Relationship of Mergers and Acquisitions with Financial Performance: Indian Evidence

Abstract

In this paper an attempt has been made to investigate the level of relationship between acquisitions/mergers and operating financial performance by making the pre and post-merger comparison of operating financial performance. The researchers have studied various aspects such as Return on Capital Employed (ROCE), Debt Equity Ratio, Return on Net worth (RONW), Net Profit Margin (NPM), Operating Profit Margin (OPM), Gross Profit Margin (GPM), Earning per Share (EPS) and Price to Earnings Ratio (P/E) so as to ascertain the relationship between pre and post-merger operating financial performance of the acquirers. For this purpose two industries are taken into consideration such as, aviation industry and oil and gas industry. The reference period of five years has been taken for every firm. The findings put forth by the study affirm that the inorganic growth decisions have not gone well, particularly, in the aviation industry for the financial performance has gone from bad to worse, however, the oil and gas industry has put forth mixed results.