Abstract
Merger and Acquisition is a strategy adopted by the organizations globally to meet the needs of dynamic business environment. This strategy also has much importance in Pakistan mostly in banking sector. Therefore, the objective of the study is to assess the impact of M&A on the financial performance of banks in Pakistan. The accounting and financial data of 10 banks were used in this study. Data was taken from the financial statement analysis (FSA) by State Bank of Pakistan from the period of 20062011. For the analysis of pre and post Merger and Acquisition performance 15 financial ratios were used in the study. To compare the results Paired sample t-Test was used to measure the significant difference between pre and post M&A financial performance. The overall results show that there is no significant difference in financial performance. It is concluded that there is insignificant difference between pre and post M&A performance of banks in Pakistan.
Highlights
The Business environment is going to be fast day-by-day because of dynamic changes in the global environment
If the P-value is less than 0.05, it means there is a significant difference in the financial ratios between pre and post Merger & Acquisition (M&A)
The results indicate that the financial performance of banks slightly decreased in post M&A period
Summary
The Business environment is going to be fast day-by-day because of dynamic changes in the global environment. The most effective and well-known approach organizations use to compete in such a fast business environment is Merger & Acquisition (M&A). Organizations have to realize the advantages to go into Merger and Acquisition and to identify the target business (Zahid & Shah, 2011). Worldwide scenario of Merger and Acquisition is represented in figure 1. It is clear from the figure that the number of M&A transactions have increased fourteen times over the last twenty-five years; 3,000 to 42,000 transactions from 1985 to 2011. The trend in the figure shows that the International Merger and Acquisition goes toward the developing countries and from the developing counties, means in both ways that is modernizing the world’s economic boundaries (Chapman, 2003). Merger and Acquisition clutch in time and through this strategy organization performs well (Martynova et al, 2006 and Kropf & Viswanathan, 2004)
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