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

Abstract

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.

Comparative Analysis of Company Performance Before and After Mergers and Acquisitions in Company Listed on Idx 2018-2021

“…According to the paired sample test (T-Test) findings, ROA and ROE variables are significantly different before and after mergers and acquisitions, Jallow [16]. According to Singh [17], companies perform better following mergers and acquisitions. This improvement does not occur before the merger.…”