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Cross-border
Do frequent acquirers outperform acquisitions
in cross-border acquisitions? A
study of Indian companies
Samta Jain, Smita Kashiramka and P.K. Jain 491
Department of Management Studies, Indian Institute of Technology Delhi,
New Delhi, India Received 18 December 2019
Revised 1 June 2020
19 July 2020
Accepted 19 July 2020

Abstract
Purpose – The purpose of this paper is to examine the impact of cross-border acquisitions (CBAs) on the
financial and operating performance of acquiring firms from emerging economies in the long-term; the
acquiring firms have been segregated into frequent (multiple) and first-time (single) acquirers based on their
prior cross-border experience. The intent is to identify if overseas activities bring over and above advantage
to multiple acquirers in terms of enhanced financial synergies and reduced costs, motivating them to engage
in sequential international transactions.
Design/methodology/approach – The paper analyses the impact of CBAs announced and completed
during 2004–2013 by Indian companies listed on the NIFTY 500 index. The post-acquisition financial and
operating performance of Indian cross-border acquirers has been compared with their pre-acquisition
performance. The average performance over three-years immediately preceding the acquisition year
constitutes the benchmark for the post-acquisition performance. The post-acquisition period includes a year
of integration followed by three successive post-integration years. Therefore, in operational terms, the
research period extends from 2001–2017. The long-term performance of frequent (multiple) and first-time
(single) Indian acquirers has been investigated comprehensively using a set of 16 financial ratios. The
performance has been assessed using the secondary data collected from financial statements of acquiring
companies; the financial statements and the list of CBAs by Indian companies have been obtained from
Thomson Reuter’s EIKON database.
Findings – The financial and operating performance of frequent as well as first-time acquirers have
depicted a similarly deteriorating trend during the post-acquisition period. These findings indicate that the
international expansion of Indian companies is not guided by synergy creation potential and may be pushed
by the overconfidence or over-optimism and agency conflicts of managers. This, perhaps, indicates that firms
are being imprudent in investing free cash flows available with them.
Originality/value – The study is the first of its kind. No study, to the best of the authors’ knowledge, has
analysed the performance of acquiring firms by segregating them into frequent and first-time acquirers using
accounting measures of performance. More so, an extensive analysis of the long-term financial and operating
performance of acquiring companies is rare to come across in the extant literature.
Keywords Cross-border acquisitions, Financial performance, India, Frequent acquirers,
Single acquirers
Paper type Research paper

