A Study on Impact of Merger on Operating Performance of Acquiring Firms: Sectoral Analysis

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DOI: 10.21522/TIJMG.2015.SE.19.02.Art005

Authors : Isha Gupta, Nandita Mishra


In this tremendously exigent environment the markets all over the world have become more competitive. Merger and acquisition has become one of the important alternatives for corporate strategic expansion. It is a form of inorganic growth where the company purchases growth. This paper is an attempt to critically examine the financial strength of companies during pre and post-acquisition period. The study also attempts to analyze the impact of acquisition on the acquirer company. Different types of ratios were selected and paired t-test was applied to attain objectives of the study.

Data is collected from audited balance sheet, profit and loss account of the concerned companies, CMIE data base, BSE and NSE. It was hypothesized that acquirer companies show positive operating performance post M&A as compared to pre M&A performance. Additionally, it has also been attempted to analyze and test if the operating performance differs significantly as per industry type by analyzing sub-samples of different industry sectors. The results reveals that the operating performances are little diverged in different industry sectors in India following mergers. In the Agri-products sector, the profitability margins and return on assets and investments showed a significant decline following M&A. In Electrical Equipment sector, operating performance has declined marginally following M&A and in pharmaceutical sector, M&A results showed that profitability margins and return on assets and investments has slightly improved.

Keywords: Operating Performance, Merger and Acquisition, Sectors, Financial Ratios.


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