Abstract
This study analyzes a sample of 170 companies merged in India during the period 1993–2003. Total sample has been classified into two sub-samples, that is, group mergers (125) and non-group mergers (45). Operating performance of three pre-merger years is com-pared with three post-merger years and thereby the outcomes of mergers are discussed. Several aspects of operating performance like profitability, size, liquidity, leverage and earnings per share (EPS) are examined. Mean values of pre-merger and post-merger years are compared with the help of t-statistics. The results show that profitability has declined in the post-merger period in both group and non-group companies. However, non-group mergers have shown much greater decline in return on net worth and negative net profit margin in the post-merger period. Group mergers have attained operating efficiencies in terms of reduced cost of production to net sales in post-merger period, whereas non-group mergers have lost their edge over operational synergies. Significant decline has been observed in EPS during the post-merger period in sub-sample of non-group mergers. Thus, analysis of operating performance reveals that profitability decline is quite huge and significant in non-group mergers. The reasons for this decline are operational inefficiency and poor asset utilization by non-group merged companies. The study provides evidence that group mergers are a better choice to non-group mergers.
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