1. Introduction
Cross-border acquisitions (CBAs) have developed into a major ingredient of a corporate
expansion strategy for emerging market companies. With the liberalisation and
globalisation of their economies, companies from emerging markets have increasingly been Review of International Business
and Strategy
exploring CBAs to establish a footprint in the global economy. Global Financial Crisis 2007– Vol. 30 No. 4, 2020
pp. 491-514
2008 further provided momentum to multinational companies for exploring growth avenues © Emerald Publishing Limited
2059-6014
in markets beyond national boundaries, achieving both geographical and risk DOI 10.1108/RIBS-12-2019-0160
RIBS diversification (Yavas et al., 2019).These international acquisitions by emerging market
30,4 companies have gained wide coverage in the business press, media has been highly
enthusiastic and affirmative of these mega-deals. Over time researchers have also reached
an agreement that such transactions generate positive and significant abnormal returns
(over and above normally expected returns in terms of equity market price) to the acquirers
in the short-term around the event announcement (Jain et al., 2020, 2019b; Li et al., 2016;
492 Bhagat et al., 2011; Gubbi et al., 2010). Further, in the long-term, the management claims that
the internationalisation strategy is in the overall interest of shareholders.
Lack of competitive (ownership) advantages and foreign experience do not restrain these
firms to single acquisitions only. For instance, major acquisitions of Tata Consultancy
Services Ltd. include FNS, financial services company of Australia, Comicrom, Chile’s
outsourcing giant, the British insurance company, the pearl group; the corporate growth
strategy of Hindalco Industries Ltd. has been executed by acquiring Atlanta based company
Novelis Inc. and a recent acquisition of Aleris Corporation; the acquisition of majority stake
in the South Korean automaker, Ssang Yong Motor Company by Mahindra and Mahindra
Ltd., etc. Emerging market firms especially tech firms are characterised by excess cash
reserves and are always in the look out for companies either not doing well or are
undervalued (Techgig, 2020). Therefore, they execute a series of acquisitions across the
national boundary to overcome their strategic disadvantages (Schipper and Thompson,
1983) and are referred herein as multiple or frequent acquirers. Firms with prior experience
of foreign acquisition during past three years (from the most recent deal) are defined as
multiple (frequent) acquirers whereas firms with no experience at all or no experience during
past three years [1] (from the most recent deal) are defined as single (first-time) acquirers.
The adoption of this expensive corporate growth strategy involving huge financial
commitment actually makes it quintessential to assess the post-acquisition performance of
emerging market acquirers, typically characterised by lack of international exposure, in the
long-term.
The concept of acquisition performance is heterogeneous in nature (Zollo and Singh,
2004) and several measures have been used for the evaluation of corporate takeovers. While
international business and finance, researchers have often explored accounting-based
measures (accounting studies) and stock market-based data (event studies). Event studies
make use of stock-price data to determine abnormal or excess returns around the event day
to measure short-run performance. In the long-term, it becomes virtually impossible to make
the nodal event absolutely immune from other confounding events as several overlapping
and critical corporate events simultaneously influence the stock price. On these grounds,
using accounting metrics vis-à-vis stock market data represents a rational choice to evaluate
the long-term performance of emerging market acquirers. The use of accounting metrics is
even aligned with the strategic objective of corporate businesses to gain an adequate return
on investments (McGee et al., 2010).
In view of the foregoing arguments, the focus of the present paper is to make an objective
assessment of the post-acquisition performance of corporate takeovers using data from
financial statements. The post-acquisition performance has been measured separately with
regard to the liquidity, solvency, turnover and profitability of bidding firms. The paper,
thus, addresses the needs and concerns of various stakeholders and users of financial
information. To the best of the author’s knowledge, there is virtually no study investigating
the long-term performance of acquiring companies by classifying them into multiple
(frequent) and single (first-time) acquirers.
This paper contributes to the extant merger and acquisition (M&A) literature by
assessing separately the performance of multiple (frequent) and single (first-time) acquirers
in an emerging Indian market. It is worth mentioning that Indian companies are relatively Cross-border
frequent acquirers vis-à-vis other emerging market firms; their acquisitions are largely acquisitions
dominated in the services sector and other critical assets in services; and finally, their target
companies are headquartered both in developed markets and emerging markets (Kinateder
et al., 2017). The performance analysis of emerging market acquirers segregated into
frequent and single acquirers is likely to enhance the understanding of the management
behaviour and competence for the following reasons: firstly, various cross-nation studies
have indicated that country-related factors such as the market for corporate control 493
(Alexandridis et al., 2010), protection for minority investors (Boubakri et al., 2008; Rossi and
Volpin, 2004) and the level of financial market development (Rahahleh and Wei, 2012) exert
a significant influence on acquisition decisions. Secondly, unlike developed markets,
emerging markets are predominantly characterised by closely knitted family owned and
managed businesses wherein external supervision is merely procedural, thus, fostering
hubris-driven behaviour of the management. Thirdly, emerging market firms are less likely
to be affected by a lesser number of potentially good target firms vis-à-vis their developed
counterparts due to relatively lower participation in cross-border deals. Finally, emerging
markets are generally plagued with asymmetric information dissemination, lower level of
investor protection and high transaction costs. All these reasons hold enormous potential to
affect differently, the long-term performance of both single and frequent acquirers from
emerging countries vis-à-vis from developed markets, hence the need for the present study.
This paper evaluates the post-acquisition financial and operating performance of
emerging market acquirers, classified into multiple (frequent) acquirers and single (first-time)
acquirers in the long-term. The use of accounting data to analyse the long-term financial and
operating performance of acquirers grouped into multiple (frequent) and single (first-time)
acquirers is a unique attribute of the study; it is a first of its kind study. The paper addresses
critical research gaps in the extant M&A literature and contributes to knowledge creation.
The remaining paper is structured as follows: Section 2 outlines the theoretical
background and hypotheses development. Section 3 describes the data and sample used in
the study. Section 4 delineates the methodology used to achieve the objectives of the study
followed by Section 5 reporting the results of empirical analysis and discussion thereof.
Finally, Section 6 concludes the study.

