Post-merger Performance Research Articles

Mergers and Acquisitions: Strategic Fit and Post-Merger Performance in Vietnam

Purpose: The aim of the study was to investigate the mergers and acquisitions: strategic fit and post-merger performance in Vietnam. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Strategic fit, encompassing alignment in organizational culture, business goals, and operational synergies, emerges as a key determinant of M&A success. However, challenges such as cultural integration issues, regulatory complexities, and managerial resistance can impede integration efforts and undermine anticipated synergies. Unique Contribution to Theory, Practice and Policy: Resource-based view (RBV), agency theory & transaction cost economics (TCE) may be used to anchor future studies on the mergers and acquisitions: strategic fit and post-merger performance in Vietnam. Encourage organizations to enhance due diligence processes by integrating comprehensive assessments of cultural compatibility, strategic alignment, and operational capabilities. Policymakers should streamline regulatory frameworks to facilitate cross-border M&A activities while ensuring compliance with local laws and regulations

A study on domestic vs cross-border acquisitions in the consumer cyclical sector in Asia

The work aims to study and analyze the impact of domestic and cross-border acquisitions in the consumer cyclical sector of Asia with particular emphasis on Indian markets on the shareholder return and the financial performance of the acquiring companies. The study employs two quantitative methods. The first method which is the event study method is used to evaluate whether the mergers and acquisitions (M&As) deal has generated any positive abnormal return for the shareholders and compare which acquisition had a superior impact on the shareholder return — cross-border or domestic M&As. The second method is the analysis of the M&A deal with the help of six major financial ratios which have proven to directly impact the financial performance of the company’s merger and post-merger performance. Pre-merger and post-merger averages of these ratios are analyzed for the sample companies to understand whether the M&As had a positive or negative impact on the financial performance of the company. This would ultimately help infer whether cross-border or domestic M&As are superior for consumer cyclical companies in India.

Do Bank Mergers has Forgone or Undergone Value? From the Perspective of Investor

Purpose: The purpose of the study is to explore banking industries investors’ perceptions about merged banks synergies “economies of scale, brand scope and market power “reaction to mergers.
 Design/methodology/approach: Based on the descriptive research design, a quantitative survey was adopted and administered to 117 investors through judgmental sampling techniques. Structural Equation Modeling (SEM) was then utilized to evaluate the significance of direct and indirect relationships between the various factors under study.
 Findings: The results confirm that the bank products & services and prices affect positively similarly, brand strategy and sales channels affects positively to the perceived gain of investors after mergers.
 Research limitations/implications: The absence of a longitudinal study measuring the post merger perception of investor is the main limitation of this study. Moreover, despite being insightful, the result of this study is generalized around small geographic area only.
 Originality/value: This study is an initial attempt to fill the void in published information about the behavioral finance of bank mergers. It provides new empirical insights about the effect of post-merger performance perceived by investor’s perspective.

Industry Concentration, Firm Size and Entry-Timing in Merger Waves

As early mover advantage and late mover advantage have been discussed for decades, the conditions for the best use of them are yet unclear. Using the U.S. merger data during 2000–2019, this study examines the entry-timing and the post-merger performance of 1,376 bidders in the merger waves recognised. We find that early movers have advantages with higher post-merger performance in a merger wave, while the effect of late mover advantage is not significant. Moreover, early mover advantage can only be implemented in competitive industries. Our analysis further provides the entry-timing strategies for large firms and small/mid enterprises, respectively. Our results indicate that late mover advantage can only be adopted in large companies, while small/mid firms should be followers, not early or late movers, in high concentration industries. Overall, our study sheds new light on the entry-timing in a merger wave with the consideration of different market concentration environment and different firm size.

Acquirer Carbon Risk and M&A Performance: Evidence from China

This paper selects a sample of cross-border M&A events by Chinese acquirers over the period 2000-2021 and uses a multiple regression model to investigate the relationship between acquirer’s carbon risk and M&A performance. On the one hand, it explores whether the acquirer’s carbon risk promotes M&A performance and whether the selection of other developing economies as host countries by Chinese acquirers can strengthen the above relationship. On the other hand, the impact of changes in post-merger carbon risk on M&A performance is explored. The results show that: (1) The higher the acquirer’s carbon risk the better the post-merger performance, but this relationship is not strengthened by the choice of other developing economies as the host country. (2) For acquirers with high initial carbon risk, their M&A performance increases if the post-merger firm reduces its carbon risk by practicing CSR, etc.; for acquirers with low initial carbon risk, there is no significant relationship between M&A performance and the change in carbon risk. Our findings contribute to further understanding of the impact of acquirers' carbon risk on M&A performance.

