IMPACT OF MERGERS ON THE WEALTH OF ACQUIRER AND TARGET COMPANIES IN INDIA

Murugesan Selvam, Reader and Head, Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India drmselvam@yahoo.co.in Manivannan Babu, Lecturer, Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India babuphd@gmail.com Gunasekaran Indhumathi, Research Scholar, Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India indhu_nila@rediffmail.com Bennet Ebenezer, Research Scholar, Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India bennetebenezer@yahoo.com

ABSTRACT
Mergers and acquisition becomes the major force in the changing environment. The policy of liberalization, decontrol and globalization of the economy has exposed the corporate sector to domestic and global competition. It is true that there is little scope for companies to learn from their past experience. Therefore, to determine the success of a merger, it is to be ascertained if there is financial gain from mergers. The present study is limited to a sample of companies which underwent merger during the period of 20022005. It is proposed to compare the performance of the acquirer and target companies before and after the period of mergers by using ratio analysis and t-test during the study period of three years. The study found that the shareholders of the acquirer companies, increased their wealth i.e. increased the returns for the investment after the merger event. Key words: Merger, Acquirer, Target, Financial Performance INTRODUCTION Mergers, acquisitions and corporate control have emerged as major forces in the modern financial and economic environment. Mergers, a source of corporate growth, have been the subject of careful examination by scholars. The mergers and acquisitions in India have changed dramatically after the liberalization of Indian economy. The policy of liberalization, decontrol and globalization of the economy has exposed the corporate sector to domestic and global competition. Low cost products, with good quality have become essential for a company to survive in the competitive market. Factors like low interest rates, cheap labour, and liberal government policy, have helped the Indian corporate sector to reduce their cost. It is in this context that corporate sectors view mergers for further cost reduction through technology advancement or to make their

presence felt in the market. The liberalization policy of Government of India has witnessed an unprecedented number of mergers and acquisitions in the country. In terms of the growth rate in mergers and acquisitions deals, India occupies the second position in the world. REVIEW OF LITERATURE An extensive review of literature has been carried out in order to enhance the level of understanding in the area of mergers, gain insight into the impact of mergers on the wealth of acquirer and target companies and formulate research problem for further investigation in this area. For the purpose of this study, review has been done on empirical studies in books, journals, published papers, etc. These studies have been reviewed and summarized as follows. Prasanna Chandra (1995) in his article, “Shareholder Wealth Maximization”, discussed the various issues connected with the goal of shareholders’ wealth maximization, rationale for the goal of maximizing shareholder wealth, critics for and against the shareholders’ wealth maximization, conflicts between managers and shareholders regarding wealth and shareholder orientation in India. Evrim Akdogu, Jarrad Harford and Sara.B.Moeller (2005) in their article, “Value Creation and Merger Waves”, studied merger waves at the industry level. These waves can be categorized into horizontal, vertical and conglomerate waves based on the pattern of merger activity. The study found that only conglomerate merger waves destroy value of the firm. Horizontal mergers create more value within a wave dominated by horizontal activity than anywhere else either outside waves or inside other types of waves. The study results have implications for overall value creation and strategic considerations within waves. The article entitled, “Mergers- A Few Reflections on Basics”, by Murty. GRK (2006) has overviewed the basic concepts of merger and the underlying logic of mergers. The shareholders of business firms do expect positive outflows from mergers and acquisitions. They are indeed resorted to with a hope that mergers result in reduction of expenses, enhancement of market power, and reduced earnings volatility, extra capital, smooth privatization, and competency build-up. The author also discussed the factors leading to failures of a merger and gave suggestions for rectifying the failures. Vanitha. S (2007), in her dissertation (unpublished) entitled, “Mergers and Acquisition in Manufacturing Industry”, analyzed the financial performance of the merged companies, share price reaction to the announcement of merger and acquisition and the impact of financial variables on the share price of merged companies. The author found that the merged company reacted positively to the merger announcement and also, few financial variables only influenced the share price of the merged companies. A book entitled, “Mergers & Acquisitions in the Banking Sector- The Indian Scenario”, written by Selvam. M (2007) has analyzed the implications of stock price

reactions to mergers and acquisitions activities taken place in banking industry with special reference to private and public sector banks. The author has found from the analysis that the share prices are market sensitive. From the financial analysis it was observed that majority of the banks went for branch expansion and this has affected profitability to some extent and it resulted in unhealthy competition among the players. Vanitha. S and Selvam. M (2007) in their study, “Financial Performance of Indian Manufacturing Companies during Pre and Post Merger”, analyzed the pre and post merger performance of Indian manufacturing sector during 2000-2002 by using a sample of 17 companies out of 58 (thirty percent of the total population). For financial performance analysis, they used ratio analysis, mean, standard deviation and ‘t’ test. They found that the overall financial performance of merged companies in respect of 13 variables were not significantly different from the expectations. To sum up the review of literature, many contributions have offered different perspectives of merger in different industries worldwide and explained the history of merger, valuation techniques followed by merging companies, organizational conflicts and shareholders wealth effect due to merger. From the review of many excellent research papers and articles analyzing the pre and post merger performance of merged companies, it is inferred that majority of the studies strongly support the concept of enhanced post merger performance due to merger and it is beneficial to the acquirer companies. STATEMENT OF THE PROBLEM Many studies have been conducted to analyze corporate events like mergers, takeovers, restructuring and corporate controls. The researchers have generally focused on public and corporate policy issues, financial implications and method of valuation. However, most of the studies have deeply concentrated only on the analysis of financial performance of both acquirer and target companies in the pre-merger period and specifically compared the performance of acquirer companies during pre and post merger period. There has been no comprehensive analysis attempted from the view point of the acquirer and target companies in the pre- and post- merger periods. Hence, in order to fill this gap in research, the present study attempts to analyze the financial performance of both acquirer and target companies in the pre- and post-merger period. NEED FOR THE STUDY Merger is a routine event in the changed economic environment. Post- merger financial gain will be generated only when the two companies are worth more together than apart. Therefore, there is a need to study the wealth enhancement with respect to mergers, which can be helpful in assessing the success of merger. Many studies have been conducted to analyze both acquiring and target companies in the pre-merger period and more specifically, acquirer companies in the pre- and post-merger periods. It is equally important to analyze from the view point of the acquirer and target companies in the pre-

The details of sample companies. Hence an attempt has been made to study the wealth of both acquirer and target companies in the pre. For the purpose of corporate analysis. all the required data for analysis were available in the PROWESS (Corporate Data Base). . But only for 13 companies. along with the date of merger and name of the Industry concerned are given in Table-1.2005. 2. Period of the study For the purpose of selecting sample companies. 1. Besides.2002 to 31. METHODOLOGY OF THE STUDY Sample selection There are 93 companies which underwent mergers within and across industry during the study period from 01. . the sample size of this study is confined to 13. Sources of data The present study basically depends on secondary data. following points were taken into account. (Acquirer and Target). 2002 to 31st March. three years before merger and three years after merger were considered. 1. 18 companies merged in the same industry during the study period. . 2005.and post-merger periods also.Acquirer and target companies should belong to the same industry.04. OBJECTIVES OF THE STUDY The following are the objectives of the study. To evaluate the pre and post merger financial performance of the acquirer and target companies.The companies should be listed in BSE.Availability of merger date and industry information.and post-merger period. Hence. it was decided to select all companies which merged with other companies in the same industry during the study period. the present study covers a period of three years from 1st April. The post merger financial performance of the combined firm is not significantly different from the aggregate performance of the acquirer and target companies prior to the merger. suggestions and conclusion. while selecting the sample.03. To offer the findings. But in order to evaluate the financial performance of sample companies on a comparative basis. HYPOTHESIS OF THE STUDY The following null hypothesis has been developed for testing the objectives of the study. The required data on financial performance before and after merger were collected for the three year period and they .

Ricoh India Ltd-Gestetner (India) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd were high during the post merger period when compared to the pre merger period. The data were also collected from books. Tata Chemicals Ltd-Hind Lever Chemicals.were obtained from CMIE-PROWESS and www. Further. Ltd-Lakshmi Auto Components. Sundram Fasteners Ltd-T V S Autolec. PE Ratio. The standard current ratio is 2:1 that is 2/3 of current assets and 1/3 of current liabilities. A combined firm should ensure that it does not suffer from lack of liquidity. Liquidity ratios Liquidity ratios measure the ability of the firm to meet its current obligations (liabilities). PB Ratio. Profitability Ratio and t-test were used. .merger performance of the combined firm.Equity Ratio and Interest Coverage Ratio. ANALYSIS OF FINANCIAL PERFORMANCE Empirical tests were carried out on the collected financial data with the help of ratio analysis. articles in various journals. It is understood from the Table that the calculated current ratio (average of three years) of acquirer and target companies like Asahi India Glass Ltd-Floatglass India. the following null hypothesis has been tested: H0: The post merger financial performance of the combined firm is not significantly different from the aggregate performance of the acquirer and target companies prior to the merger. T V S Motor Co. and also that it does not have excess liquidity. EBIT to Sales and EBIT to Fixed Assets in order to ascertain whether mergers resulted in shareholders wealth or not. Tools used In order to study the financial performance of acquirer and target companies. Eastern Silk Inds LtdSstella Silks.2 shows the current ratio of sample acquirer and target companies’ pre merger average performance and post merger combined performance. Current Ratio. namely.bse-india. Solvency Ratio. Activity Ratio. it is evident that above eight companies improved their current ratio after merger and the other sample companies failed to perform well. magazines and newspapers. Return on Capital Employed. The present study attempts to measure and analyze the pre and post merger performance of acquirer and target companies by using liquidity ratios. t-test and standard deviation. ratios like Liquidity Ratio. Leverage Ratio. Debt. The calculated current ratio of combined average performance of the acquirer and target companies. activity ratios like Fixed Asset Turnover Ratio and Total Asset Turnover Ratio and profitability ratios like Return on Networth. leverage Ratios like.com. Matrix Laboratories Ltd-Fine Drugs & Chemicals. Accordingly. a) Current ratio Table . The pre-merger average performance of the acquirer and target companies were compared with the post. Quick Ratio and Net Working Capital.