2. Theoretical background and hypotheses development

The literary text states that the financial and operating performance of bidding firms, in
general, improves subsequent to an international acquisition. Diverse reasons for
anticipated economic gains include synergies (Larsson and Finkelstein, 1999), market
monopoly (Ghosh, 2004; Sharma and Ho, 2002; Lubatkin, 1983), economies of scale and
scope (Pangarkar and Lim, 2003), risk diversification, better tradability of securities and tax
benefits (Mandelker, 1974). The market for corporate control is exceedingly competitive; it
ensures the management of the acquired firm by the most efficient managers (Manne, 1965),
at least theoretically. The financial market, therefore, perceives new managers to be more
competent vis-à-vis incumbent managers, who, in turn, should bring about improved
operating performance in the long-term. Besides tangible benefits, this strategic move
accompanies intangible advantages in the form of enhanced corporate image and a higher
valuation of goodwill (Bany-Ariffin et al., 2016).
A considerable number of scholarly researchers has investigated whether overseas
acquisitions induce improvements in the long-term performance of acquiring firms
(Nicholson et al., 2016; Grigorieva and Petrunina, 2015; Rahman and Limmack,2004; Powell
and Stark, 2005; Linn and Switzer, 2001; Switzer, 1996; Healy et al., 1992; Ravenscraft and
RIBS Scherer, 1989). Despite many firms executing multiple CBAs, the present study is virtually
30,4 the first to examine the disaggregated financial and operating performance of multiple
(frequent) acquirers and single (first-time) in the long-term. Existing studies have assessed
daily abnormal returns based on a change in stock price around the event announcement to
multiple and single acquirers, predominantly in developed merger markets.
For instance, using a sample of 16,221 acquisitions by US companies from 1985–2004,
494 Ismail (2008) has noted that shareholder returns to single acquirers exceeded by 1.66% in
comparison to multiple acquirers and in equity-swap financed deals, the difference in returns
widens to 5% in favour of single acquirers.
Ng (2009) has examined the long-term operating and marketing effects of sequential
merger activity of 138 Canadian bidders during 1996–2000. The results have indicated a
significant decline in the profitability per se the operating performance of sequential bidders
owing to reduced profit margins and high leverage ratio. Single bidders vis-à-vis sequential
bidders have recorded a higher market valuation.
Rahahleh and Wei (2012) have examined the performance pattern of frequent (multiple)
acquirers in 17 developing nations and concluded that subsequent acquisitions on average
yield negative, but insignificant returns to serial bidders. However, successful initial deals
have caused significant and larger deterioration in abnormal returns to sequential bidders,
supporting hubris-infected conduct as a factor in frequent mergers. Similarly, Adel and
Alkaraan (2019) have reported greater daily abnormal returns for infrequent bidders as
compared to frequent bidders from both national and international acquisitions.
There are several theoretical propositions, which aim to explain the difference in the
performance pattern of single acquirers and multiple acquirers. Some of these arguments
endorse that single acquirers outperform multiple acquirers whereas others enforce the
contradictory viewpoint.
Roll (1986) proposed that hubris-infected managers generally tend to overvalue and, in
the process, make unwarranted payments for their targets. Managerial overestimation of
their abilities to generate higher anticipated returns might even induce value-destroying
acquisitions (Malmendier and Tate, 2008). Managerial competence and behaviour exercise a
considerable influence particularly on the performance of frequent bidders. Recent empirical
studies are testimony to an increasing manifestation of hubris in the performance of multiple
(frequent) acquirers (Aktas et al., 2009; Ismail, 2008). Adel and Alkaraan (2019) and Ismail
(2008) have further observed that the first successful acquisition particularly reinforces the
behaviour of over-confidence and over-optimism amongst corporate managers, ultimately
causing declined returns in later acquisitions. This, perhaps, suggests that managerial
attitude and performance of bidding firms are interdependent and cannot be isolated from
each other. Therefore, it becomes critical to understand the fallout of acquisition
performance for management conduct and decision-making also.
There are studies, for instance, Aktas et al. (2007) and Guest et al. (2004) indicating that
multiple or frequent acquirers are usually left with a smaller pool of good target firms for
their subsequent bids. This causes a deterioration in the performance of multiple or frequent
acquirers vis-à-vis single acquirers during the post-acquisition period; the deterioration is
due to the “diminishing valuable targets effect”.
The organisational learning theory postulates that sophisticated routines established
through accumulated experiences should enhance the future performance of multiple
bidders. The extent of experiential learning enables capacity building and increases the
absorptive capacity of acquiring firms that would generate higher shareholders’ returns and
improved performance. Not only acquisition successes but minor failures are also an
invaluable source of learning for an organisation. A failed merger deal becomes an
intellectual asset through improved acquisition skills and competencies that might enhance Cross-border
the overall performance of subsequent acquisition programmes (Finkelstein and Haleblian, acquisitions
2002; Haleblian and Finkelstein, 1999). Ismail (2008) has also endorsed that first-time
unsuccessful acquirers learn from their experience. In contrast, Meschi and M¨etais (2015)
have documented that the performance of future acquisitions is negatively influenced by
large merger failures. In other words, taking inference from the “threat-rigidity theoretical
framework”, Meschi and M¨etais (2015) have stated that large merger failures are not a
source of learning for acquiring firms. 495
The execution of several acquisitions might build-up a strategic momentum for the
bidding firm for many coming years (Amburgey and Miner, 1992) and generate wealth for
its equity holders (Frick and Torres, 2002; Rovit and Lemire, 2003). Similarly, by virtue of
operating in diverse economic, institutional and cultural settings, the financial performance
of frequent or multiple acquirers is anticipated to be better than that of first-time or single
acquirers. Based on the above arguments, the proposed hypothesis of the study is:

H1. Multiple (frequent) acquirers are likely to outperform the single (first-time) acquirers
in the post-acquisition financial and operating performance in the long-term.

3. Methodology
The post-acquisition studies are conceptualised and designed to judge whether the corporate
restructuring strategy of M&A has actually improved or worsened the financial health of
the acquiring firms. In other words, whether firms should undertake and invest heavily in
this inorganic expansion strategy. The post-acquisition performance of the acquisition firm
involves the comparison of the performance of the combined/resulting entity (the bidder and
the acquired firms) with the control group entity. There are two main ways of designing
control group studies:
(1) pre- and post-performance comparisons of the acquiring firms; and
(2) comparisons with non-acquiring firms preferably in similar industry and size
categories.

However, the identified group of non-merging firms rarely matches the firm-level attributes
of acquiring firms specifically cross-border acquiring firms (Kumar, 2009). Moreover,
changes in the cultural, economic and institutional ecosystem of cross-border acquiring
firms cannot be observed in a sample of non-acquiring firms. This study, in concurrence
with previous studies such as Tripathi and Lamba (2015), Rani et al. (2015), follows pre- and
post-design, generally known as the “change model” to evaluate the post-acquisition
performance of acquiring firms in the long-term.
Accounting studies typically exploit financial accounting information (drawn from
financial statements) to assess the performance of a firm and/or industry. In the extant
literature, long-term performance of CBAs has been investigated over several time-frames
varying from 2 (
2, 2) to 5 (
5, 5) years before and after the deal (Leepsa and Mishra, 2013;
Kumar, 2009; Martynova et al., 2007; Sharma and Ho, 2002; Switzer, 1996; Healy et al., 1992).
Three years after a deal are critical to its success and in many cases enough to bear fruit
(produce results) of acquisition and its integration. In the light of these considerations, and
also following Bianconi and Tan (2019), Liou and Rao-Nicholson (2019); Kumar (2009),
Kumar and Bansal (2008); Sharma and Ho (2002), the present study has chosen to examine
the performance over a period of pre- and post-three years; the reference period for the study
of acquisitions announced during 2004–2013, eventually extends from 2001 to 2017, the
RIBS accounting data of all these years has been sourced from Thomson Reuter’s EIKON
30,4 database.
Non-availability of financial statements consistently for seven years, that is, three years
before and four years after the year of acquisition led to the exclusion of companies from the
valid sample. The final screening yielded a usable sample of 642 acquisitions comprising
481 acquisitions undertaken by 92 multiple acquirers and 161 acquisitions by 101 first-time
496 acquirers and the remaining 60 acquisitions by 18 single acquirers, which have executed
CBAs during past three years immediately preceding the latest deal. The study, therefore,
analyses the performance of 92 multiple (frequent) and 119 single (first-time) acquirers.
In the present study, corporate performance for three years prior (t
3, t
2, t
1) prior
to acquisition has been compared with the performance for three years (t þ 1, t þ 2, t þ 3)
post-acquisition. The year of acquisition (t0) and year of integration (t þ 1 0 ) have been
excluded from the analysis for, it would take time for the combined entity to integrate the
operations and resources, as well as to absorb the initial cost of acquisition incurred
(Papadakis and Thanos, 2010; Kumar, 2009; Martynova et al., 2007). The timeline of the
accounting study methodology is presented in Figure 1.
Ratio analysis, being a relative measure, is the most widely used and efficient tool for
assessing the financial health of a corporate enterprise. Trend ratios, in particular, allow
comparability of the firm’s current performance with its past performance. Being so, it is
logical to compare the post-acquisition ratios with those during the pre-acquisition period to