Does the merger improve the operating performance of the company? Evidence from the beverage industry in India.

Background: There is fierce market competition both locally and globally. Every organisation seeks to maintain itself and, more crucially, to develop quickly through inorganic means. The expansion of a company through mergers and acquisitions is an inorganic process. Organic growth takes a very long period and is time-bound, but inorganic growth through mergers may be achieved quickly. This research aimed to determine whether the operating results of Indian beverage firms have improved after the merger or not. Methods: In order to assess merger-related advantages to the acquiring firms, this study used the operating performance technique, which contrasts the pre-merger and post-merger performance of corporations using accounting data. Secondary data were used to carry out this study. The operating performance was assessed on six operating parameters (ratios) i.e. Operating Profit Margin, Gross and Net Profit Margin, Debt-Equity, Return on Net Worth and Capital Employed. The comparison was done for three years pre and post-merger period of these operating ratios. Results: The findings demonstrate that mergers do not seek to increase owner wealth. This finding shows that rather than just becoming larger and achieving covert goals, managers should pay more attention to post-merger integration challenges in order to produce merger-induced synergies. Conclusion: This study shows that the M&As have not had a good effect on a company's operating performance, especially for the chosen beverage companies in India. Since financial measures cannot fully account for the influence of mergers on business performance, future research may create other metrics for merger-related gains. Research that provides profound insights into the causes and trends of post-merger business performance through the different types of mergers and industries would also be beneficial.

Better performance after mergers and acquisitions? The case of US farmer cooperatives

PurposeThis study analyzes the long-term effect of merger and acquisition (M&A) activity on the profitability, efficiency and liquidity of the largest 500 farmer cooperatives in the United States.Design/methodology/approachSecondary data from the U.S. Department of Agriculture are complemented with primary data collected from print media publications about M&A activity by US farmer cooperatives. The analysis is based on group comparisons of means and distributions to study the effect of M&A activity on financial performance.FindingsFarmer cooperatives with M&A activity generally have lower profitability, efficiency and liquidity than farmer cooperatives without M&A activity, both at the time of the merger or acquisition as well as afterward. Marketing cooperatives in particular perform worse following M&As. Also, the post-merger performance of farmer cooperatives with M&A activity is not affected by the profitability, efficiency or liquidity of the target.Originality/valueResearch on the post-merger performance of farmer cooperatives is both scarce and dated. This study analyzes the effect of M&A activity for a relatively large sample and a relatively long time period (2005–2020).

Ethnicity and homophily effects in US M&As

AbstractWe show that ethnic diversity of CEOs of merging firms has been increasing and report evidence of ethnic homophily effect in M&As transactions. Specifically, M&As perform better when the CEOs of the merging firms share a common ethnic background. In a sample of 444 US mergers completed between 2000 and 2018, we find that ethnic homophily improves the probability of deal completion. Furthermore, we report mild variation of performance across ethnic groups. White CEOs exhibit better postmerger performance while Asian CEOs instigate a better market reaction (announcement return). Subsequent analyses show that White CEOs tend to have longer tenure and longer experience while Asian CEOs tend to be more transparent. We discuss our findings in light of a few extant theories and show that our findings are robust to several additional tests including instrumental variables, Heckman's selection bias correction, and several variations in the model specifications and definitions of key variables.

Board overconfidence and M&A performance: evidence from the UK

This paper investigates the relationship between board overconfidence and mergers and acquisitions (M&A) performance based on 754 M&A deals in the UK from 2002 to 2018. Employing three proxies to measure overconfidence, namely, fraction of male directors on the board, multiple acquisitions and merger characteristics, our results suggest that a higher fraction of male directors on the board and multiple acquisitions lead to poor M&A performance. The results also show that multiple acquirers’ deals generate higher returns than subsequent deals and this is due to self-attribution bias. In terms of merger characteristics, this study has found that, when overconfident acquirers use cash as the method of payment or when they embark on diversifying M&A, it leads to poor M&A performance. The results are robust across both univariate and multivariate analyses and also across alternate measures of post-merger performance. The findings of this study have important policy implication with regard to the ratio of male directors, number of acquisitions and the method of payment.

