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Title Comparison of Success of Merger and Acquisition (M&A) in Manufacturing Sector and Services Sector in Pakistan with respect to Classification of M&As

Author(s) Mumtaz Ahmed

Abstract The study has been conducted on comparison of effect of merger and acquisition (M&A) in manufacturing sector and services sector of Pakistan with respect to classification of M&As. The study is based on Tobin Q-theory of investment which says that a firm's investment rate should rise with its Q. The study is also based on the efficiency theory of merger which states that mergers only occur when it is expected to generate enough realizable synergies to make the deal beneficial to both the parties. The study is event based and merger of a company is considered as a point of event. The objective of this study is to evaluate the effect of merger & acquisition on post-merger financial performance of the company and compare its impact on classification of Merger & Acquisition and sector of the company. Literature review provides theoretical base for the previous relationship between success and type of merger. The study examines the post-merger financial performance of all mergers, took place in Pakistan during the period 1995-2018, listed on Pakistan Stock Exchange (PSX).A convenience sampling technique is used however it has been ensured that all types of merger from both the sectors are included proportionately. The study analyzed total 14 mergers (8 from manufacturing sector & 6 from service sector) listed on Pakistan Stock Exchange (PSX). Sample of the study consist 5 horizontal mergers, 3 vertical mergers, 2 conglomerate mergers and 4 congeneric mergers. The ratio analysis is used to compute the performance of merger alliance. Paired Sample t-test, is used to compare post merger performance the company with the pre-merger performance of the same company. Independent Sample t-test is used to compare the post-merger performance of manufacturing sector and services sector in Pakistan. The findings of the study showed that the horizontal mergers had insignificant positive effect on post-merger performance of merged companies in Pakistan with respect to classification of merger. The vertical mergers indicate mix effect of merger on post merger financial position of merged/acquirer. The conglomerate and congernic merger indicate insignificant negative effect of merger on financial performance of the company in Pakistan. The merger in manufacturing sector indicated slightly positive effect and better performance as compared to services sector in Pakistan. The difference of post merger performance between manufacturing sector and services sector is partially significant. The acquirer predicts the improved profitability in the industry sector, while the target predicts improved synergy only in the services sector. The findings indicate that different factors affect merger differently. The merger & acquisition has a versatile effect and the success depends upon the overall management of the company during and after the merger.

Type Thesis/Dissertation MS

Faculty Management Sciences

Department Management Sciences

Language English

Publication Date 2020-01-30

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