determine the economic impact of CBAs. The extant literature lacks consensus with regard
to the classification, computation and number of financial ratios used to examine the
financial performance of firms. For instance, Delen et al. (2013) have applied and calculated
31 financial ratios whereas Karaca and Çigdem (2012) have used 24 ratios in their studies.
Ho and Wu (2006), Gombola and Ketz (1983) have used as large as 59 and 58 ratios,
respectively.
In M&A literature, Tripathi and Lamba (2015) have assessed the financial performance
of acquiring firms on four broad parameters, namely, profitability, solvency and liquidity,
size and efficiency using a set of nine ratios. Rani et al. (2015) have compared pre- and post-
long-term financial performance of bidding firms using 14 ratios on efficiency, leverage,
liquidity and profitability. Following the existing literature, in the present study, change
(improvement/decline) in post-acquisition operating performance of firms has been captured
using a comprehensive set of 16 financial ratios; these ratios have been broadly classified
into profitability, efficiency, solvency and liquidity ratios as described in the following Sub-
sections: 3.1 to 3.4.

3.1 Profitability analysis

Profitability is a conventional measure of operating and economic efficiency. For
management, it is a test of efficiency; for owners, it indicates adequate returns; for the

Pre-acquisition period Post-acquisition period

Acquisition year

Figure 1.
t–3 t–2 t–1 t0 t + 1' t+1 t+2 t+3
Framework of
accounting study
methodology
Integration year Post-integration period
creditors, it reflects cushion of safety; and for the employees, it is an indicator of secured Cross-border
employment. The profitability of a firm is basically measured on the basis of: acquisitions
 sales; and
 investments (total assets).

In M&As, firms are valued using multiples of EBITDA [2]; it is often used as a proxy for
determining the operating cash flow generating the ability of the firm (Switzer, 1996; Healy 497
et al., 1992). This measure remains uninfluenced by depreciation policy, taxation structures
and financing decisions of the firm. In other words, EBITDA is not affected by the choice of
capital structure and directly focus on operating efficiency. EBITDA has been deflated by
total assets and sales. It is to be borne in mind that the book value (as recorded in the balance
sheet) instead of the market value of total assets is used, as the market value might already
incorporate (at least partially) the operating inefficiencies at the time of announcement.
Therefore, replicating Sharma and Ho (2002) and Grigorieva and Petrunina (2015), two
operating cash flow ratios, namely, EBITDA margin and EBITDA to total assets have also
been used to assess the performance.
Profitability ratios have been segregated into margin ratios (profitability related to sales)
and rate of return ratios (profitability related to investment or assets). Profitability based on
sales has been computed in terms of ratios, namely, gross profit margin (GPM), operating
profit margin (OPM), net profit margin (NPM) and EBITDA margin. An increase in margin
ratios augurs well for the realisation of anticipated synergies and improved profitability.
Profitability from operations intends to analyse whether there have been operating
synergies from CBAs by emerging economies.
.Profitability ratios are critically important from the perspective of owners and investors. In
fact, the sole reason why they finance (fund) the operations of any corporate firm is to earn an
adequate return on their investments. Investments related profitability ratios are appropriate
measures of the firm’s profitability. These rate of return ratios have been determined based on
two major concepts of investment, namely, return on assets (ROA) and return on capital
employed (ROCE). The cross-border effect evincing higher profitability would positively
influence the wealth of the shareholders, thereby, the performance of the acquiring firm.
All the profitability ratios have been delineated in equations (1) to (6):
3.1.1 Margin ratios.


