Financial Performance Analysis of Post-Merger and Acquisition

Abstract

Mergers and acquisition are important corporate strategy actions that aid the firm in external growth and provide it competitive advantage. In todays globalized economy, mergers and acquisition are being increasingly used the world over, for improving competitiveness of companies through gaining greater market share, broadening the portfolio to reduce business risk, for entering new market and geographic, and capitalizing on economies of scale etc. The corporate sector all over the world is restructuring its operations through mergers and acquisitions in an unprecedented manner in order to successfully overcome the challenges posed by turbulence caused in the world relating to business cycles. This study has focused on the financial performance of Merger and Acquisition of ICICI Bank.The main objectives of the study are to evaluate financial performance of post- acquisition of ICICI bank from Bank of Rajasthan using Investment Ratios,Management Efficiency Ratios, Debt Coverage Ratios, Leverage Ratios,Profitability Ratiosand Profit And Loss Account Ratios and to provide findings based on analysis. In view of the objectives of the study, exploratory research design has been adopted. The study is based on secondary data covering ten years annual data of pre-merger and post-merger period.Data have been collected from official websites of money control.com, and various other reports like magazines, journals, published books are also referred to for the present study.The statistical tools applied for data analysis is descriptive and inferential statistics. Based on the objectives, the hypotheses formed for analysis have been tested on the financial performance of M&A of ICICI bank by considering pre and post M&A financial ratios. To sum up, post-merger profitability has increased not from effective utilisation of assets and loans but reduction of operating expenses and increase in non-interest income. Primary business of accepting deposits and lending of the same is indispensible for survival and sustenance of the banks. Hence, it is focussing its business from aggressive policy to conservative policy of lending.