Effect of Merger and Acquisitions on Growth Position and Cost of Utilization: Evidence from Manufacturing Industry in India

Abstract

A merger is a combination of two or more different firms into one; the desired effect being not just the accumulation of assets and liabilities of the different firms, but to achieve several other benefits such as, economies of scale, acquisition of cutting edge technologies, obtaining access into sectors / markets with established players, etc. The present paper is carried out with the objective of studying what shift-in-structure (improvement) is experienced especially in the growth (G) position and cost of utilization (CU) after M&As by studying 39 selected acquiring manufacturing firms in India. The firms, which had gone into the M&As process during the financial year 2006–07 are only considered for the study. Paired samples t-test is applied to study the G position and CU of these firms in the pre-and post-merger periods. The study found that the G position has significant difference for 38 out of 39 firms and CU has significant difference for 27 out of 39 manufacturing firms, which fact reveals that they are well managed and they have used their internal resources to expand profits.