Oriental Bank of Commerce-Global Trust Bank and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd) failed to perform better.Floatglass India. it is evident that pre merger average performance of seven acquirer and target companies (J K Tyre & Inds. Matrix Laboratories Ltd-Fine Drugs & Chemicals. Sundram Fasteners Ltd-T V S Autolec. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) and Silicon Valley Infotech LtdPentasoft Technologies Ltd increased significantly after merger. few sample merged companies were significantly different in the pre. Asahi India Glass Ltd-Floatglass India. Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd (1. Asahi India Glass Ltd-Floatglass India and Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India).53500). Supreme Industries Ltd-Siltap Chemicals. Gujarat Ambuja Exports Ltd-Jupiter Biotech.namely. before merger was much higher than the standard ratio. namely.25000) in post merger. Gujarat Ambuja Exports Ltd-Jupiter Biotech.3. Tata Chemicals Ltd -Hind Lever Chemicals. The result of standard deviation clearly shows the fact that the variation in current ratio of all merged companies. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) (2. Hence.65833). Tata Chemicals Ltd-Hind Lever Chemicals. The calculated quick ratio of Oriental Bank of Commerce-Global Trust Bank (3.52500) in the pre merger period.94833) in pre merger period and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd (32. Eastern Silk Inds. As revealed by the Table. Ltd-Vikrant Tyres. Oriental Bank of Commerce-Global Trust Bank and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd. Eastern Silk Inds Ltd-Sstella Silks and Ricoh India Ltd-Gestetner (India) was better during the post merger period when compared to the pre merger period.values of sample merged companies. T V S Motor Co. This clearly brings out the fact that all sample merged companies. was higher than the standard ratio of 2:1. was higher than the standard ratio (1:1). Asahi India Glass Ltd . except Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) (2.37333 in the post merger period . showed significant difference between pre-merger and post-merger performance at 5% level of significance. Only Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd has registered significant difference in its preand post-merger values at 10% level of significance. the average premerger current ratio of companies like Asahi India Glass Ltd-Floatglass India. Ltd-Sstella Silks and Ricoh India LtdGestetner (India)) was higher than the combined performance of the same acquirer and target companies during the post merger period and the other companies (Supreme Industries Ltd-Siltap Chemicals. Ltd-Lakshmi Auto Components. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). The t. The calculated quick ratio (average of three years) of merged sample companies like J K Tyre & Inds Ltd -Vikrant Tyres.94833). This clearly brings out the fact that all sample companies after merger was lower than the standard ratio. Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd alone earned the negative ratio of -1. Matrix Laboratories LtdFine Drugs & Chemicals.and post-merger period at 5% level of significance. were higher than that of pre merger period.53833). Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) (1. Further. b) Quick ratio The quick ratio of sample acquirer and target companies’ during pre merger and post merger period is given in Table . except Asahi India Glass Ltd-Floatglass India. Oriental Bank of Commerce-Global Trust Bank (4.

Fine Drugs & Chemicals. Supreme Industries Ltd-Siltap Chemicals. Oriental Bank of Commerce-Global Trust Bank and Ricoh India LtdGestetner (India)) improved their Working Capital after merger. Ltd-Lakshmi Auto Components. The result of standard deviation of merged companies clearly shows that the variation in the quick ratio during the post merger period was higher than the pre merger period in the case of Asahi India Glass Ltd-Floatglass India.and it depicts that the company failed to maintain sufficient cash to meet its current requirements. Supreme Industries Ltd. During pre merger. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) and Matrix Laboratories Ltd-Fine Drugs & Chemicals was statistically significant after merger. It reveals the fact that few sample merged companies (Gujarat Ambuja Exports Ltd-Jupiter Biotech. Ltd-Sstella Silks. The application of t. This leads to the conclusion that the average quick ratio of sample companies like Asahi India Glass Ltd-Floatglass India. c) Net working capital The average Net Working Capital of sample acquirer and target companies and combined average performance during pre and post periods is provided in Table-4. Sundram Fasteners Ltd-T V S Autolec. Matrix Laboratories Ltd-Fine Drugs & Chemicals. T V S Motor Co. Oriental Bank Of Commerce-Global Trust Bank and Ricoh India Ltd-Gestetner (India) were higher than that of pre merger period. converting inventories into cash and vice-versa. it is evident that 10 sample companies (Asahi India Glass LtdFloatglass India. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Further. The amount of working capital required depends upon the length of operating cycle. Sundram . the average performance of the acquirer and target companies like J K Tyre & Inds Ltd -Vikrant Tyres. Matrix Laboratories Ltd-Fine Drugs & Chemicals. while Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Eastern Silk Inds. Gujarat Ambuja Exports Ltd-Jupiter Biotech. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Sundram Fasteners Ltd-T V S Autolec. Tata Chemicals Ltd-Hind Lever Chemicals.test revealed that few sample merged companies like Asahi India Glass Ltd-Floatglass India was significant at 5% level and Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) and Matrix Laboratories Ltd-Fine Drugs & Chemicals were significant at 10% level in their quick ratio. Eastern Silk Inds Ltd-Sstella Silks and Ricoh India Ltd-Gestetner (India) were significant at 5% level and Matrix Laboratories Ltd-Fine Drugs&Chemicals and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd were significant at 10% level. T V S Motor Co. Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd. Ltd-Lakshmi Auto Components. This means that these companies enjoyed sufficient current assets to meet current liabilities. It is understood from the t-test that Gujarat Ambuja Exports Ltd-Jupiter Biotech and Sundram Fasteners Ltd-T V S Autolec were significant at 1% level. The result of standard deviation clearly establishes the fact that the variation of Working Capital of all merged companies except Tata Chemicals Ltd-Hind Lever Chemicals. Oriental Bank of Commerce-Global Trust Bank.Siltap Chemicals and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd was high when compared to the post merger period. Matrix Laboratories Ltd. Gujarat Ambuja Exports Ltd-Jupiter Biotech. The operating cycle for a manufacturing company is the time taken for conversion of raw material into cash and vice-versa and for trading firm. Tata Chemicals LtdHind Lever Chemicals.

are more concerned with the firm’s long term financial strength. financial leverage or capital structure ratios are calculated. Matrix Laboratories Ltd-Fine Drugs & Chemicals. This result establishes that the average Solvency Ratio of Gujarat Ambuja Exports Ltd-Jupiter Biotech. Ltd-Sstella Silks (2. T V S Motor Co. Matrix Laboratories Ltd-Fine Drugs & Chemicals (2. This indicates the fact that these sample companies were in a position to meet its long term as well as short term requirements. Table . Matrix Laboratories Ltd-Fine Drugs & Chemicals and Silicon Valley Infotech LtdPentasoft Technologies Ltd) achieved significant growth with respect to Working Capital.24333). Sundram Fasteners Ltd-T V S Autolec and Ricoh India Ltd-Gestetner (India)) registered significant difference in its pre. excluding noncash depreciation expenses. Tata Chemicals Ltd-Hind Lever Chemicals. The result of standard deviation clearly explains that the variation of Solvency Ratio of the merged companies like Tata Chemicals Ltd-Hind Lever Chemicals.19333) was higher during the post merger period when compared to the pre merger period. Higher ratio indicates that a company is most likely to meet its debt obligations. To judge the long term financial position of the firm. Ricoh India Ltd-Gestetner (India).5 explains the solvency ratio of sample acquirer and target companies during pre and post merger periods. Eastern Silk Inds Ltd-Sstella Silks. Ricoh India Ltd-Gestetner (India) and Silicon Valley Infotech LtdPentasoft Technologies Ltd was higher than that of pre merger period. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). a) Solvency ratio The solvency ratio measures the size of a company's after-tax income.and post-merger values at 10% level in their Solvency Ratio. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Eastern Silk Inds Ltd-Sstella Silks. Sundram Fasteners Ltd-T V S Autolec and Ricoh India Ltd-Gestetner (India) increased significantly during the post merger period. Matrix Laboratories Ltd-Fine Drugs & Chemicals. The Oriental Bank of Commerce-Global Trust Bank gained the highest ratio of 20.Fasteners Ltd-T V S Autolec. financial institutions etc. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Only two companies (Tata Chemicals Ltd-Hind Lever Chemicals. Eastern Silk Inds. Ltd-Lakshmi Auto Components (2. as compared to the firm's total debt obligations. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Eastern Silk Inds Ltd-Sstella Silks) recorded significant difference between pre-merger and post-merger performance at 5% level of significance. The application of t-test explains that four sample merged companies (Gujarat Ambuja Exports Ltd-Jupiter Biotech.33333) and Ricoh India Ltd-Gestetner (India) (2. Tata Chemicals Ltd-Hind Lever Chemicals (3. It is important to note that all sample companies earned the solvency ratio more than one time in the post merger period.08333).74333). Eastern Silk Inds. From the table it is clear that the calculated (three years average) Solvency Ratio of merged companies like J K Tyre & Inds Ltd-Vikrant Tyres (1.30667).61833 and 18. Ltd-Sstella Silks. . Leverage ratios The long term creditors like debenture holders.25000 in pre merger as well post merger period respectively. Asahi India Glass Ltd-Floatglass India (1.31000).

