 25 and two-thirds under 35.is rich in its human resources, the Indian companies
are concentrating more on increasing their employee base which would lead to the enhancement
of intellect within the company. Wipro and Infosys, for instance, are putting in place several
processes and methodologies to harness the wealth of knowledge they possess. A number of
Indian pharmaceutical firms have achieved high levels of success globally in product and process
development. They are competing effectively in the generic pharmaceutical markets of the USA
and Europe. They have progressively accumulated process development and manufacturing
capabilities which meet the stringent criteria of the US and European Union regulators, and have
also acquired drug "discovery" skills to a level which has gained some recognition from major
Western pharmaceutical companies. These companies main focus is on research development
these days. Every sector in India has its prime focus on enhancing their intellectual capital by
improving their quality employee base.
Microsoft plans to shift its worldwide head quarters to India by the year 2010. The BPO
industry is expected to grow $ 100 billion in India by the year 2010.india is inching towards
becoming a R&D hub of Asia. The electronic major Whirlpool designs all its appliances for Asia
from India, Indian engineers’ in JACK WELCH TECHNOLOGY CENTER filed for 95 US
patents and another 125 patents are filed by Indian engineers working in TEXAS
INSTRUMENTS R&D wing India. India is growing in fast phase in every sector especially in
the education the country which pioneered the first university in the world (THAKSHASILA)
would indeed become a knowledge house sooner.

7. The urge for developing the in-house intellect companies are in continues prowl of
knowledge assets i.e. Human assets, process innovation and know-how through different
strategies many organizations consider mergers and strategic alliances to strengthen their
intellectual capital and resources.
Mergers and Acquisitions the Leverage for Acquiring Knowledge Assets
Mergers in India have led to a massive upsurge in the Indian economy. Numerous
companies in the auto sector, steel sector, cement sector, pharmaceutical sector, petrochemical
sector, and many more have experienced mergers with the global companies.
In a merger, companies come together to combine and share their resources to achieve
common objectives. The shareholders of the combining companies often remain as joint owners
of combined entity; an acquisition is more of an arm’s-length deal, with one firm purchasing the
assets of another for a better performance of its operations.
Mergers & Acquisitions offers tremendous opportunities for companies to grow and add
value to Shareholders wealth. It is a strategy for growth and expansion. Let us examine the trends
of mergers & acquisitions over the years.
1st merger wave (1897-1904) Merging for monopoly
Underlying factors
 Technological developments
 Rapid economic expansion
 Corporation laws relaxed.
 Voluntary code of ethical behavior
Characteristics of 1st merger wave

8.  Horizontal merger.
 Heavy manufacturing industries.
2nd merger wave (1916-1929) Merging for Oligopoly
Underlying factors
 Post-World War I economic boom
 Lax margin requirements
 Technological developments
 Government encouraged firms to work together during WWI, maintained this policy
in 1920s
Characteristics of 2nd wave mergers:
 Produced fewer monopolies, rather oligopolies, vertical mergers, and conglomerates
(usually related)
 Primary metals, petroleum products, food products, chemicals, and transportation
equipment were the most active M&A industries
 Used significant proportion of debt to finance deals
 Investment banks played central role in financing (as in 1st wave)
3rd Merger Wave ( 1965-1969) Conglomerate Mergers
Underlying Factors:
 Booming economy$$
 Rising stock prices
 High interest rates

9.  Tough antitrust enforcement
 Management science developments
 Financial manipulations
Characteristics of 3rd wave:
 Primarily conglomerate mergers
 Some bidders smaller than targets
 Primarily equity-financed – investment banks did not play central role
 Aerospace most active industry, while industrial machinery, auto parts, railway
equipment, textiles, and tobacco also active
 CEOs with vision to create conglomerates
4th Merger Wave (1981-1989) The Megamerger
Underlying Factors
 Expanding economy
 Technological developments
 International competition
 Deregulation
 Increased pension fund assets
 Financial innovations
 Investment banking industry much more competitive
 Failure of conglomerates
Characteristics of 4th wave

10.  Size and prominence of acquisition targets much greater than before.
 Oil and gas industries dominant in early 1980s, while pharmaceuticals most common
in late 1980s; airlines and banking also common.
 Foreign takeovers became common
 Heavy use of debt to pay for acquisitions.
 Junk bonds.
 More hostile takeovers.
5th Merger Wave (1992-2000) Strategic restructuring
Underlying Factors:
 Expanding economy, rising stock prices.
 Technological developments.
 Globalization.
 Deregulation.
Characteristics of 5th wave:
 Emphasized longer-term strategy rather than immediate financial gains.
 More often financed with equity than debt.
 Consolidation in the telecommunications and banking industries.
Now there is a shift in the inward essence of considering mergers and aquisitions the
underline concept is improving knowledge assets for meeting the knowledge economy

11. requirements. For instance Microsoft's acquires an average of six companies a year. The
company has purchased more than ten companies a year since 2005, and acquired 18 firms in
2006, for enhancing its human assets for meeting the ever growing global requirements in
programming and IT.
Let’s examine few mergers and acquisitions in recent years in India that enhanced their
employee base using mergers and acquisitions as a strategic tool.
Mergers and acquisitions in India which focused on enhancing their
knowledge base
 Wipro acquired Infocrossing in August 2007. The deal will give Wipro five data centers
in the U.S. and approximately 900 employees, as well as access to Infocrossing's U.S.
customers. After the acquisition, Wipro's IT infrastructure management practice will be
1.5 to 2 times larger than its nearest peers, Tata Consultancy and HCL Tech. While this
will enable the company to compete more effectively in larger IT management deals.
This improved base ok knowledge workers in the company.
 Genpact acquired 90% stake of City BPO in October 2007. Adding an employee base of
1800 to the company.
 Marketrx is being acquired by Cognizant, This acquisition expands Cognizant's
capabilities in the analytics segment and broadens our service offerings for the life
sciences industry while providing strong synergies with our existing business
intelligence/data warehousing and CRM (customer relationship management) services
with an added 1440 employees joined in the company.

12.  WNS acquired Marketics in March 2007 WNS to enhance knowledge services business,
which provides market research, business & financial research and analytics services.
Many other alliances that pawed way for improving knowledge base in their organizations let it
are in pharrma, BPO, IT or any other where talent acquisition is inevitable for its growth.
Closing lines
Corporate interests on reviewing the balance sheets of companies before forming
alliances with them has shifted towards analyzing the intellectual and knowledge assets of the
company as the success mantra in the present knowledge economy is accumulating intellect
rather than monetary Requirements.
References
1. www.bpoindia.org
2. Business line Monday dec 29 2008,Monday Oct 11 2004 www.businessline.com
3. “Merger, Indian-Style: Buy a Brand, Leave It Alone” Wall Street Journal, 22 March 2008
4. India meets the world, Accenture,, September 2006
5. The urge to merge: more small to mid-sized companies consider M&A as a growth
strategy
6. Black Enterprise, August, 2004 by Bridget McCrea
7. www.torys.com
8. www.ejkm.com
9. university of florida

13. 10. www.google.com
11. www.wikipedia.com