Post Merger Performance Of Acquiring Firms From Different Industries Finance Essay

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1.1 OBJECTIVE

A survey among Indian corporate managers in 2006 by Grant Thornton found that Mergers &

Acquisitions are a significant form of business strategy today for Indian Corporate. The three main objectives behind any M&A transaction, for corporate today were found to be: • Improving Revenues and Profitability • Faster growth in scale and quicker time to market • Acquisition of new technology or competence The overall Objectives of the research is to try and show the quantities approach towards pre and post merger and acquisition of 3 different sector of industry, according to:- Share price difference Price earning Ratio Earnings per share Profitability. .

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1.2 AIMS

To analysis the financial statement and Investment ratio of a company or sector during pre and post mergers. (Where they were and where they are).

LITERATURE REVIEWS

In the last four decades, there were ample number of studies on merger and acquisitions and numerous of theories have been proposed and tested for observed corroboration (Mantravadi, 2008). In an article by Canyon et. al, 2000, merger activity of this form has implications for corporate governance. Although the shareholders may gain from such breach of trust, whereas other stakeholders may suffer and the net consequences are far from clear. While Pillof et.al, 1996, argues, that mergers and acquisition activity results in overall benefits to shareholder when the consolidated post- merger firm is more valuable than the two different entities (pre-merger). Researchers have studied the economic impact of mergers and acquisitions on industry consolidation, returns to shareholders following mergers and acquisitions, and the post-merger performance of companies. Several measures have been suggested for analysing the success of mergers. Such measures have included both short term and long-term impacts of merger announcements, effects on shareholder returns of aborted mergers hostile takeover attempts and open offers etc.

3. METHODOLOGY

In the effect of merger, this research will calculate a set of financial ratios such as share price difference, price earning, liquidity ratio, debt ratio, market ratios, earning per share, profitability ratios etc, these financial ratios were computed on the basis of pre and post mergers (3 years each). Financial ratios will help the firm to analyse their position. These ratios are also useful to estimate the complete financial position of a firm or an organisation. (Megginson et. al, 2008, p46-51). The post-merger performance will be comparing with the pre-merger performance and tested for significant differences, using paired “t” test. Further, companies in the sample should not have been engaged in further mergers/acquisitions within four years after the merger under study.

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