All the merged companies.85000.12667) and Ricoh India LtdGestetner (India) (3. and Silicon Valley Infotech LtdPentasoft Technologies Ltd were high during the post merger period when compared to the pre merger period. c) Interest coverage ratio Table . Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd earned the negative ratio both in pre (-11. The calculated (three years average) Debt-Equity Ratio of five merged companies J K Tyre & Inds LtdVikrant Tyres.36667. The application of t-test reveals that few sample merged companies. This indicates that the merged companies’ lenders of above companies have contributed more funds than owners.b) Debt-Equity ratio Table . The other merged sample companies reduced their debt capital after the merger activity. Eastern Silk Inds. 0. namely.6 tabulates the average Debt-Equity Ratio of sample acquirer and target companies and combined ratio during pre and post periods. It shows that the outsiders’ capital proportion was more than the owners’ proportion. Eastern Silk Inds. Gujarat Ambuja Exports LtdJupiter Biotech. This leads to the conclusion that the average Debt-Equity Ratio of acquirer and target companies during the pre merger increased significantly in the combined post merger.14000 and 0.25167) and post merger (7. A low debt-equity ratio implies a greater claim of owners than creditors. A high level of debt introduces inflexibility in the firm’s operations due to the increasing interface and pressure from creditors and constraints on the managements’ independent functioning and energies. Supreme Industries Ltd-Siltap Chemicals. four sample company mergers like. The result of standard deviation confirmed that the variation of Debt-Equity Ratio of all merged sample companies except Gujarat Ambuja Exports LtdJupiter Biotech. Ltd-Sstella Silks and Ricoh India Ltd-Gestetner (India) were significant at 5% level in their Debt-Equity Ratio. From the point of view of creditors. 1.32000) earned more than two times during pre merger. A high debt-equity ratio means that claims of creditors are greater than those of owners.50333). It establishes that the lenders’ contribution were 1.11000 times of owners’ contribution respectively.7 shows the Interest Coverage Ratio of sample acquirer and target companies during pre and post merger periods. Ltd-Lakshmi Auto Components and Matrix Laboratories Ltd-Fine Drugs & Chemicals were higher than that of pre merger period. 1.75000) and Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) earned high ratio of 120. Asahi India Glass Ltd-Floatglass India and Sundram Fasteners Ltd-T V S Autolec were significant at 10% level and Gujarat Ambuja Exports Ltd-Jupiter Biotech. it represents a satisfactory situation since a high proportion of equity provides a larger margin of safety for them. T V S Motor Co. Oriental Bank Of Commerce-Global Trust Bank (21. Sundram Fasteners Ltd-T V S Autolec.75667. Asahi India Glass Ltd-Floatglass India (7. Ltd-Sstella Silks (2. earned high ratio during the post merger when compared to the pre merger.21667 . It is clear that J K Tyre & Inds Ltd-Vikrant Tyres and Oriental Bank of Commerce-Global Trust Bank earned the lowest ratio in the post merger 1. J K Tyre & Inds. This relationship describes that the lenders’ contribution for each rupee of the owners’ contribution in the capital mix of the company was higher. except Supreme Industries Ltd-Siltap Chemicals. In the present analysis. Ltd-Vikrant Tyres.96333. Among these companies.79333).

Ltd-Lakshmi Auto Components. The application of t-test reveals that most of the sample merged companies. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Ricoh India Ltd-Gestetner (India). Rs. The overall analysis takes us to the conclusion that the average Interest Coverage Ratios of those companies increased statistically significant after merger. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). These ratios are also called Turnover Ratios because they indicate the speed with which assets are being converted or turned over into sales.68896 respectively for investment in fixed assets. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Eastern Silk Inds Ltd-Sstella Silks and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd were higher during the pre merger period rather than in the post merger period. namely. Activity ratios Funds are invested in various assets to generate sales and profits. The result of standard deviation clearly shows the fact that the variation of Interest Coverage Ratio during the post merger period was higher than that of pre merger period in the case of Asahi India Glass Ltd-Floatglass India. The result of standard deviation clearly shows the fact that the variation of Fixed Assets Turnover Ratio of all merged companies.8 shows the Fixed Assets Turnover Ratio of sample acquirer and target companies during pre and post merger periods. 14. Activity Ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. T V S Motor Co. This means that for generating a sale of one rupee. Further. Tata Chemicals Ltd-Hind Lever Chemicals. 15. a) Fixed assets turnover ratio Table .values of sample merged companies. Oriental Bank of Commerce-Global Trust Bank and Ricoh India LtdGestetner (India) improved their Fixed Assets Turnover Ratio after merger with high ratios earned. it is evident that eight sample companies like Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India).33401. It is significant that standard deviation for Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd was zero. Asahi India Glass LtdFloatglass India and Eastern Silk Inds Ltd-Sstella Silks at 5% level were significant. Supreme Industries Ltd-Siltap Chemicals. except Supreme Industries Ltd-Siltap Chemicals.74858 and Rs. the companies.and 1. namely. As revealed by the Table. Oriental Bank of Commerce-Global Trust Bank and Ricoh India Ltd-Gestetner (India) had to spend Rs.and post-merger period at 5% level of significance. It is found that Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd did not utilize the fixed assets to improve the sales during the post merger period. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Matrix Laboratories Ltd-Fine Drugs & Chemicals. few sample merged companies were significantly different in the pre. Higher ratio represents better utilization of the fixed assets.45667 respectively. Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd were significant at 10%. It is understood that the calculated Fixed Assets Turnover Ratio of merged companies like Asahi India Glass Ltd-Floatglass India. were lower than that of pre merger period. Sundram . Sundram Fasteners Ltd-T V S Autolec. 18. The t. Sundram Fasteners Ltd-T V S Autolec. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Ricoh India Ltd-Gestetner (India) at 1% level. namely.

10. Tata Chemicals Ltd-Hind Lever Chemicals. were higher than that of pre merger period.39426 times of Gujarat Ambuja Exports Ltd-Jupiter Biotech during the post merger period reveals that the merged entity generated a sale of Rs.39426).63432). The highest Total Assets Turnover Ratio of 2. Supreme Industries Ltd-Siltap Chemicals and Oriental Bank of CommerceGlobal Trust Bank. T V S Motor Co. It is understood that the calculated Total Assets Turnover Ratio of merged sample companies like Supreme Industries Ltd-Siltap Chemicals (1. Gujarat Ambuja Exports Ltd-Jupiter Biotech and Oriental Bank Of Commerce-Global Trust Bank were significant at 5% level and Glaxosmithkline Pharmaceuticals LtdBurroughs Wellcome (India) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd were significant at 10% level. But the other eight merged companies earned insignificant returns.31700). Hence.9 shows the Total Assets Turnover Ratio of sample acquirer and target companies during pre and post merger periods.Fasteners Ltd-T V S Autolec and Ricoh India Ltd-Gestetner (India) were significantly different in pre-merger and post-merger performance at 5% level of significance. T V S Motor Co. The result of standard deviation clearly showed the fact that the variation of Total Assets Turnover Ratio of merged companies.51415). It is clear from the Table that the calculated . 2. Hence every action initiated by management. Gujarat Ambuja Exports Ltd-Jupiter Biotech (1. Supreme Industries Ltd-Siltap Chemicals and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd registered significant difference in its pre. Ltd-Lakshmi Auto Components (1. Profitability ratios A company should earn profits to survive and grow over a long period of time. a) Return on networth The Return on Networth of sample acquirer and target companies during pre and post merger periods is given in Table . The application of t-test revealed that few merged sample companies Supreme Industries Ltd-Siltap Chemicals. b) Total assets turnover ratio Table .90228). should aim at maximizing profits for expansion and growth. Ltd-Lakshmi Auto Components (1. Sundram Fasteners Ltd-T V S Autolec (1. This leads to the conclusion that the average Total Assets Turnover Ratio of those companies increased significantly after merger. The financial manager should continuously evaluate the efficiency of the company in terms of profits. namely.33026) were more than one time and performed well during the post merger period when compared to the pre merger period. Gujarat Ambuja Exports Ltd-Jupiter Biotech (2. During the pre merger period. These firms received significant t-value in their Total Assets Turnover Ratio.12148) and Ricoh India Ltd-Gestetner (India) (1.06792) earned more than one time. the average Fixed Assets Turnover Ratio of those companies increased significantly after merger.and post-merger values at 10% level of significance in their Fixed Assets Turnover Ratio.39 for one rupee investment in fixed and current assets together. Sundram Fasteners Ltd-T V S Autolec (1.

