Delaney & Wamuziri (2004) examines the impact of Merger and Acquisition on shareholders wealth in the UK construction industry with a sample of target firms and bidding firms. They investigate the financial performance of the companies during the merger announcement and after the merger (Delaney & Wamuziri 2004). This study includes an observation period of 20 days before and 20 day after the merger to examine the impact of merger on performance of the companies. In order to evaluate the financial performance, the accounting data has been used as tool of analysis in this study. Delaney & Wamuziri (2004) states that the M&A has generate significant positive gains for the target company’s shareholders in terms of increase in stock price.
They found that the share price of most of the target companies has increased during the announcement and after the merger. According to this study, the shareholders of most of the target companies have gained because of the M&A process (Delaney & Wamuziri 2004).
It is also found that the announcement of M&A by the target companies has given the higher abnormal return to the shareholders. On the other hand according to the Kumar (2009), the financial performance of the merged companies has showed no improvement in comparison to pre merger values. In order to evaluate the financial performance, the accounting data has been used as tool of analysis in this study.
Pazarskis, Vogiatzogloy, Christodoulou & Drogalas (2006) investigates the post merger operating performance of fifty companies that executed at least on e merger in the period from 1998 to 2002 in Greece. This study measures post merger performance of the companies with the help of financial and non financial variables. In this study, the result of the hypothesis testing of financial ratio analysis explains that the profitability, return on assets and gross profit margin ratio is decreased after the merger (Pazarskis, Vogiatzogloy, Christodoulou & Drogalas 2006). According to this study, the profitability of the companies has decreased due to the merger or acquisition event.
On the other hand according to the Delaney & Wamuziri (2004), the financial performance of the companies has increased due to the increase in shareholders’ value through increase in stock price.
References:
Cherunilam, F, 2007, International Business: Text and Cases, 4th edn, PHI Learning Pvt. Ltd.
Delaney, F.T & Wamuziri, S.C, 2004, The Impact of Merger and Acquisitions on Shareholders Wealth in the UK Construction Industry, Engineering, Construction and Architectural
Management, Vol. 11, no.1, pp. 65-73.
Kumar, R, 2009, Post Merger Corporate Performance: an Indian Perspective, School of Management, Vol. 32, no.2, pp. 145-157.
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