A study of merger & acquisition on the performance of a firm: An evidence of Indian companies across diversified industries

Abstract

Merger and acquisition is not a new concept in the business world. The first wave of mergers took place between 1803-1904. India has appeared as one of the most favored emerging market destinations for M&A deals over the last decades(Gupta,2014) due to the growing opportunities and availability of resources. In the past two years, the Indian market witnessed a lot of turbulence due to GST (Good and Service tax), demonetization, and presently due to the outbreak of global pandemic Covid-19. In India, mergers and acquisitions are being governed by the Companies Act, 2013 for the general framework, Indian Contract Act, 1872 for contract and rights of the parties, the Specific Relief Act, 1963 for remedies on breach of contract. In this paper, five companies were chosen from different industries to check the effect of mergers using six financial parameters which are: Current Ratio, Net Profit Ratio, Price to Earnings Ratio, Earnings per Share, Debt to Equity Ratio, and Asset Turnover Ratio. The study period ranges from 2011 to 2021. Shapiro-Wilks test was done to check the normality of the data and Wilcoxon Paired Sign-Rank Test was computed for dataset not following a normal distribution. Paired sample T-test was used to check the existence of positive or negative impact post-merger. This paper strives to find out the prevailing scenario of M&A worldwide and also to know the overall performance of the selected companies post-merger. Through this paper, we come to know that merger and acquisition is not always a good option. The majority of the companies faced a significant amount of loss after the merger. The findings directed varied results.