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Mergers and Acquisitions: A pre-post analysis for the Indian financial services sector

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  • Sinha, Pankaj
  • Gupta, Sushant

Abstract

This paper examines the Mergers & Acquisitions scenario of the Indian Financial Services Sector. The data for eighty cases of M&A in the period from March 1993- Feb 2010 is collected for a set of ten financial parameters representing the various characteristics of a firm. All the cases have been analyzed individually and collectively to determine the overall effects of M&A in the industry. The results of the study indicate that PAT and PBDITA have been positively affected after the merger but the liquidity condition represented by Current Ratio has deteriorated. Also Cost Efficiency and Interest Coverage have improved and deteriorated in equal number of cases. Interest Coverage remains an important factor in determining the return on shareholders’ funds both before and after the merger but Profit Margin also becomes important after the merger. And looking at the diversification effects of merger, in two out of the three cases there has been a reduction in total and systematic risk.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31253.

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Date of creation: 10 Apr 2011
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Handle: RePEc:pra:mprapa:31253

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Keywords: Mergers & Acquisitions; Financial Services Sector; liquidity;

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  1. Sumon Kumar Bhaumik & Ekta Selarka, 2008. "Impact of M&A on firm performance in India: Implications for concentration of ownership and insider entrenchment," William Davidson Institute Working Papers Series wp907, William Davidson Institute at the University of Michigan.
  2. Cornett, Marcia Millon & McNutt, Jamie John & Tehranian, Hassan, 2006. "Performance Changes around Bank Mergers: Revenue Enhancements versus Cost Reductions," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(4), pages 1013-1050, June.
  3. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 241-273, April.
  4. Albert Banal-Estañol & Marco Ottaviani, 2007. "Bank Mergers and Diversification: Implications for Competition Policy," European Financial Management, European Financial Management Association, vol. 13(3), pages 578-590.
  5. Mahesh Kumar Tambi, 2005. "Impact Of Mergers And Amalgamation On The Performance Of Indian Companies," Finance, EconWPA 0506007, EconWPA.
  6. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
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