THE EFFECT OF MERGERS AND ACQUISITION IN THE GROWTH OF A FIRM

Abstract

Over the last decades, mergers and acquisitions has played a crucial role in assisting industries to achieve their goals as well as increasing their financial performance, through the provision of platform to gain access other market outside their main locations, diversify their investment or gain management expertise. The thesis establishes three main kinds of motives managers makes before taking decision on Merger and Acquisition. One of the motives in this dissertation is that deals with the instability of investors‘ worth or has unclear encroachment on investors‘ worth. The expansion intention has unverifiable impact on the investors‘ worth. This dissertation also examines the outcomes of participating in merger and acquisition (M&A) and these are explored more, using the approaches in the literature review. One of such outcome is that M&A multiplies shareholders worth for the targeted firm, and on the other hand reduces the shareholders worth for the purchasing firm or the newly joined firm. This study also comprises of quantitative research methodology; it is a gauge paper to ascertain the difference in the financial records of both the targeted firm and purchasing firm. The hypothesis seeks to establish if company‘s profitability or performance improves as a result of engagement in mergers and accusation. To establish this assumption the researcher tries to analyze some company‘s performance after their mergers and acquisition exercise by comparing their financial result before and after M&A exercise. For the more clear understanding of this study, the effects on the M&A performance of the acquiring company will be compared with companies that didn‘t engage in M&A. Nevertheless, two cases was chosen in this study and analyzed for a more clear understanding; the M&A activity between Hewlett Packard and Compaq, and the M&A activity between a supermarket called Migros Turk A.S. supermarket and Tansaş A.S supermarket. The findings entails that both companies are on a health performance before the merger and acquisition activity but experience a slight loss is wards before rising.