Page 1 of 9
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e‐ISSN: 2395‐0463
Volume 01 Issue 07
August 2015
Available online: http://internationaljournalofresearch.org/ Page | 408
Post‐Merger Performance of Acquiring Firms
across Industries in India: A Case Study
Neha Duggal
Research scholar, University School of Management, Kurukshetra University, India
(nehaduggal.phd@gmail.com)
Abstract
Mergers and Acquisitions (M&A) have gained
substantial importance in recent times as a
significant toll for corporate restructuring and
thus creating value for the entities. It enables the
firms to explore new markets, expand their
horizons, reducing the business risks, and
geographical areas thereby increasing the
profits and gaining through competitive
advantage. The present research paper aims at
studying the impact of mergers on the financial
performance of Indian corporate entities from
different sectors like banking, pharmaceutical
and steel by examining various financial ratios
of the sample of companies listed on the BSE
from the period 2000-2010. For the purpose of
analysis paired sample t-test is conducted. The
results suggested that there was positive impact
seen in the banking sector which has sustained
also upto (t+5) in the given profitability
variables whereas in case of pharma and steel
sector not much impact is seen on the
profitability. There is improvement in net profit
margin in pharma and return on assets ratio in
the steel sector in (t+1 year window). The
results reported in the study points to the
positive impact of merger announcement on the
financial performance in majorly in the short
run (+1 yr).
Keywords: Merger & Acquisitions, financial ratios,
financial performance
1.0 Introduction
The rapid changing technologies, fast moving
economies, the positive impact of globalization,
accelerated revenues has triggered the activity of
M&A in India and increased manifold in recent
times. Mergers and acquisitions have always
been taken as the one of the most convenient and
profitable strategy to survive in the competitive
environment. The intent is to gain competitive
advantage, capitalizing larger market share,
creating profits through synergistic effect and
economies of scale thereby bringing
competencies and capabilities for a sustainable
corporate performance.
1.1 Mergers and Acquisitions in
Indian Industry.
The Indian companies have understood well the
significance of environmental adoptions,
technological innovations and competitive
advantage. Post economic liberalization in early
Page 2 of 9
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e‐ISSN: 2395‐0463
Volume 01 Issue 07
August 2015
Available online: http://internationaljournalofresearch.org/ Page | 409
1990’s Indian economy has undergone a
massive transformation. The Indian companies
have understood well the significance of
environmental adoptions, technological
innovations and competitive advantage. The
economic reforms gave enabled the corporate to
introduce various structural changes and
restructuring activities mainly followed by
merger and acquisition deals.
Statistics have shown the increasing trend of
M&A activity in recent times. In 2014 mergers
and acquisition deals amounting to $16 bn took
place in which banking and pharmaceutical
sector dominated the deals. A total of 253 deals
took place majority leading to mergers and
acquisitions in pharma and banking sector
followed by energy and natural resources. Figure
1 shows the statistics generated by grant thorton
on mergers and acquisitions activities took place
in India in 2014.
Fig.1 Domestic M&A round up in 2014
(Source: Grant Thornton Annual Dealtracker Report, 2014)
Page 3 of 9
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e‐ISSN: 2395‐0463
Volume 01 Issue 07
August 2015
Available online: http://internationaljournalofresearch.org/ Page | 410
2.0 Review of Literature
Various studies have concluded and resulted an
optimistic affect of mergers on corporate
performance of the company. By adopting
certain parameters of measuring the financial
and operative improvements in the companies
researches have concluded that mergers have
favorable impact on corporate.
Kruze, Park and Suzuki (2003) studied the
long term operating performance of mergers of
Japanese companies with a sample of 56
mergers of manufacturing companies from the
period 1969 to 1997. The cash flow performance
in the five year period following mergers were
studied .it found evidence of improvement in
operating performance and also pre and post
merger performance are highly correlated. It
concluded that long term operating performance
of control firms was positive but insignificant
and high correlation existed between pre and
post merger performance.
Vanitha.S and Selvam. M (2007) in their study
“Financial Performance of Indian Manufacturing
Companies During Pre and Post Merger”
analyzed 17 companies as a sample out of 58 to
study the impact of merger on the performance
in Indian manufacturing sector from 2000- 2002.
For financial performance analysis ratio
analysis, mean, standard deviation and “t” test
was used. The found overall financial
performance to be insignificant for 13 variables.
Pramod Mantravadi and Vidyadhar Reddy
(2008) investigated a sample of 118 cases of
mergers in their study, “ Post merger
Performance of acquiring firms from different
industries in India” aimed to study the impact
of Mergers on operating performance of
acquiring corporates in different industries from
a period of 1999 to 2003. The results showed
minor variation in the operating performance
following mergers where more impact of merger
was noticed on the profitability of banking and
finance industry, pharmaceutical, textile and
electric equipment sector whereas significant
decline was seen in chemical and Agri-Products
sector.
Beena (2004) analyzed the pre and post merger
performance of firms belonging to
manufacturing industries with an investigation
of sample of 115 acquiring firms between the
period 1995-2000. For the purpose of analysis
four sets of financial ratios were considered and
it was tested using t –test. The study showed no
improvement in the performance in comparison
to the pre merger period for sample companies.
Ghosh and Jain (2000) analyzed whether the
merging firms increase their financial leverage
after merger. For this a sample of 239 mergers
during 1978 to 1987 in the US taken. The result
showed that mean financial leverage resulted in
17% increase as compared to pre merger
financial leverage of combined firms. The study
was conducted on comparing pre and post
merger performance on the case to case basis.
