Alex Borodin

Department of Finance,

Plekhanov Russian University of Economics,

Russia

aib-2004@yandex.ru

Impact of mergers and acquisitions on companies’ financial performance

Sayabek Ziyadin

Korkyt ata Kyzylorda State University,

Kazakhstan

sayabekz@gmail.com

Gulnara Islyam

The Faculty of Economic Sciences,

Serikbayev East-Kazakhstan State University Oskemen,

Kazakhstan

ertis_economika@mail.ru

Galina Panaedova

The Faculty of Economic Sciences,

North-Caucasus Federal University,

Russia

afina-02@rambler.ru

Abstract. This paper explores the influence of M&A transactions on the financial performance of US and European companies. We have studied the sample of 138 M&A transactions performed within these two regions during the period between 2014 and 2018. We investigate the correlation between return on sales (ROS) and such variables as equity-to-enterprise value ratio. Moreover, we observe the impact of the financial crisis and industry-relatedness to M&A parties on the performance of a merged company. Most of the corporations studied both in the USA and in Europe were profitable, and remained so after mergers and acquisitions. However, despite the fact that positive values were found for the studied variables, tests for the analysis of average values in the sample show a significant deterioration in ROS in both regions. At the same time, in the USA the change in the EBIT/Total Revenue ratio averaged –6.8 %, and in the European countries –5.3 %. Regression analysis did not reveal a significant relationship between mergers and acquisitions and company performance indicators, and the difference in values by region can be interpreted by the fact that the US entered the crisis at an earlier point in time. The significance and the sign of the EVEQ coefficient indicate that, ceteris paribus, an increase in the “attractiveness” of target companies leads to an increase in ROS. The results do not indicate any particular impact of M&A on post-M&A performance in the companies considered.

Received: March, 2019

1st Revision: January, 2020

Accepted: May, 2020

DOI: 10.14254/2071-8330.2020/13-2/3

JEL Classification: F53, O51, O52

Keywords: corporate finance, mergers and acquisitions, M&A deals, ROS, company