Ltd-Lakshmi Auto Components. were lower during the post merger period. Ltd-Sstella Silks were significant at 5% level in their Return on Networth.35667 on net worth in the post merger period. b) Return on capital employed Table . The application of t-test reveals that few sample merged companies.38000.test reveals that few sample merged companies like Gujarat Ambuja Exports Ltd-Jupiter Biotech and Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) were significant at 1% level and Asahi India Glass Ltd-Floatglass India. Gujarat Ambuja Exports Ltd-Jupiter Biotech and Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) at 1% level. This clearly brings out the fact that all sample companies. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). the calculated average Return on Capital Employed of three years of merged companies like Supreme Industries Ltd-Siltap Chemicals. Glaxosmithkline Pharmaceuticals LtdBurroughs Wellcome (India). According to the Table. The function of t. it is evident that nine sample companies out of 13 companies improved their Return on Capital Employed after merger.49833 and -29. This leads to the conclusion that the average Return on Capital Employed of companies (Gujarat Ambuja Exports Ltd-Jupiter Biotech.51000. The standard deviation explains the fact that the variation of Return on Networth of all merged sample companies. T V S Motor Co.17667 and 18. over a period of three years were not high during the post merger period when compared to the pre merger period. The Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd earned negative returns of -2. The other merged companies show lower returns in the post merger period.85667). Ltd-Lakshmi Auto Components and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd.11 reveals the Return on Capital Employed of sample acquirer and target companies during pre and post merger periods. Eastern Silk Inds Ltd-Sstella Silks.81500 respectively) to positive returns (3. namely. Sundram Fasteners Ltd-T V S Autolec and Eastern Silk Inds. Further. Ltd-Lakshmi Auto Components was higher than that of pre merger period. J K Tyre & Inds Ltd- . Asahi India Glass Ltd-Floatglass India. It is important to note that J K Tyre & Inds Ltd-Vikrant Tyres.average Return on Networth of merged companies like Tata Chemicals Ltd-Hind Lever Chemicals. Ltd-Sstella Silks) increased statistically significant after merger. Supreme Industries Ltd-Siltap Chemicals. The result of standard deviation clearly shows the fact that the variation of Return on Capital Employed of T V S Motor Co. Oriental Bank Of Commerce-Global Trust Bank and Silicon Valley Infotech LtdPentasoft Technologies Ltd were better during the pre merger period rather than in the post merger period. 53. Eastern Silk Inds LtdSstella Silks at 5% level and J K Tyre & Inds Ltd-Vikrant Tyres and Supreme Industries Ltd-Siltap Chemicals at 10% level were significant in their Return on Capital Employed. earned positive returns from their total capital employed after the merger. T V S Motor Co.54667 respectively) due to merger. -19. Asahi India Glass Ltd-Floatglass India and Oriental Bank Of Commerce-Global Trust Bank recovered from negative returns (1. Sundram Fasteners Ltd-T V S Autolec and Eastern Silk Inds. It depicts that the above company did not properly utilize its equity capital after merger. except Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd (-0. Thus it is concluded that the average Return on Networth of those companies (Gujarat Ambuja Exports Ltd-Jupiter Biotech. except Ricoh India Ltd-Gestetner (India).

and post-merger period at 10% level of significance. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Eastern Silk Inds Ltd-Sstella Silks showed significant difference between pre-merger and post-merger performance at 5% level of significance and Sundram Fasteners Ltd-T V S Autolec and Ricoh India Ltd-Gestetner (India) were significant at 1% level.values of sample merged companies. The companies like T V S Motor Co.Vikrant Tyres and Supreme Industries Ltd-Siltap Chemicals) recorded increased returns on capital employed significantly after merger.15333 respectively during the post merger. According to standard deviation. was not healthy during the post merger period when compared to the pre merger period. Ricoh India Ltd-Gestetner (India) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd was healthy during the pre merger period rather than during the post merger period while other sample companies earned higher yield during the post merger period. Asahi India Glass Ltd-Floatglass India and Glaxosmithkline Pharmaceuticals LtdBurroughs Wellcome (India). T V S Motor Co. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India).23667). Lower Price to Book value is better for the company. The t. Ricoh India LtdGestetner (India) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd earned negative price earnings of -10. Oriental Bank Of Commerce-Global Trust Bank and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd. namely. Matrix Laboratories Ltd-Fine Drugs & Chemicals. the variation of PB Ratio of all merged companies. But sample companies like J K Tyre & Inds Ltd-Vikrant Tyres. namely. Sundram Fasteners Ltd-T V S Autolec and Ricoh India Ltd-Gestetner (India)) increased significantly after merger.01333). As explained by the Table. d) Price-Earnings ratio The PE ratio of sample acquirer and target companies during pre and post merger periods is given in Table .13667 and -46. It is important to note that the calculated PB Ratio (average of three years) of all merged companies except Oriental Bank of Commerce-Global Trust Bank (1. Market value per share is expected to be higher than the book value per share for growing and profit-making firms.17667). it is evident that three sample companies. except Asahi India Glass Ltd-Floatglass India. were higher than that of pre merger period. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) (8. earned high price to book value after the merger activity. Hence. It is understood from the Table that the calculated PE ratio (average of three years) of merged companies like J K Tyre & Inds Ltd-Vikrant Tyres.13.70333) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd (1. . Ltd-Lakshmi Auto Components. Asahi India Glass Ltd-Floatglass India (6. Further.11667) and Matrix Laboratories Ltd-Fine Drugs & Chemicals (6. Ltd-Lakshmi Auto Components. This clearly indicates that the companies’ market price was lower than the book value. the average PB Ratio of those companies (Asahi India Glass Ltd-Floatglass India. c) Price to book value ratio Table-12 exhibits the PB Ratio of sample acquirer and target companies during pre and post merger periods. Eastern Silk Inds Ltd-Sstella Silks. showed significant difference between pre-merger and post-merger performance at 10% level of significance. few sample merged companies were significantly different in the pre.

LtdLakshmi Auto Components. This ratio indicates the effect of fixed expenses on profitability. the average PE ratio of those companies (Matrix Laboratories Ltd-Fine Drugs & Chemicals. Ltd-Sstella Silks. Asahi India Glass LtdFloatglass India. T V S Motor Co. Glaxosmithkline Pharmaceuticals LtdBurroughs Wellcome (India). Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) (27. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Gujarat Ambuja Exports Ltd-Jupiter Biotech.40667) earned the EBIT to sales ratio more than 20 times. Ricoh India Ltd-Gestetner (India) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd) recorded insignificant ratio.53333) was higher than other companies during post merger.34000 respectively when compared to other companies in the post merger. As discovered by the Table. T V S Motor Co. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Silicon Valley Infotech LtdPentasoft Technologies Ltd was low than that of pre merger period.86333 and 21. Oriental Bank of Commerce-Global Trust Bank was significant at 5% level and Sundram Fasteners Ltd. Oriental Bank of Commerce-Global Trust Bank and Sundram Fasteners Ltd-T V S Autolec) increased PE Ratio significantly after merger. Table . It is clear from the above Table that the calculated EBIT to Sales (average of three years) of all merged companies increased due to merger except. The calculated EBIT to Sales Ratio of Oriental Bank of Commerce-Global Trust Bank (74.It depicts the fact that these companies failed to fulfill the expectations of investors after merger. The function of t-test brought out the fact that few sample merged companies like Matrix Laboratories Ltd-Fine Drugs & Chemicals were significant at 1% level. But the ratio of 21. But Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd did not earn profit with respect to sales during post merger.34000 earned by Ricoh India Ltd-Gestetner (India) was low with respect to pre merger earnings. Supreme Industries LtdSiltap Chemicals.70667) and Matrix Laboratories Ltd-Fine Drugs & Chemicals (28. The result of standard deviation clearly shows the fact that the variation of EBIT to Sales of all merged companies were lower than that of pre merger period. Ltd-Lakshmi Auto Components.T V S Autolec was significant at 10%. Ltd-Lakshmi Auto Components. Supreme Industries Ltd-Siltap Chemicals.14 shows the EBIT to Sales Ratio of sample acquirer and target companies during pre and post merger periods. It is important that Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) and Ricoh India Ltd-Gestetner (India) earned high ratio of 26. T V S Motor Co. Matrix Laboratories Ltd-Fine Drugs & Chemicals and .and post-merger period at 5% level of significance. The result of standard deviation clearly shows the fact that the variation of PE ratio of all merged companies except J K Tyre & Inds Ltd-Vikrant Tyres. Supreme Industries Ltd-Siltap Chemicals. Hence. Eastern Silk Inds. The companies like Tata Chemicals Ltd-Hind Lever Chemicals (21. Ltd-Vikrant Tyres. Tata Chemicals Ltd-Hind Lever Chemicals. T V S Motor Co. e) EBIT to sales The EBIT to Sales Ratio determines whether the fixed costs are too high for the production volume. some of the sample merged companies were significantly different in the pre.90333). Supreme Industries Ltd-Siltap Chemicals. The t. namely. That is the effect of fixed expenses on profitability was more due to merger activity.values of sample merged companies. Ltd-Lakshmi Auto Components and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd. But the other merged companies (J K Tyre & Inds.

