Published
2016-12-01
Issue
Section
Articles
How to Cite
Performance Evaluation of UK Acquiring Companies in the Pre and Post-Acquisitions Periods
Khurshid Ali
Salford University Manchester, UK
Zeeshan Khan
Pakistan Institute of Development Economics (PIDE)
Numan Khan
Center for Management & Commerce, University of Swat
Abdul-Hamid Ibrahim Alsubaie
University of Liverpool, UK
Fazal Subhan
Subject Specialist Economic Department of Elementary Secondary Education, KP, PK
Moumen Kanadil
Salford University Manchester, UK.
DOI: https://doi.org/10.20448/journal.501/2016.3.2/501.2.130.138
Keywords: Financial Performance, Liquidity, Profitability, Solvency, Acquisition, CAPM, AAR, CAAR.
Abstract
This paper has two objectives: first, it examines the financial performance of twenty UK based acquiring companies over the period of five years (2009-2013) using financial ratios of Liquidity, Profitability and Solvency in order to empirically determine whether there is any significant financial performance changes in the operation of the underlying companies as a result of acquisitions. Both average ratio and paired t-test analysis have been conducted. The analysis concludes that none of the ratios proved statistical significance which shows that the underlying acquisitions did not influence changes in the financial performance of the acquiring companies. The paper also examines whether shareholders make short-term gain while opting for acquisitions by analyzing stocks return over 58 days window period i.e. 29 days prior to acquisition announcement and 29 days after acquisition announcement by applying CAPM model and AAR and CAAR analysis. The analysis concludes that none of the results show statistical significance which further asserts that UK shareholders do not make gain in the short-term as a result of the acquisition activities they have undertaken.