This article consists of 34 pages and 7760 words. Mergers and Acquisitions In order to have full access to this articles, email us at thedocumentco@hotmail.co.uk
Ref No: 1402
Abstract
The research aims to analyze the impact of merger and acquisition on the creation of shareholder value over the years. The research is important for individuals as well as companies as it will help them understand the consequences of merger & acquisition on the shareholder value creation in a better way. As analyzed from the literature review regarding the impact of merger & acquisition on the operational performance, financial performance and shareholder value suggest that there are different views of researchers on these aspects. The research is explanatory in nature and utilizes the deductive approach of research. Mergers and Acquisitions The sample size selected for this research is 26 companies which includes 13 acquiring companies and 13 target companies and the analysis is carried out by financial ratio analysis comprising of all five categories of ratio analysis. It has been found that there is a negative impact of the mergers on the financial performance and growth of the acquiring companies. It has also been found that there is a marginal effect of the mergers on the operating performance of the acquiring companies. It has also been concluded that the shareholder value is affected negatively as a result of the merger/acquisition in the short-run. Further, the research has provided recommendations to the companies for their decisions regarding mergers and acquisitions Mergers and Acquisitions .
Table of Contents
1.1 Introduction to the Research.
1.2 Research Aims and Objectives.
Chapter – 2 Literature Review.
2.1 Introduction to the Chapter.
2.2 The Factors affecting the Shareholder Value.
2.3 The Causes and Theories behind Merger & Acquisition.
2.4 The impact of Merger & Acquisition on the Operational and Strategic Performance of the Company
2.5 The impact of Merger & Acquisition on the Financial Performance of the Company.
2.6 The impact of Merger & Acquisition on the Shareholders’ Wealth.
3.1 Research Methods, Data Collection, and Data Analysis Technique.
Chapter – 4 Data Analysis and Results.
4.1 Description of Data Collected.
4.2.2.1 Operating Profit Margin.
Chapter – 5 Conclusion and Recommendations.
Chapter – 1 Introduction
1.1 Introduction to the Research
Mergers and Acquisitions: The research focuses on analyzing the impact of merger and acquisition on the creation of shareholder value over the years. The research is important considering the fact that shareholder value creation is one of the important objectives of the company. In accordance with Anderson, Fornell, and Mazvancheryl (2004), the shareholder value is affected by each and every decision taken by the company so the management and directors need to be careful while taking any major decision. It is further stated that the shareholder satisfaction is most important as they are the actual owners of the company and managers are the agents of those shareholders. The statement is referred to as agency theory and requires the agents to act in the best interests of their owners. A later theory relating to the importance of shareholder value creation is known as stakeholder theory. Though it includes other stakeholders’ interests into consideration while taking any decision but it must be noted that the shareholders’ interest prevails over those of other stakeholders (Jensen, 2002). Mergers and Acquisitions: These theories illustrate that the shareholder value creation is very important and therefore, extra care must be taken for a major decision like merger and acquisition. In the view ofGaughan (2010), the merger & acquisition lead to the restructuring of the company and it can be both beneficial and risky depending on the situation and strategic fit between the companies.
The research carries significance to individuals as well as companies who may be interested in merger/acquisition in future. Firstly, the research is important for the researcher himself as it will help him develop his financial analysis, strategic analysis and research skills and will enable him using these skills in the professional life. Secondly, the research is important for the individuals in the society as they can gain knowledge about the impact of merger & acquisitions on the performance and shareholder value creation of the acquiring companies. Thirdly, the research carries significance for the companies as they can understand the impacts of merger & acquisition before they acquire a company. The research will help the companies understand the consequences of merger & acquisition on the shareholder value creation in a better way.
1.2 Research Aims and Objectives
The research aims to analyze the impacts of merger & acquisition on the shareholder value creation of the acquiring company. The objectives of the research are as follows:
- To determine whether the impact on shareholders wealth was positive or negative as a consequence of the merger and acquisition.
- To analyze the activity of merger and acquisition and its impact on improving financial growth.
- To determine if the operating performance of companies are positively or negatively affected by merger and acquisition.
1.3 Research Questions
Every research aims to answer certain questions in line with the achievement of the research objectives. The research questions for this research are as follows:
- Do a merger and acquisition have an impact on the operating performance of a company?
- Do merger and acquisition to improve financial growth?
- Do merger and acquisition have an impact on shareholder value?
Chapter – 2 Literature Review
2.1 Introduction to the Chapter
This chapter focuses on the analysis of the results of past researchers related to the aims and objectives of the research. The chapter focuses on numerous aspects pertaining to the shareholder value and impacts of merger and acquisition. The chapter starts with the determinants of shareholder value, discusses the causes behind merger & acquisition and goes on to discuss the impacts of merger and acquisitions on different performance measures such as operational performance, financial performance, and shareholder value. Lastly, the chapter highlights research gaps as identified from the study of past literature and discusses how current research will try to fill those gaps in the academic literature.
2.2 The Factors affecting the Shareholder Value
In the view of Jensen (2002), an ultimate objective of management of every corporation is to maximize the value for its shareholders as these are the actual owners of the company. A later concept named stakeholder theory contrasts this objective and states that the objective of the corporation should focus on maximizing the value for all the stakeholders of the company. Those stakeholders include employees, customers, shareholders, management, suppliers and anyone else attached to the company directly. The shareholder value for shareholders of a firm is determined by different measures that include both operational and financial measures. According to Anderson, Fornell, and Mazvancheryl (2004), there are many factors that affect the shareholder value in the modern era. These factors vary from core financial measures to the satisfaction level of employees and customers indicating that the value of all the stakeholders is interlinked. Each of these factors affects the shareholder value to a certain degree. In accordance with Martin and Sayrak (2003), the operational efficiency of a company has a major impact on the shareholder value as it refers to overall efficiency in the procedures and processes of the company. It is further stated that the companies cannot improve their operational efficiency without the higher commitment level of their employees. However, some other researchers argue that the operational efficiency is also impacted by the corporate ownership of a company. It is further stated that whenever the ownership of a company changes by Merger / Acquisition or any other mode, it has a significant impact on the operational efficiency of a company as well. It is also stated that the impact of the change of ownership varies based on the situation and mode of change employed (Cornett, Marcus, Saunders, and Tehranian, 2007)…
Recent Comments