Post-M&amp;A Operating Performance of Indian Acquiring Firms: A Du Pont Analysis

Rani, Neelam; Yadav, Surendra S.; Jain, Pramod Kumar

doi:10.5539/ijef.v5n8p65

Cited by 10 publications

(6 citation statements)

References 17 publications

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“…Firm performance have marked industry orientation; those from the drugs & pharmaceuticals, and to a lesser degree, chemicals and electronics have done much better as compared with firms in the electrical and non-electrical machinery segments. The findings of the analysis concur with those of Ramakrishanan (2008) and Rani et al (2013). This study, however, has not identified the sources of additional profit gains accruing to acquirers/merged entities, i.e.…”

Section: Discussionsupporting

confidence: 63%

“…They found no significant impact of M&A activity on firms' long-term profitability. Rani et al (2013) with a large sample of 305 firms across all industries that merged/acquired between 2003 and 2008 concluded that firms showed an improvement in post-merger operating performance. Using Du Pont analysis, the study also pointed out that the improvement in performance is due to improvement in operating margins.…”

Section: Review Of Literaturementioning

confidence: 99%

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Profitability of Mergers and Acquisitions: Evidence from India’s High-Tech Industries

Singh

2018

The Indian Economic Journal

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This article analyses the post-merger profitability of acquirers for a sample of mergers and acquisitions (M&As) that did take place during the period 1999–2011 in certain high technology industries in India. Taking the performance of median firm(s) from the three-digit industry category of acquirer(s) as the benchmark, this study deploys difference-in-differences (DID) method to evaluate acquirer performance using both parametric and non-parametric tests. Results of the analysis show that an overwhelming majority of acquirers have performed better than the benchmark firms in their respective industries. Interaction of acquirer characteristics such as size, types of M&As undertaken and industry origin, among others, impacts the outcome. Horizontal M&As are more successful than the other types. Smaller firms, being more inclined to go for horizontal M&As, have fared better than their larger counterparts. Similarly, firms from the drugs & pharmaceuticals and electronics industries have performed better than those from chemicals, electrical and non-electrical industries. Here too, better performing industries have higher sprinkling of horizontal M&As.

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Section: Discussionsupporting

confidence: 63%

Section: Review Of Literaturementioning

confidence: 99%

Profitability of Mergers and Acquisitions: Evidence from India’s High-Tech Industries

Singh

2018

The Indian Economic Journal

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“…First, we ask whether the acquired firm improved its accounting performance through M&As during a period of economic crisis. Second, in order to delve deeper, we inquire past managerial decisions to find what particular merger characteristics led to a worsened or improved performance (Ghosh, 2001;Ramaswamy & Waegelein, 2003;Rani et al, 2013;Rao-Nicholson et al, 2016). We hope to answer these questions through an analysis of mergers that took place in Greece during 2011-2015, which is a period when Greece was under the supervision of the "troika" (EC, ECB and IMF), was shrinking in financial activity, and was being influenced by the pervasive effect of economic uncertainty (Pantelidis et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

Managerial decisions and accounting performance following mergers in Greece

Pantelidis¹,

Pazarskis²,

Drogalas³

et al. 2018

Investment Management and Financial Innovations

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An investigation was conducted to study a sample of 23 Greek firms listed on the Athens Stock Exchange that underwent mergers from 2011 to 2015, which is a period that embodies the Greek economic crisis. For the investigation, the authors use statistical tests to explore relative changes at twenty accounting ratios of the sample firms. These ratios are computed for one year before and after the merger. These ratios are found to be statistically insignificant indicating firms do not experience a post-merger improvement in accounting performance. The authors also examine six qualitative variables representing merger characteristics as past managerial decisions. Important findings for these characteristics include the following. First, for companies that do not fall under the same production line, the researchers observe an improvement for three ratios: collection period ratio, return on total assets, and profit or loss before tax. Thus, liquidity and profitability are improved. Second, when companies merged with their subsidiaries, the authors discover significant improvement for two ratios: gross margin and collection period ratio. In brief, positive results are found for mergers with subsidiaries and negative results with others. Third, the payment method influences two ratios, the current ratio and the stock turnover ratio. The current ratio is affected positively for the transactions in cash and negatively for the transactions in shares, while the stock turnover ratio is affected negatively for cash transactions and positively for share transactions.

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“…In order to assess the changes in operating performance of the acquirer firms owing to the acquisition, two models have been employed in this work. They include the change model (Heron & Lie, 2002;Kumar, 2009;Mantravadi & Reddy, 2007;Ramakrishnan, 2008;Rani et al, 2013;Zhu et al, 2010) and the generalised method of moments (GMM) model.…”

Section: Models To Assess Changes In Performancementioning

confidence: 99%

Post-acquisition Performance Analysis of Indian Target Firms: The Role of Deal Characteristics

Kapil

Barick

2018

The Indian Economic Journal

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The aim of this article is to identify and determine various dimensions of deal characteristics affecting the post-acquisition performance of Indian target firms. Available researches have focussed on the stock market reaction as the indicator of target firm performance. Nonetheless, various determinants are found to affect the post-acquisition performance of target firms. Bearing that in mind, this article focusses on the significance of deal characteristics while assessing the performance of the Indian target firms post-acquisition. The article attempts to analyse the post-acquisition performance of target firms independent of the acquirer firm to get a more appropriate perception of their position. The change model, generalised method of moments (GMM) model and the regression model has been employed to assess the changes in operating performance, analyse the importance of financial variables in post-acquisition performance and study the impact of deal characteristics in the post-acquisition performance of the Indian target firms. The outcomes reveal that there has been a significant difference in the improvement of targets depending on whether it has been taken over by a domestic acquirer or inbound acquirer.

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Post-M&A Operating Performance of Indian Acquiring Firms: A Du Pont Analysis

Cited by 10 publications

References 17 publications

Profitability of Mergers and Acquisitions: Evidence from India’s High-Tech Industries

Profitability of Mergers and Acquisitions: Evidence from India’s High-Tech Industries

Managerial decisions and accounting performance following mergers in Greece

Post-acquisition Performance Analysis of Indian Target Firms: The Role of Deal Characteristics

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