Post‐merger corporate performance: an Indian perspective

Abstract

Purpose -The purpose of this paper is to examine the post-merger operating performance of acquiring companies involved in merger activities during the period 1999-2002 in India. It attempts to identify synergies, if any, resulting from mergers. Design/methodology/approach -This paper uses the operating performance approach, which compares the pre-merger and post-merger performance of companies using accounting data to examine merger related gains to the acquiring firms. Findings -It is found that the post-merger profitability, assets turnover and solvency of the acquiring companies, on average, show no improvement when compared with pre-merger values. So it seems that, contrary to common beliefs and expectations, mergers usually do not lead to improve the acquirer's financial performance.Research limitations/implications -Further studies may develop some alternate measures of merger-related gains as financial measures have limitations to capture the full impact of merger on corporate performance. Moreover, a study providing detail insights into the reasons and patterns of post-merger corporate performance across the types of mergers and industry would be useful. Practical implications -The results show that mergers are not aimed at maximizing wealth of owners. This result suggests the need for managers to better focus on post-merger integration issues in order to create merger-induced synergies, rather than simply acquiring bigger size and achieve hidden objectives. Originality/value -The value of this research is its extension of the mergers and acquisitions performance research, which has been conducted on mostly American and European firms, to Indian firms.

The Efficiency of Mergers and Acquisitions in Malaysia Based Telecommunication Companies

“…Based on Singh and Mogla (2008), Indian firms that merged declined in profitability over the period of the operation while Kumar (2009) also agrees that the profitability of the acquired companies showed no improvement when comparing with pre-merger values. Certain companies such as Wolter Kluwer which is known as major multinational publishing house suffered loss after merging and the reasons are due to failure to integrate the hundred-plus acquisitions it has engaged in over the decades [(NRC Handelsblad, 2003) as cited in Barkema and Schijven (2008)].…”

Corporate mergers and financial performance: a new assessment of Indian cases

“…Likewise, no momentous progress reported in the post-merger period (Beena, 2004;Kumar, 2009;Kumar & Suhas, 2010;in Singapore: Tanuwidjaja, 2007). In Malaysia, Rahman and Limmack (2004) In a nutshell, research in developing nations concludes that most studies report negative results or no improvement during post-merger.…”

“…Beena, 2004;Das, 2000;Kaur, 2002;Kumar, 2009;Ramakrishnan, 2008;Rao & Rao, 1987;Selvam et al, 2009;Sinha et al, 2010), Singapore (Tanuwidjaja, 2007), Malaysia (Marimuthu, 2008;Rahman & Limmack, 2004), Greece (Mylonidis & Kelnikola, 2005) and Pakistan (Ullah et al, 2010). Rao and Rao (1987) (Selvam et al, 2009).…”

Mergers of agrifood cooperatives and their effects: from expectations to results. An empirical study in four Spanish Autonomous Regions

“…their relative position with respect to the mean, so as to prevent distortions in the analysis of the results stemming from the economic backdrop of the sector in which the entities operate (Healy et al, 1992;Apellaniz et al, 1996;Kumar, 2009).…”

“…-Studies assessing the results of mergers by means of an analysis of economic and financial information through the application of ratios of differing significance (Healy et al, 1992;Apellaniz et al, 1996;Serra et al, 2001;Kenkel et al, 2003;Richards and Manfredo, 2003;Colarte and Rodríguez, 2006;Kumar, 2009).…”