The Impact of Merger and Acquisition on Financial Performance of selected Sectors

Mergers and Acquisitions are important corporate strategy actions that aid the firm in external growth and provide a competitive advantage. The company's stock price and financial performance can be affected by various events like government announcements, innovations and company announcements. The key objective of the study is to explore the impact of merger and acquisitions on the financial performance and stock prices for the selected Indian companies for the period between 2008 and 2014. Paired t-test, correlation, coefficient of variation and comparative analysis are used as the important tools to analyze the pre-merger and post- merger financial data. For the purpose of study, the sectors namely, Banking, Steel, Oil, Automobile, Electrical and IT sectors have been selected. These sectors had mergers within the period of 2008 to 2014. The analysis indicates that the Banking and Steel sector has huge impact on their profitability after the merger. The IT sector has significant impact on the stock prices. The comparative analysis shows that Banking, Electrical, Automobile and IT sectors have positive change in profitability after merger and Steel and Oil sector have reduced profits. Similarly Steel and Oil sector become more leveraged after merger. Banking, Electric and Oil sector have improved liquidity position than others after merger. The Oil sector has more price variation after merger and resulted in poor returns. The best sector to undergo merger is banking and the best stocks to invest during the merger are IT and Automobile stocks which gave huge return to the investors.