Abstract
M.Com. (Financial Management)
Mergers and acquisitions (M&A) is a thoroughly researched area in finance.
However, some basic concerns still remain unresolved such as the measurements of
corporate performance post M&A (Agrawal, Jaffe & Mandelker, 1992:1605. In this
study, the impact of M&A on corporate performance of South African listed
companies in the financial sector was investigated. The primary goal was to
determine if corporate performance post M&A does actually change.
Share price studies have had little success in relating the gains in equity value of
M&A to improvements in subsequent corporate performance (Healy, Palepu &
Ruback, 1992:136). Therefore, an accounting study approach was applied to
determine if corporate performance changes post M&A. The accounting study
utilised a quantitative approach that follows a quasi-experimental research design.
This involved statistical testing to examine the accounting data of companies before
(pre-testing) and after (post-testing) the M&A, to determine a change in corporate
performance. Accounting ratios were applied as performance indicators and
consisted of: inflation adjusted return on assets, inflation adjusted return on equity,
operating profit margin and return on capital employed.
None of the performance indicators indicated a statistical significant change between
pre and post M&A performance. It was concluded that the sample of financial
companies that engaged in M&A did not experience a significant change in corporate
performance within their first financial year post M&A.