Political connection and M&A performance: Evidence from China

This paper explores the role of political connections in mergers and acquisitions (M&A) by examining the stock market performance in the short-run announcement period and the long-run post-merger period of Chinese M&A from 1998 to 2017. We further examine whether the corporate governance mechanisms and nature of ownership may determine the extent by which political connections may impact on M&A outcome. The results show that political connection has a positive and significant impact on firm performance for both privately-owned enterprises (POEs) and state-owned enterprises (SOEs). The results are more pronounced in the presence of strong corporate governance mechanisms: board independence and board gender diversity. We also find that the effect of political connection on post-merger performance is higher for POEs in comparison to SOEs. Our results are robust across alternative measures of firm performance and alternative measures of political connection.

MERGER DECISIONS, ACCOUNTING INFORMATION AND PERFORMANCE STABILITY INSIDE AND OUTSIDE OF ECONOMIC CRISIS PERIODS: EVIDENCE FROM GREECE

This study examines the merger decisions from a sample of Greek listed companies in the economic crisis period and shortly after its end, by employing various quantitative and qualitative variables of mergers that signalize different levels of risk. The results revealed that the performance subsequent of mergers is not significantly different for the merged companies. But in comparison to control sample of companies without mergers for the examined period, the results reveal that merger transactions signalize a more stable profitability and better performance for the companies with mergers. Furthermore, merger events signalize different performance levels during and after the crisis: mergers that took place when there was no economic crisis are far more profitable and lead to better performance from mergers during the period of economic crisis. Last, regarding the industry relatedness of the merged firms, the industry type and the merger combination of merged companies, there is not any impact from them on the post-merger performance in the examined accounting measures. The study proposes for companies that during crisis periods maybe merger be the only way to survive and provide a stable profitability and accounting performance for shareholders.

Do the ties of corporate executives and directors affect short-term M&A return growth? Evidence from China

This article investigates whether the social ties of corporate executives and directors affect short-term return growth during the announcement period of mergers and acquisitions (M&A). We consider both the educational background and employment history of the corporate executives and directors to measure social ties. Specifically, a text analysis algorithm is employed to match employment history. Then, we choose the cumulative abnormal returns to measure the short-term return growth. Using a sample of 157 M&A deals in the Chinese market from 2000 to 2017, we find that acquirer-target social ties have a significantly negative effect on post-merger performance. However, the negative effect of social ties on post-merger firms’ short-term returns will decrease (become less negative) when the firms have good corporate governance mechanisms. Moreover, social ties could also affect the retention of the target firms. The executives and directors are more likely to remain in the post-acquisition firm when the social ties are high. Our results have important implications for policymakers and corporate governance.

Post-Merger and Acquisition Financial Performance of Banks Reconceptualised: Towards A Collaboratively Oriented Value-Based Financial Performance Metrics

Post-Merger and Acquisition Financial Performance of Banks Reconceptualised: Towards A Collaboratively Oriented Value-Based Financial Performance Metrics

Does company performance really improve following mergers? A pre-post analysis of differences in Greece

Merger transactions occur in various business sectors and are a drastic way of corporate restructuring. For several companies, mergers are the only path to gaining access to new resources, improving profitability, and achieving business excellence. The purpose of this study is to investigate the mergers that occurred among companies and reveal different aspects of their final results beyond the traditional and simple comparison methods of analysis. Thus, several merger events from Greek companies are tracked and compared by evaluating various accounting measures from their published financial accounts. The preliminary statistical results from univariate data analysis with accounting comparisons reveal no significant business performance changes after mergers. Then, the merger event is examined per company from each year’s released financial statements with a not used before proposed method of analysis: comparison of pre- and post-merger performance by employing a heat-map with a multi-step approach. The results showed that five companies out of eighteen examined present a deterioration on separate sections of accounting performance (profitability, capital structure, and leverage). While univariate statistical analysis of comparison in pre- and post-merger performance failed to signalize these differences, the heat-map methodology approach with a multi-step approach revealed them. The obtained results show important differences in the accounting performance of almost one-third (27.8%) from the examined sample companies. Thus, the findings reveal the usefulness of the new proposed approach in merger analysis.

