STUDY ON IMPACT OF MERGERS AND ACQUISITION ON PERFORMANCE OF FINANCIAL FIRMS IN INDIA

Abstract

With the series of M&A taking place in financial sector in India more than half of the merging firms showed improved financial performance in the post merger time period as compared to the pre-merger period. Our study produced following findings findings.  First, earning available to shareholders (EPS) and debt to equity ratio showed a significant change in pre and post-merger financial position of the companies.  Second, contrary to our expectations, we found the change in the return on net worth (RONW), liquidity position and profit before tax to total income of the companies to be not statistically significant.  Overall, the result of the study indicate that in most of the M&A cases, in the long run the acquiring firms were able to generate value creation in one or the other form, that is  Higher cash flows,  Cost cutting  Greater market power,  However in spite of improved financial performance sixty four per cent of cases showed increased debt to equity ratio.  It is also significant to note that profit before tax in all the merging cases has shown a positive trend for both financial sector companies.