Return from Indian Acquisitions: Does Deal Size Matter?i

Abstract

Mergers and acquisitions are the corporate growth strategy that has grown in recent years. The performance of companies in post acquisition period is influenced by various factors; one of the factors which remain explored is deal value. This paper attempts to investigate the post acquisition performance of manufacturing companies in India based on their deal size-small and large deal size. Performance is evaluated on profitability parameters (return on capital employed, return on net worth, return on assets) of the company in pre and post acquisition three years using paired t test and Wilkoxson signed rank test. It is found that for the variable ROApost12 and ROApost123, the post acquisition performance is positive for large deals while negative for small deals. There is no difference in ROApost1 performance in pre and post acquisition performance in case of small deals while negative performance in ROApre1 in the post acquisition first year. For the rest variables, ROCE and RONW, the large and small deals perform in a similar manner, but the results of large deals are more significant than small deals.