Merger and Acquisition

The 21st century is an era of globalization, dynamic market and fast growing economies. The competitive edge over the competitor is need of an hour. The main aim of any company is maximization of shareholder’s wealth, and for that the corporate across the globe are chasing new competencies and capabilities. The faster route of growth preferred by the companies is adoption of corporate restructuring strategies. It is planned mainly to achieve financial growth, technological improvement, geographical expansion and sometime for key personnel of the target company. Most of the organizations carry out corporate restructuring as per the need of the business through mergers, acquisitions, takeovers, joint ventures and some by demergers as well; while some others make structural changes through internal reconstruction and carry out optimization of available resources in the organization. Though the research work in this field is plenteous yet, there is need to carryout research in Indian context as the majority of the work is focused on the developed countries like Europe and United States. In India, the studies on analysing the effect on M&A have gained momentum after liberalisation in 1991 because the pace of M&A has increased mainly after that. But majority of the studies in India are focusing on manufacturing and financial sector only and that too are based on case studies. Very few studies are based on broader aspect and with the sample covering majority of sectors. In addition to that none of the studies have integrated all the important issues pertaining to M&A in one study to have a holistic view.Moreover, with globalization and the emergence of knowledge based industry with increasing emphasis on inorganic growth, the M&A in India needs a fresh look. Attempt has been made to fill the gap in knowledge about M&As and specially in the area of acquisitions in India. The book is based long term analysis to study the effect of M&As on financial performance of the companies. Ratio Analysis is used as financial analytical tool. Out of various ratios, 16 ratios are selected, based on the frequency of their use and applicability in various researches which represents liquidity, leverage, activity, profitability and valuation position of the firm. Various descriptive and inferential statistical tools are used to examine the significance of changes in post acquisition performance of the acquired companies as compared to pre acquisition performance. To examine whether acquisition of particular sector has some special effect, the similar analysis is also carried out sector wise by dividing total sample in various important sectors as per classification given by GICS. The results of the empirical analysis suggest that the rate of return ratios declined significantly after acquisition. This indicates that in long run the financial performance of the acquirer firm is affected negatively. This could happen because of decrease in profit or increase in size of total assets and net worth. The acquirer company should control its expenses properly and use internal resources after acquisition to maximise the profit. The acquisition has not affected any other performance measure significantly. Therefore, the acquiring firm should focus on post integration process to use the resources of the acquired firm properly in order to improve liquidity, leverage, activity, profitability and valuation measures.