Spartan Stores and NashFinch – Merger Case Study of Bidder Size Smaller Than the Target Size

Spartan Stores a publicly traded company in the grocery industry made a bid to acquire Nash-Finch Company in 2013. Nash Finch shareholders received 1.2 shares of Spartan stores and the transaction was valued at $340 million. The merger was unusual that the target firm Nash Finch was larger than the bidding firm Spartan stores. Its 2012 revenue was almost double Spartan Stores and its shares traded for more on the NASDAQ. It was losing market share in its retail stores and their wholesale customers were experiencing competitive pressure. The case study is written for students in advanced managerial finance course. Students are asked to understand the motives of the merger, method of payment and its signaling content, valuation of the two firms prior to the takeover offer, and learn about the post-merger performance.

Havenly acquisitions

We explore the valuation, tax and post-merger performance consequences of M&As with tax haven firms. Using an international sample of cross-border mergers over the period 1989 to 2010, we find that acquirers of tax haven firms decrease their effective tax rates significantly in two years following the M&As. The announcement returns to acquirers of tax haven firms are, on average positive but lower relative to a control sample of non-tax motivated M&As. Lower returns are associated with potential agency costs, taxpayer/consumer backlash as well as relatively poor operating and sales performance of the acquirers following these acquisitions.

Nowhere Else to Go: Determinants of Bank–Firm Relationship Discontinuations after Bank Mergers

The decision to change or terminate a bank-firm relationship has been demonstrated to be crucial for firm performance following bank mergers. We find both competition and the available firm collateral to be important factors in enabling firms to switching banks, instead of dropping their bank relationships. We also provide novel evidence that firms who are able to \textit{add} a bank relationship following a merger exhibit much stronger post-merger performance. Our findings are consistent with the interpretation that bank-mergers cause a reduction in lending to most firms, leading them to search for alternative sources of finance.

Pre-merger and post-merger performance analysis of Bank of Baroda-A camel analysis

Pre-merger and post-merger performance analysis of Bank of Baroda-A camel analysis

Investigating the relationship between bank performance and accounting standards: evidence from M&As in European banking

PurposeThe study aims to identify whether international financial reporting standards (IFRS) or local generally accepted accounting principles (GAAP) reporting provides investors and senior management of acquirer banks with superior information on target banks under post-merger bank performance.Design/methodology/approachThe authors examine the claim that IFRS improves corporate transparency and increases financial reporting quality in European Bank merger and acquisitions (M&As). The authors compare the financial performance of merged banks where the target and acquirer banks employed the same reporting system (up to 305 merged banks) to the performance of a control group of banks not engaged in M&A activity (up to 1,690 European banks).FindingsLocal GAAP reporting allows a more transparent assessment of financial performance using traditional indicators, making it a superior tool for assessing potential acquisition targets.Practical implicationsOverall, the empirical findings are consistent with prior studies and indicate a significant relationship between local GAAP and post-merger performance, while IFRS does not contribute to post-merger bank performance.Originality/valueThe study is one of the very few studies to investigate the relationship between bank performance, M&A activity and accounting standards in EU-28 countries. The primary contribution the finding of poor performance of IFRS reporting merged banks compared to local GAAP banks in EU-28 countries in line with prior results of Huian (2012). In addition, several deal- and bank-specific characteristics that affect accounting standards influence M&A transactions in European banks.

THE IMPACT OF CORPORATE GOVERNANCE PRACTICES ON POST-MERGER PERFORMANCE

The relation between the post-merger performance and corporate governance mechanism is examined using Linear regression model for a sample of US, Canada, EU-28 and Western European countries listed firms for the period from 2003 to 2012. We also examine as to whether the use of International Financial Reporting Standards (IFRS) improves corporate transparency, therefore, increasing financial reporting quality. Using a sample of banks from international countries, we present the following key findings: post-merger performance is significantly better common law in countries than code law in countries with better IFRS group banks during the post-merger performance. We also find that local GAAP reporting allows a more transparent assessment of financial performance on the basis of traditional indicators making it a superior tool for assessing potential acquisition targets. This study analysis changes in a country legal regulation as a measure of corporate governance and shows that these regulations play an important role in merger activity. Legal origins and owner-protection mechanisms are important in explaining the relationship between the quality of accounting standards and corporate governance practices following IFRS adoption. Overall, our empirical findings result consistent with Ciobanu (2015) find that merger and acquisition is influenced both the legal origin and accounting regulations.