Impact of Mergers and Acquisitions on Corporate Performance An Analytical Study in Indian Context

Abstract

The present study aims to analyze the impact of Mergers and Acquisition on financial performance of companies during the 5 year- pre-merger and 10 year-post-merger period based on key determinants financial ratios. Additionally, compounded annual growth rate has also been computed in order to understand the growth and rationale of mergers in Indian context. Only secondary data and sources have been utilised for this research work. It covers the pre and post merger corporate financial performance in respect to liquidity, profitability, solvency and efficiency position. This study also highlights the procedural aspects relating to MandA deal governed by various Legal bodies of our country. The present study has selected a sample of 41 companies across 09 major industries in India. Companies which have undergone merger and acquisition activity during the window period between 2005 to 2008 are considered for our study. For the purpose of making analysis, apart from ratio analysis, descriptive statistics, paired t-test, consistency and compound annual growth rate have used in the present research. Ratios, pertaining to multidimensional position of firms as mentioned above, have been anlysed and interpreted separately ratio wise. With respect to improvement in mean from pre to post period, current ratio and quick ratio have shown improvement in 33% and 77% of the industries respectively, ROCE, ROA and EPS have shown improvement in 77%, 66% and 88% of the industries respectively, DER has shown improvement only in one industry and FATR and WCTR have shown improvement in 88% and 100% of the industries respectively. In this context, the top performing industries may include Cement industry, Pharmaceuticles Industry, Iron and Steel Industries and Chemical and Fertilizer Industries whereas the bottom newlineperforming industries may include Textile Industry, IT and Telecommunications Industries, Oil and Refineries Industries and Iron and Steel Industries. newline