was high during the post merger period when compared to the pre merger period. it is evident that three companies. EBIT to Fixed Assets and FA Turnover Ratio.16 consolidates the t. variables like Current Ratio. Quick Ratio. Gujarat Ambuja Exports Ltd-Jupiter Biotech. Hence. But the other nine merged companies earned insignificant returns. Further. The Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) received significant t-value for all the variables except Debt-Equity Ratio. except Ricoh India Ltd-Gestetner (India) and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd. namely. “T”. Asahi . PE Ratio. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Ricoh India Ltd-Gestetner (India) earned significant values in seven variables. In the light of the above analysis. It is understood that the calculated average EBIT to Fixed Assets Ratio (three years) of all merged companies. Ltd-Sstella Silks showed significant difference between pre-merger and post-merger performance at 5% level of significance.values for different financial variables in connection with sample companies for the purpose of this study. it is concluded that the average EBIT to Fixed Assets Ratio of companies like Supreme Industries Ltd-Siltap Chemicals. Gujarat Ambuja Exports Ltd-Jupiter Biotech. LtdSstella Silks. Matrix Laboratories Ltd-Fine Drugs & Chemicals and Eastern Silk Inds Ltd-Sstella Silks and Silicon Valley Infotech Ltd-Pentasoft Technologies Ltd) increased significantly after merger. T V S Motor Co. Sundram Fasteners Ltd-T V S Autolec and Ricoh India Ltd-Gestetner (India) increased significantly after merger. Silicon Valley Infotech LtdPentasoft Technologies Ltd was significant at 1% level. Return on Capital Employed.17272) had improved their EBIT by properly utilizing their fixed assets after merger while other companies earned less than one. EBIT to Sales and TA Turnover Ratio earned insignificant t-value. f) EBIT to Fixed Assets Table . The analysis of standard deviation clearly shows the fact that the variation of EBIT to Fixed Assets Ratio of all merged companies. The appliance of t-test revealed that sample merged companies like Supreme Industries Ltd-Siltap Chemicals.Eastern Silk Inds. In the case of Sundram Fasteners Ltd-T V S Autolec. the average EBIT to Sales of sample companies (Supreme Industries Ltd-Siltap Chemicals. Oriental Bank of Commerce-Global Trust Bank (12. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India). Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) (5.60736) and Ricoh India Ltd-Gestetner (India) (3. were lower than that of pre merger period. except Tata Chemicals Ltd-Hind Lever Chemicals. Gujarat Ambuja Exports Ltd-Jupiter Biotech and Sundram Fasteners Ltd-T V S Autolec recorded significant values at 5% level and Ricoh India Ltd-Gestetner (India) was significant at 1% level in their EBIT to Fixed Assets Ratio. Supreme Industries Ltd-Siltap Chemicals and Eastern Silk Inds.15 displays EBIT to Fixed Assets Ratio of sample acquirer and target companies during pre and post merger periods. The EBIT to Fixed Assets Ratio is computed to know the productivity of fixed assets. there are 14 variables (ratios) in four groups. Ltd-Lakshmi Auto Components. As stated earlier.value of different financial variables in connection with sample companies Table .33630).

. Gujarat Ambuja Exports Ltd-Jupiter Biotech in respect of NWC. RNW and PBVR and Supreme Industries Ltd-Siltap Chemicals in respect of ICR. T V S Motor Co. it is evident that the hypothesis set for validation is not fully proved. FA Turnover Ratio. six companies. FINDINGS OF THE STUDY 1. From the above analysis. namely. RNW. TATR. SR. EBIT-S and EBIT-FA earned significant values in six variables. Matrix Laboratories Ltd-Fine Drugs & Chemicals in respect of QR. The above analysis clearly indicates the fact that the performance of merged companies in respect of 14 variables taken for this study was not significantly different from the expectations. NWC. DER. Asahi India Glass Ltd-Floatglass India in respect of CR. “The post merger financial performance of the combined firm is not significantly different from the aggregate performance of the acquirer and target companies prior to the merger. for Return on Networth. three companies. PB Ratio and Solvency Ratio. RCE. For Debt-Equity Ratio and EBIT to Sales. FATR. FATR. Ltd-Lakshmi Auto Components and Oriental Bank of Commerce-Global Trust Bank earned significant values in two variables. SR. The conclusion emerging from the above analysis is that mergers cannot be successfully used to turn around from the point of view of financial evaluation. Quick ratio and PE Ratio. Return on Capital Employed. five companies under 2. Hence the null hypothesis namely.India Glass Ltd-Floatglass India and Supreme Industries Ltd-Siltap Chemicals earned significant values in six variables and J K Tyre & Inds Ltd-Vikrant Tyres. and TA Turnover Ratio five companies and for Current Ratio. Interest Coverage Ratio. 3. Tata Chemicals Ltd-Hind Lever Chemicals in respect of SR and FATR. RCE and EBIT-FA. ICR. EBIT to Fixed Assets.” is partially accepted. PB Ratio and Solvency Ratio. No sample merger firm of this study achieved significant t-value for all the activity and profitability related variables. ICR. It is found that J K Tyre & Inds Ltd-Vikrant Tyres in respect of DER and RCE. It is understood that six companies under Debt-Equity Ratio and EBIT to Sales. 4. PER and EBIT-S and Ricoh India Ltd-Gestetner (India) in respect of NWC. Three sample companies. PBVR. According to this study. LtdLakshmi Auto Components in respect of PBVR and EBIT-S and Oriental Bank of Commerce-Global Trust Bank in respect of TATR and PER earned significant values in two variables. PBVR and EBIT-FA earned significant values. T V S Motor Co. earned significant t. ICR. Tata Chemicals Ltd-Hind Lever Chemicals. DER. QR. Seven sample companies earned significant values with respect to variables like Net Working Capital. Interest Coverage Ratio. However.values. The following are the major findings of the present study. TATR. It is clear that seven sample companies earned significant values with respect to variables like Net Working Capital. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) achieved significant value for all liquidity related variables and Sundram Fasteners Ltd-T V S Autolec achieved significant value for all leverage related variables. SR. DER.

6. Hence the companies should channelize their investment on the fixed assets for production activities.e.related variables (Current Ratio. EBIT to sales and EBIT to Fixed Asset). Monopolies & Restrictive Trade Practices Act. 3. Return on Capital Employed. Adequate care should be taken to satisfy all conditions necessary for merger to be valid under the provisions of Companies Act.Equity Ratio and Interest Coverage Ratio). There is a possibility that the acquirer firms with higher price-earnings ratios may get instantaneous gains from acquisitions of low price-earning ratio targets due to the market’s tendency to value the combined firm at the acquirer’s original price. Quick Ratio and Net Working Capital) while Sundram Fasteners LtdT V S Autolec achieved significant value for all leverage . SUGGESTIONS OF THE STUDY 1. The regulators (SEBI) should take steps to detect the tax evasion by the acquirer companies. it is found that the shareholders of the acquirer companies. The sample companies from the transport industry. The present study measured the financial performance of sample companies from the viewpoint of profitability. From the overall analysis. Price Earnings Ratio. FA Turnover Ratio. leverage and activity. 4. It denotes that the companies utilized the restructuring method (merger) for the development of the business and tried to provide better returns to the investors by way of proper utilization of their fixed assets. EBIT to Fixed Assets and TA Turnover Ratio.values during the study period. failed to perform both during the short term as well as the long term solvency positions. Debt. increased their wealth i. All the sample merged companies of this study did not achieve significant t-value for all the activity ratios (Fixed Asset Turnover Ratio and Total Asset Turnover Ratio) and profitability related variables (Return on Networth. The investors. Price to Book Value Ratio. and three companies under Current Ratio. increased the returns . Return on Capital Employed. The companies. namely. Quick Ratio and PE Ratio. must keep sufficient current assets to set off their current liabilities. The financial characteristics of a firm play a critical role in the merger decision process. It is inferred from this study that mergers were not successfully used to improve the activity and profitability variables by all companies. before investing their money. 6. Return on Networth. 5. earned significant t. etc CONCLUSION The process of corporate restructuring through mergers and acquisitions is very relevant in the post-liberalization period. Glaxosmithkline Pharmaceuticals Ltd-Burroughs Wellcome (India) achieved significant value for all liquidity . The following are the major suggestions of the study. The overall findings in the financial performance of the acquirer and target companies. 7. Income Tax Act. liquidity. 2.5.related variables (Solvency Ratio. which underwent merger activity. The merger did not exercise much impact on the sales in proportion to asset utilization of the sample companies. are advised to analyze the profitability position of the companies which underwent the merger.

Ltd. 21 (1). 2000. IDBI and IDBI Bank: The Merger Story. M. 2006. Bharathidasan University. 2004. S. Response Books. Selvam. Singh. 1998.1 LIST OF SAMPLE COMPANIES Sl. S. Chung Kwang. Vision Books Pvt. Chennai. Vanitha. Pandey. & Selvam. Vanitha. Financial Management. Vikas Publishing House Pvt. 2000. New Century Publications. Tiruchirappalli. J. Mergers. New Delhi. M. Reserve Bank of India occasional papers. Greece. Corporate Growth through Mergers and Acquisitions. Sanjeev Kumar. Deep & Deep Publications Pvt. Financial Performance of Indian Manufacturing Companies during Pre and Post Merger. International Research Journal of Finance and Economics. Prasanna Chandra. Rabi Narayan Kar. & Hoag Susan. 2007. Ltd.Viswanathan (Printers & Publishers) Pvt. P. Mergers and Acquisitions of Enterprises. TABLE. 1992.Indian Experience. REFERENCES Bhoi. 2007. Fred Weston. R.. Mergers and Acquisitions in the Banking Sector. 2000. New Delhi. Constantine Manasakis. S. I. 1 (1). Restructuring. The ICFAI Journal of Applied Finance. New Delhi. Prentice-Hall of India Private Ltd. M. Banking Finance. S.NE. Shiva Ramu. Ltd. 2006. Corporate Mergers and Acquisitions. Corporate Governance: A Case of HLL and BBLIL Merger. Balance Sheets.. E. 1-12. 1999. Mergers and Acquisition. 6 (1). Khan. Mergers and Acquisitions in the Manufacturing Sector: An Evaluation Study.The Indian Scenario. K. 2006.Indian and Global Experiences. 15-25. S.Contents. M. Financial Management – Text and Problems. New Delhi. BE. New Delhi. Shareholder Wealth Effects from Mergers and Acquisitions in the Greek Banking Industry. 7-35. Ltd. 2006. Analysis & Interpretation. Tata McGraw-Hill Publishing Company Ltd. New Delhi. 133-166. & Jain.. Gurminder Kaur. 2007. 12. 60-64. Shareholder Wealth Maximization. Working Paper series. K.. 7-9. B. and Corporate Control. Mergers and Acquisitions: An Indian Experience. Dani Hemant. The overall conclusion is that the analysis of this study supports the findings of existing research that the acquirer companies always benefited more than the target companies in the merger event. Acquirer Merger Date Target . New Delhi. Y. PhD Dissertation (Unpublished). 1995.for the investment after the merger event. Working Paper. 2005. Treasury Management. Pitabas Mohanty. The ICFAI Journal of Applied Finance. P. J.TeC.

