Does Time-Period of Occurrence, or Firm-Relatedness, Impact Operating Performance of Acquiring Firms Differently? Evidence from Mergers in the New Millennium in Indian Industry ()
ABSTRACT
There is
an increasing trend worldwide, in using mergers and acquisitions (M & A) as a strategy for
achieving higher size &
enhancing market share, financial stability, and for becoming more competitive
through economies of scale. This research study has aimed to study the impact
of mergers in India, on the operating performance of acquiring corporates, in
the first 15 years of the 21st Century. Methodology used was to
examine the pre-merger vs. post-merger financial profitability, capital
structure and financial return ratios of publicly listed acquiring firms, in
India, between 2001 and 2015. At the aggregate level, analysis suggests no improvement
in profitability ratios or returns on capital ratios. However, results suggest
that there are variations in the operating performance following mergers, among
those that involved mergers between same promoter-group vs. those mergers that involved unrelated firms.
Differences were also seen in terms of merger impact, for acquiring firms in
the two different time periods of 2001-2008 and 2009-2015, though they could not be correlated with the
Global Financial Crisis that caused a downturn in the Indian industry. Results
also seem to indicate that the mergers were motivated to larger extent, by the
potential for utilizing tax and depreciation benefits, in acquiring financially weaker companies, and for
increasing asset base through consolidation of businesses, and thereby
enhancing short-term post-tax profitability for the acquiring firms.
Share and Cite:
Mantravadi, M. (2021) Does Time-Period of Occurrence, or Firm-Relatedness, Impact Operating Performance of Acquiring Firms Differently? Evidence from Mergers in the New Millennium in Indian Industry.
Open Journal of Business and Management,
9, 74-90. doi:
10.4236/ojbm.2021.91004.