Post-Merger & Acquisition Financial Performance of Selected Indian Firms

Abstract

As a business restructuring tactic, mergers and acquisitions (MA), has significantly drawn attention of practitioners as well as researchers around the world. Firms across different economies including the Indian firms have invested billions in MA activities. Whilst corporate MA are widely believed of as the primary method for growth and expansion, related research have shown that MA can occur for a variety of other reasons. The majority of these studies have a market-based (also known as a stock market-based) approach and are accounting-based. In this research, we aim to determine if Indian mergers have been successful. Samples of twelve companies have been selected for the purpose of the study. We used average financial ratio data from the three years before (Pre-merger) and three years after (Post-merger) the merger to compare and test for differences using a paired "t"test. We conclude that profitability ratios have increased during the post-merger period compared to the pre-merger period. Further, solvency of the merged companies has deteriorated after mergers due to greater reliance on debt for financing merger deals.