B Transport equipment 6 T V S Motor Co. E Textiles 10 Eastern Silk Inds. 7 Sundram Fasteners Ltd. Vikrant Tyres Asahi India Glass Ltd. 2 Tata Chemicals Ltd. Ltd.19 Vikrant Tyres Hind Lever Chemicals Siltap Chemicals Burroughs Wellcome (India) Fine Drugs & Chemicals Lakshmi Auto Components T V S Autolec Floatglass India Jupiter Biotech Sstella Silks 2004.25 2004.07.42000 (0. 3 Supreme Industries Ltd.54537 0. I MANUFACTURING A Chemicals 1 J K Tyre & Inds. 5 Matrix Laboratories Ltd.29098) (0.07.30000 1. Source: PROWESS DATA BASE 2002.26 2004. D Food & Beverage 9 Gujarat Ambuja Exports Ltd. Ltd. C Non-metallic mineral products 8 Asahi India Glass Ltd.29 2005. 4 Glaxosmithkline Pharmaceuticals Ltd.07937) 0.55667 1. II SERVICE A Banking services 11 Oriental Bank Of Commerce B Trading 12 Ricoh India Ltd. Ltd.07 2003. Ltd.24194) 1. TABLE .03.11333 (0.29 2003.02.80180 1. Floatglass India Hind Lever Chemicals Siltap Chemicals Supreme Industries Ltd. C Information technology 13 Silicon Valley Infotech Ltd. T V S Motor Co.10 2004.07.33853) (0.53167 1.03 2003.21741) (0.10.01. Lakshmi Auto Components .30584 1.35346) 1.94438** 0.No. No.30526) (0.73333 (0.01.25701) (0. Gujarat Ambuja Jupiter Biotech Exports Ltd.21 2003.05 2004.37501) 1.65108) (0.22 2003.04735 J K Tyre & Inds.07.18055 0. Merger 1.68667 1.93333 (0. 1 2 3 4 5 6 Acquirer Target Current ratio Pre-Merger PostAvg.01667 0. Tata Chemicals Ltd. Ltd.15667 (0.10536) t-value 0.01155) 0.29 2003.01.10.17 Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.08000 (0.10.2 CURRENT RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.03.92333 1.

33000 (0.53500 0.16289) 3.14048) 0. Eastern Silk Inds.21572) 0.53833 3. Ltd.09644) 1.39333 (0. Source: Computed from PROWESS 1.36833 0. Sundram Fasteners Ltd. Glaxosmithkline Pharmaceuticals Ltd.05196) 1.13106) (0.36000 (0.51333 (0.87167 (9.06000) (0. Oriental Bank Of Commerce Ricoh India Ltd.66000 (0.35350) 1.23167 0. Technologies Ltd.41639 0.25118) 1.92506) (1. Supreme Industries Ltd.59667 (0.15182) t-value 0.14503) 3.15822) 1.74637*** TABLE .39434) (0.11652) (0.63667 0. Gujarat Ambuja Exports Ltd.44117) 0.50833 (0.02000 (0.17851) 2.76392 1. Matrix Laboratories Ltd.59333 (0. Oriental Bank Of Commerce Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Quick ratio Pre-Merger PostAvg.58908) 0.25000 (14.06557) 0.49713 .48167 0.06110) 0.85737 0.75333 (0.3 QUICK RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl. Merger 0. Eastern Silk Inds.42632*** 1.50000 (0.24991) (0.34085) (0.64167 0.57572 0. Ltd. 1 2 3 4 5 6 7 8 9 10 11 Acquirer J K Tyre & Inds.28500 0.39000 (0. Asahi India Glass Ltd.12323) (0. Ltd.7 8 9 10 11 12 13 Sundram Fasteners Ltd.76241) 0.62000 (0.42667 (1.12000 0.15716) 0.87278 2.12041 0.70554) 1.46899) (0.18346) (0. Ltd.83667 (0. T V S Motor Co.44960) 4.73557*** 1.29000 (0.15725 1.84333 (1.26667 (0. Matrix Laboratories Ltd.77667 (0.39837) 1.12014) 0.18155 2.12333 (0.25686) (0.58842** 0.11919** 1. Tata Chemicals Ltd.94833 (1.49457) 10.59833 0.65833 (1.50273 0.26652) 0. No . Glaxosmithkline Pharmaceuticals Ltd. T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Silicon Valley Pentasoft Infotech Ltd.40958 0.48333 (0.41167 0.39850) 32.06814 0.56721) 1.88259 0.

80667 140.32667 (12. Ltd. Sstella Silks Oriental Bank Of Commerce Ricoh India Ltd.71325) (7.16943) (16.00035* 2.36659) (18.11333 (13.25466) 11.11667 (27.94632 1. Ltd.32680 1.50001) 0.12 13 Ricoh India Ltd.91333 85. Fine Drugs & Chemicals Eastern Silk Inds.12468) 8. Tata Chemicals Ltd.83000 130.20672 (860.4 NET WORKING CAPITAL OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.50177) 0.98058 0. (India) Matrix Laboratories Ltd. Asahi India Glass Ltd.40937 TABLE . Supreme Industries Ltd.06576) 41.02833 723. Merger -6.97256) 98.28527) 1.52000 -55.34572* 0.16577) (39.87302) (72. Source: Computed from PROWESS 0.20839) (3.99226) (1. 1.09072) 174. Sundram Fasteners Ltd.02667 (106. Ltd.5 SOLVENCY RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Acquirer Target Solvency Ratio t-value Sl.70653) 12.42360) t-value 1.38926) ) 5.26502) -1.32000 9.90657) (62.04935) 14.72333 (2653.42145*** 2.56667 5226. Technologies Ltd.52500 (1. Technologies Ltd.50902) (413.95333 487.30833 40.98160) 9.08902 8.32333 (242.27755** 1.64833 49.65667 (26.39761 0.14333 (79.99833 75.37333 (2.29350** Glaxosmithkline Burroughs Wellcome Pharmaceuticals Ltd.69783 2. No . Gujarat Ambuja Exports Ltd.04333 (43.24333 (14.28667 (73.99930) (49. 1 2 3 4 5 6 7 8 9 10 11 12 13 Acquirer J K Tyre & Inds.19333 (16.26333 (97.23646) 392.86833 8.92218) (185.56833 (0. Gestetner (India) Silicon Valley Pentasoft Infotech Ltd.74625) 2029. .10895) -105.65489*** Source: Computed from PROWESS TABLE .84741 4.82333 (0. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Net Working Capital Pre-Merger PostAvg.48213) (126.67167 25. T V S Motor Co.42142** 1. Global Trust Bank Gestetner (India) Silicon Valley Infotech Pentasoft Ltd.

30667 (0.12662 ) 2.34577** 0. Matrix Laboratories Ltd.36159) 7.03821** 2.66547*** 1. 1.73331*** 0.26000 (0.25000 (2.33333 (0.19255** 2.24333 (0.10998) 2. Eastern Silk Inds.23218 2.17167 (0.50667 (0.10518 Source: Computed from PROWESS TABLE . 1 2 3 4 5 6 7 8 9 10 11 12 13 J K Tyre & Inds.21932 ) 2. Glaxosmithkline Pharmaceuticals Ltd.41422 1.61833 (14.12635) 1.78339) 1.09000 ) 2.52167 (0.00577 ) 1.6 DEBT-EQUITY RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD .45925) 1.11333 (0.50417) PostMerger 1. Asahi India Glass Ltd.21783** 0.21000 (2.44431 1. Tata Chemicals Ltd.07667 (0.10833 (2. Ltd.89030 ) 1.20245 ) 0.46556) 1.32010) 5.47471 1.59383) 1.45500 (0.87000 (0. Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.32703 1.99500 (0.24354) 2.54321) 4. Supreme Industries Ltd.17214 ) 1.09165 ) 3. Ltd. Ltd.37287 ) 18. T V S Motor Co.08333 (0.36913) 20.58507*** 2.19000 (0. Oriental Bank Of Commerce Ricoh India Ltd. Silicon Valley Infotech Ltd. Pre-Merger Avg.05333 (0.40833 (1.11240 ) 3.31000 (0. Sundram Fasteners Ltd.19333 (0.09435) 1.No.95845 ) 2. Gujarat Ambuja Exports Ltd.74333 (0.76667 (0.48211 ) 7.59333 (2.07500 (0.26539 ) 2.

