Post‐merger corporate performance: an Indian perspective

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.

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.

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.

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.

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.

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.