Synergistic Gains from Mergers and Acquisitions

Author(s)

Dr Anjala Kalsie and Dr Shikha Mittal Shrivastav

Affiliations

1. Assistant Professor, Faculty of Management Studies, University of Delhi, Delhi
2. Assistant Professor, IILM Graduate School of Management, Greater Noida, Uttar Pradesh

Abstract

The objective of the paper is to study the operating and profitability performance achieved as synergy gains after merger and acquisitions (M&As). To examine the synergy gains in pre and post merger, this paper uses a sample of 15 Domestic Inbound M&A deals carried out between 2008 and 2016. For measuring Operating Performance four ‘Management Efficiency Ratios were used, viz., the Fixed Asset Turnover Ratio, Inventory Turnover Ratio, Debtors Turnover Ratio and Interest Cover Ratio’. For measuring Profitability, seven profitability ratios were used namely ‘Profit Before Interest Depreciation and Tax Margin (%), Profit Before Interest and Tax Margin (%), Profit Before Depreciation and Tax Margin (%), Cash Profit Margin (%), After Tax Profit Margin (%), Return on Capital Employed (%) and Return on Net Worth (%)’ were considered. The data for the same is collected from Venture Intelligence and Capital Line (C-MOTS Infotech). The said objective is achieved via Logit Panel Data. The results of Panel Logit Model indicate that Operating Performance Ratios – ‘Fixed Asset turnover ratio and Debtors turnover ratio’ are statistically significant with the merger and acquisition activity. Profitability Ratios – 'PBIDTM (%) PBITM(%), PBDTM(%), CPM(%), RONW(%) and APATM ratios are statically significant with the merger and acquisition activity.

Keywords

Operating Synergies, Profitability Synergies, Logit Panel, Inbound M&A

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