69287) ) 0.11000 (0.55217*** 0. Glaxosmithkline Pharmaceuticals Ltd. Ltd. Supreme Industries Ltd.26445 2. Ltd. No. Tata Chemicals Ltd.08552** 0.20667 0.36667 (0.75207 Source: Computed from PROWESS .14000 (0.01384 2.32000 0.00577 ) 0.55594** 1.67285*** 0. 1 2 3 4 5 6 7 8 9 10 11 12 13 Acquirer J K Tyre & Inds.28872) ) 0.74000 1.06250** 1.46000 (0.54500 0.19054) ) 0.83176 0. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.21000 (0.54506*** 1. Merger 1.11667 (0.95845 (6.69333 (0.Sl.12667 0.50333 0. Matrix Laboratories Ltd.47000 (0.13164 1.76074) ) 0. T V S Motor Co.96333 (0.38333 (0.07000 1.12583 (0.14048 (0.51333 (0.16574) ) 0. Debt -Equity Ratio Pre-Merger PostAvg.35333 (0.24590) ) 1.11020 0.59000 0.00333 (0. Sundram Fasteners Ltd.01833 0.57329 2. Asahi India Glass Ltd.09644 (2. Silicon Valley Infotech Ltd.53333 0.02714) ) t-value 1.34667 1.23798 (0.26287) ) 2.03601) (0.00000 (0.05143) ) 3.10408 (3.61520) ) 0.29035) ) 21.79969) ) 7.60008 (0.17616 (0. Ltd.79333 2.75667 (0.04619 (50. Eastern Silk Inds. Oriental Bank Of Commerce Ricoh India Ltd. Gujarat Ambuja Exports Ltd.35838 (0.10167 0.

35957 5.65530) (2. Technologies Ltd.36334) (2.25167 -7.38500 16. Sstella Silks Oriental Bank Of Commerce Ricoh India Ltd. Ltd. Acquirer Target t-value No.69000 (3. 1 2 3 4 5 6 7 8 9 10 11 12 13 Acquirer J K Tyre & Inds.43672) (0.86333 3. No. Pre-Merger PostAvg.87087) (69. Source: Computed from PROWESS TABLE . Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Interest Coverage Ratio Pre-Merger PostAvg.68205) (7.25374** 0.65333 (10.42245** 1.30039) 7.33891) 1.57667 (3.06506) 34. Merger 1 J K Tyre & Inds.29964 ) 1.23333 (4.12429) 0.95795 1. Asahi India Glass Ltd.7 INTEREST COVERAGE RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.85792) 4.15177) 1.50500 15.29720) (6. Vikrant Tyres 1.44667 1.83562) (0.53722) t-value 0.75000 (27.94833 1.47333 (2. Glaxosmithkline Pharmaceuticals Ltd.21832 (1.53163) 0.45667 (0. Fine Drugs & Chemicals Eastern Silk Inds. Ltd.93799) (4.38385) (5.23167 7.TABLE .32393) 1.46102 (0.49667 (3.75000 (5.69579*** 0.47440) 3.73793) (0.52021*** Matrix Laboratories Ltd.04000 120. Sundram Fasteners Ltd.42547* 0. Global Trust Bank Gestetner (India) 3.03818* 2.69959) (0.21667 (0.41145 1.99833 12. Merger 0.76667 16.81269*** 1. Ltd. T V S Motor Co. Tata Chemicals Ltd.62267 1.28322) -11. Ltd.85000 (41.19764) (0.17000 (1.33667 (0.87971) (0.8 FIXED ASSETS TURNOVER RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Fixed Assets Turnover Ratio Sl.88500 11.72874) ) 4. Supreme Industries Ltd.30089) 3.38157 1.96000 1.16000 4.60061 2.22234 . Gujarat Ambuja Exports Ltd.27453 Silicon Valley Infotech Pentasoft Ltd.

30423 (0.05247 0.06287 1.29169 (0.96695) 4.09011 (0. Oriental Bank Of Commerce Ricoh India Ltd.32851) ) 0.23990) 1. T V S Motor Co. Supreme Industries Ltd. Sundram Fasteners Ltd. Ltd.96108) 2.48635 (0.77785 (0.89095 (0. Glaxosmithkline Pharmaceuticals Ltd. Technologies Ltd.33401 (1.88368 1.42056 (0.81945) 3.86646 (0.30143 1.78700) 5. Matrix Laboratories Ltd.13328) 2.22095 2.91503) 1.14208) 2.68896 (1.46014) 0.73467) ) 0.20678) 4.39088) 1.99356 0.85185 (0.19313 Acquirer J K Tyre & Inds. 1 2 3 4 Total Assets Turnover Ratio Pre-Merger PostAvg.34779 (0.33716) 0. Supreme Industries Ltd.20902 (3.65545*** 1.27541 (4.31700 (0.90648*** TABLE .71715) 18.50355) 2.00000 (0. Ltd.46025) ) 1.73934 (3.80169) 1. Gujarat Ambuja Exports Ltd.20365) 2.71798 (1. Merger 0.84271 (0.90318 (6.02615 1. No.10937 (0.21399 0.23391 2.09495 (1.35413) 2.74858 (7. Tata Chemicals Ltd.42341 (0. Source: Computed from PROWESS 1.63396 0. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals t-value 0.27223) 15.60447 (0.56691 (0.31948 (0.00000) 0.06403 (0.18072) 14.9 TOTAL ASSETS TURNOVER RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.87587 0.66641 (12.39140) 6.28366** 1.2 3 4 5 6 7 8 9 10 11 12 13 Asahi India Glass Ltd. Tata Chemicals Ltd.50406** 0.76366) 13.22856) 13.36682 (5. Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Silicon Valley Infotech Pentasoft Ltd. Asahi India Glass Ltd.11803 1. Ltd.16978) 10.47613*** 1.80393 (0.30119 2.10369) (0.81680** . Eastern Silk Inds.37569 0.

87701*** 0.53667 (8. Oriental Bank Of Commerce Ricoh India Ltd.33417 1.22853 2.07632 .07014 1.70364) 1.39175) 0.71295 (0.87629) (1.10882 (0.79653 (0. No.10 RETURN ON NETWORTH OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.45178) 2. 1.87787*** Source: Computed from PROWESS TABLE .14797 ) 0.75822) (6. Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.21105 ) 0.14504 1.07756) 0.04290) 13. T V S Motor Co.03184 ) 0.62022 (0.50256) 0.06158 ) 0. Ltd.11357) ) 2.35861) 0. Gujarat Ambuja Exports Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Return on Networth Pre-Merger PostAvg.17667 (82.10062 ) 1.06792 (0. 1 2 3 4 5 Acquirer J K Tyre & Inds.88167 9.51415 (0.96176 (0. Glaxosmithkline Pharmaceuticals Ltd. Ltd.12148 (0.93534 1.23667 t-value 0.51000 (10.64667 (8.16803) 10. Matrix Laboratories Ltd.27957) (2.00925) 1.01521 ) 0. Ltd. Sundram Fasteners Ltd.38000 3.89368 (0.5 6 7 8 9 10 11 12 13 Gujarat Ambuja Exports Ltd.63432 (0.01203 ) 1.08338 (0.08707 (0.90228 (0.46375) 0. Supreme Industries Ltd. Tata Chemicals Ltd.00000 (0.39426 (0.36451) -19.58080 0.33026 (0.83833 12. Asahi India Glass Ltd. Merger -1.23852 ) 1.75797 (0.38397) (1.80126 1.49833 53. Eastern Silk Inds.84921) 1.37241 (0.80833 8.37374** 0.20050** 0. Silicon Valley Infotech Ltd.94594** 0.00000 ) 2.

54667 (10. Eastern Silk Inds.95082 ) 17.98167 (46. Tata Chemicals Ltd.92601) 15. T V S Motor Co. Oriental Bank Of Commerce Ricoh India Ltd.12431) 23.08111) (0.65813) 30. Technologies Ltd.82240) (2.02689 ) -2.70728) 19.03549* 0.16780 2.06923) -29.50333 15. Ltd.58678 0.92000 (38.10280 1.70667 (2.18697) (1.06486) 24.15351 0. Ltd.47385) 19. No.94333 (11.21112 0. Asahi India Glass Ltd.91128** 5. Ltd.59112*** 5.85833 15.44753) (9.61421* 0.77647) 6.64153) 29. Gujarat Ambuja Exports Ltd.35667 (2.81500 (88.75333 21.87833 20.36000 (2.47167 13.38000 (17. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec t-value 1.42500 30.36167 (7. Sundram Fasteners Ltd.29000 26.47842 1.74786 TABLE .26752) 45.69826) 11.38760) 19.68128) -0.09559* 0.80008) 20.07435 ) 22.50667 (4.75000 (3.32300 1. Matrix Laboratories Ltd. Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) (2. Sundram Fasteners Ltd. Glaxosmithkline Pharmaceuticals Ltd.44573*** 0.82595) (3. Supreme Industries Ltd.32167 (5.23960) 15.12596) Silicon Valley Infotech Pentasoft Ltd.80667 (20.44954) 12.19580) 9.19000 (4.82000 (5.11 RETURN ON CAPITAL EMPLOYED OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl. Ltd.21667 (9.25223) 38.55333 (2.51305) (3.00667 (12.78667 (6.70230) 18.26788** 1.43247) 8. Merger 7.56358) (0.50500 (14.04667 (4.90667 (7. Source: Computed from PROWESS (0. T V S Motor Co.28589 .83683) Acquirer J K Tyre & Inds.6 7 8 9 10 11 12 13 Ltd. 1 2 3 4 5 6 7 Return on Capital Employed Pre-Merger PostAvg.

48667 (0.58667 (0.29535 0.58425) ) 0.48000 (0.31667 0.54323 (2.37448 (0. Sundram Fasteners Ltd. Ltd. No .19000 0.08602) ) 1.99333 (3. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec t-value 1.38000 (3.35880** 5.07494* 0.47667 (0.10333 (21.23667 (2.85667 6.17905 0.53949) Silicon Valley Infotech Pentasoft Ltd.44433) 5.66833 (42.71000 (5.8 9 10 11 12 13 Glaxosmithkline Pharmaceuticals Ltd. Eastern Silk Inds.69116*** 1. Gujarat Ambuja Exports Ltd.97146** 0. Ltd.14063 1.31451 TABLE .29614* .46367 0.11363 ) -0.96625 (0.17667 (0.88444 (0.98000 (32.66667 1. Asahi India Glass Ltd.08405 1.35949 1.40000 (2.99667 4.74736) ) 0. Merger 0.36333 3. Supreme Industries Ltd.32531) ) 0.23000 (19.00916 ) 26.13556) 15.80344) 43.02071) 1.60169 (0. Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) 25.85167 (9. T V S Motor Co.36335) ) Acquirer J K Tyre & Inds.36665 (0.39852 ) 42.40333 (0.12 PRICE TO BOOK VALUE RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.55033) 39.90500 1.08333 (24. Source: Computed from PROWESS 48. Technologies Ltd.85914) 32.19514) 82.15000 (0.76545) 74. Oriental Bank Of Commerce Ricoh India Ltd. Matrix Laboratories Ltd. 1 2 3 4 5 6 7 Price to Book Value Ratio Pre-Merger PostAvg.21000 (40.83622 2. Tata Chemicals Ltd. Ltd.27237) ) 1.85667 (0.75195) ) 0.

61486) (5.41855) 0.69056 1.13 PRICE-EARNINGS RATIO OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.57000 (2.40533 0.75667 (27.34410) (7.18814 ) 1.11667 (3. No .78974* .01256) 9.82333 26.82167 8.07645) 1.04833 5. T V S Motor Co.13565 1.22440) -0.87609) 7.80122) (7. Ltd.94000 (4.00134 0. Silicon Valley Infotech Ltd. Asahi India Glass Ltd. Ltd. 3.52176 ) 2.31491** 2. Sundram Fasteners Ltd.29500 (0.99826 1.70333 (0.33667 -10.13667 (12.86489 ) 1.36796) (8.95372) (4.51000 (9.11333 (0. 1 2 3 4 5 6 7 8 9 Acquirer J K Tyre & Inds. Glaxosmithkline Pharmaceuticals Ltd. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Price-Earnings Ratio Pre-Merger PostAvg.27545) 11.12425** 0.86333 (17.00833 (2. Gujarat Ambuja Exports Ltd.08333 (1.06518 Source: Computed from PROWESS TABLE .54948) (7. Supreme Industries Ltd.44799 3.70833 18.33746) 8.13667 (3.91046) (3. Matrix Laboratories Ltd. Tata Chemicals Ltd. Merger 1.67333 12.01333 (0.26659) 21.47248 ) 1. Matrix Laboratories Ltd.24812* 0.01333 (0.87254 3.23333 (8.10667 20.10664 ) 6.43725) 1.89076*** 2.87002) -2.91514) -3.60775*** 0.48506) -0.50833 18.05547) (26.90461) t-value 0.55667 (3. Eastern Silk Inds. Ltd.87500 13. Oriental Bank Of Commerce Ricoh India Ltd.40762) 8.24435 ) 1.37000 (2.86074) (1.90000 (1.17667 (3.70537 0.32282) 6.27333 (25.8 9 10 11 12 13 Glaxosmithkline Pharmaceuticals Ltd. Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.

70667 (5.34713) (1.78414) 70.16673) 18. Gujarat Ambuja Exports Ltd. T V S Motor Co.70667 (1.56333 11.14 EBIT TO SALES OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl.28623) 18.50882 2. 4. Sundram Fasteners Ltd. Eastern Silk Inds.90672** 0. Glaxosmithkline Pharmaceuticals Ltd.68719) 21.57931) 16.70032 1.39307) 5.75274) (2.13742) 11. Matrix Laboratories Ltd.08221) 12.51734) 35. Oriental Bank Of Commerce Ricoh India Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 Acquirer J K Tyre & Inds.91000 0.04167 21.41581) 19.66239) (2. Supreme Industries Ltd.92000 (1.91565 ) 0.75477) 7. Ltd.52000 (4.92333 19.34000 25. Ltd. No.20667 74.52624) 6.50289) (1.16172) 64. Silicon Valley Infotech Ltd.75740** 0.36167 8. Tata Chemicals Ltd.29219 0.44590) (3.52544) (3.45907) -0.92646) 20.10 11 12 13 Eastern Silk Inds.07667 (6.48000 (5.77333 27.46667 (81.22814** 0.44500) 17.74988 Source: Computed from PROWESS TABLE .27667 (4. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.90333 (13. EBIT to Sales Pre-Merger PostAvg.15333 (169.44769 1.46163** 2. Asahi India Glass Ltd.37667 (3.00000 (10.69827) (6.40667 (14.80336) (1.53333 (10.01813** 1. Oriental Bank Of Commerce Ricoh India Ltd.69883* .96155** 0.68687 2. Ltd.07667 (12.01000 28.06519 0.74076) ) 8. Silicon Valley Infotech Ltd.98333 (4.42854) (1.96667 14.96833 (8.44833 5.31667 (5.99260) (0. Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.73667 (141.80130) (1.16000 19.85757) 13.90033) (0.16723 (21.41876 2.00000) t-value 0.66333 (0.56466 1.91039) -46. Ltd.37980 4.68667 13.00333 8. Merger 7.

Sundram Fasteners Ltd.09270 (0.05037) (2.10556 2.33630 (2. Eastern Silk Inds.24733 0.14588) ) 2.27067 0.05657) ) 0.04070 (0.60736 (7. Ltd. Supreme Industries Ltd.67589 t-value 0.18583) ) 0.40777** 2.15 EBIT TO FIXED ASSETS OF ACQUIRER AND TARGET COMPANIES DURING PRE AND POST MERGER PERIOD Sl. Asahi India Glass Ltd.30180 (0.62712** 0.36363 0.06675 (0.19015** 1.35373 (0.40856) ) 0.30609 7.59648 (0.08532) ) 0.20846) ) 0.12709) ) 0.43001 (0.45464 (0.57815) ) 10.37085 0.32691) (0.45072) ) 0.32825 (0.17272 (0.00967 (0.13360 0. Merger 0. Gujarat Ambuja Exports Ltd. Ltd. Tata Chemicals Ltd. Ltd.02166 ) 0.39124 (0.62774 3.38405 0.17704 1.24172* 0.Source: Computed from PROWESS TABLE .45668 (9. Oriental Bank Of Commerce Ricoh India Ltd.02814 (0.32595 0.15313 0.10868 12.29396 0.42276 (0.38773 . T V S Motor Co. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd.47730 (0.20379 0.03460 (0.12330 2.97720 5. 1 2 3 4 5 6 7 8 9 10 11 12 13 Acquirer J K Tyre & Inds.09243) ) 0.13543) ) 0. No.16034 (0.07182 (0.08367 (0.29902 0. Silicon Valley Infotech Ltd.39257 (0.59083 0.22696 0. Matrix Laboratories Ltd.01713 (0. Glaxosmithkline Pharmaceuticals Ltd. EBIT to Fixed Assets Pre-Merger PostAvg.47896 0.

*** = Significant at 10% level .) Source: Computed from PROWESS Figures in parenthesis denote the Standard Deviation. ** = Significant at 5% level. * = Significant at 1% level.

Matrix Laboratories Ltd. TATR.Equity Ratio. EBIT-S. Ltd. PER. No. Asahi India Glass Ltd. Sundram Fasteners Ltd.Not Significant CR-Current Ratio.16 "t" Value of different Financial Variables in connection with Sample Companies Sl. Gujarat Ambuja Exports Ltd. FATR-Fixed Assets Turnover Ratio.Significant. PBVR.Quick Ratio.Price to Book Value Ratio. Liquidity Ratios CR NS S NS NS NS NS NS S NS NS NS NS S QR NS S NS NS NS NS NS S S NS NS NS NS NWC NS NS NS NS S NS S S S S NS S S Leverage Ratios SR NS NS S NS S NS S S S S NS S NS DER S S NS NS S NS S NS NS S NS S NS ICR NS S NS S NS NS S S S S NS S NS Activity Ratio FATR NS NS S S NS NS S NS NS NS NS S S TATR NS NS NS S S NS NS S NS NS S NS S RNW NS S NS NS S NS S S NS S NS NS NS RCE S NS NS S S NS NS S NS S NS NS NS Profitability Ratios PBVR NS S NS NS NS S S S S S NS S NS PER NS NS NS NS NS NS S NS S NS S NS NS EBIT-S NS NS NS S NS S NS S S S NS NS S EBIT-FA NS NS NS S S NS S NS NS NS NS S NS Source: Compiled from Table 2 to 15 S.Table . NS. Ltd. Ltd.Net Working Capital. ICR-Interest Coverage Ratio. RNW-Return on Networth. T V S Motor Co. Target Vikrant Tyres Floatglass India Hind Lever Chemicals Siltap Chemicals Jupiter Biotech Lakshmi Auto Components T V S Autolec Burroughs Wellcome (India) Fine Drugs & Chemicals Sstella Silks Global Trust Bank Gestetner (India) Pentasoft Technologies Ltd. Glaxosmithkline Pharmaceuticals Ltd. Oriental Bank Of Commerce Ricoh India Ltd. NWC. 1 2 3 4 5 6 7 8 9 10 11 12 13 Acquirer J K Tyre & Inds. RCE-Return on Capital Employed. Silicon Valley Infotech Ltd. Supreme Industries Ltd. DER-Debt.EBIT to Sales.Price Earnings Ratio. SR-Solvency Ratio. QR. Eastern Silk Inds.Total Assets Turnover Ratio. EBIT-FA-EBIT to Fixed Assets . Tata Chemicals Ltd.

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