GPM ¼ Net sales
Cost of goods sold ½COGS =Net sales (1)

OPM ¼ ð EBIT– non-operating incomeÞ=Net sales (2)

NPM ¼ ð Earning after taxesÞ=Net sales (3)

EBITDAM ¼ ð EBIT þ Depreciation and amortizationÞ=Net sales (4)

3.1.2 Rate of return ratios.

Earnings after taxes þ Interest-Tax advantage on interest

ROA ¼ (5)
Average total assets
RIBS Earnings after taxes þ Interest-Tax advantage on interest
ROCE ¼ (6)
30,4 Average capital employed

(Capital employed = Total assets – Current liabilities)

3.2 Efficiency analysis

498 Efficiency ratios are of prime concern to the management, as the very existence of a profit-
making business is subject to the financial efficiency of its core operations. In other words,
the business objective of wealth maximisation cannot be achieved unless the firm conducts
its operations profitably. Efficiency ratios have been used as tools to compare the post-
merger operating (functional) performance of a business organisation with its performance
prior to acquisition.
Primarily, efficiency is measured from the perspective of effective or optimal utilisation
of firms’ assets for generating sales and cash; such ratios are better known as turnover
ratios. Additionally, pre- and post-M&A cost-efficiency ratios have been estimated and
compared. The economic rationale for evaluating cost-efficiency flows from the fact that
firms can earn more profits inter-alia from reduced cost or expenses. Also, an analysis of
expenses incurred in relation to the revenue earned is an important aspect of the firm’s
profitability (Jain, 1989). Aligned with this, efficiency in carrying out the functions
(operations) of the business has been determined by means of two asset efficiency and two
cost-efficiency ratios. While fixed assets turnover ratio (FATR) and current assets turnover
ratio (CATR) are asset efficiency ratios, cost efficiency ratios include the cost of goods sold
ratio (COGSR) and operating expenses ratio (OER). Enhanced turnover ratios in the post-
acquisition period imply greater utilisation of existing resources and capacity whereas
reduced ratio after the merger indicates that available capacity and resources are under-
used. In the case of cost-efficiency ratios, a lower ratio as a consequence of M&A asserts that
for a given level of sales, there is a considerable reduction in the operating expenses of the
merged entity and vice-versa for higher cost ratio. These ratios have been computed as
explained in equations (7) to (10):
3.2.1 Asset efficiency ratios.

FATR ¼ Net sales=Average fixed assets (7)

CATR ¼ Net sales=Average current assets (8)

3.2.2 Cost efficiency ratios.

COGSR ¼ Cost of goods sold=Net sales (9)

OER ¼ Operating expenses=Net sales (10)

(Operating expenses = General and administrative expenses þ Selling and distribution

expenses)

3.3 Solvency analysis

Solvency ratios measure the firm’s ability to satisfy its long-term lenders; these ratios
examine the relationship between borrowed funds and owners’ funds. It is of immense
significance for lenders, suppliers, rating agencies, etc., to judge the financial soundness of a Cross-border
firm. Akin to other capital budgeting decisions of the firm involving huge cash outflows, acquisitions
CBAs are also financed through raising long-term debt or issuing equity capital. Thus, these
decisions are likely to affect a firm’s capital structure. Solvency position is proposed to be
examined in terms of the debt repayment capacity of the acquiring firm post-acquisition.
Leverage ratios are based on a comprehensive measure of total external obligations [3]
(long-term debt þ current liabilities) to total assets.
The following ratios are proposed to be computed: debt-equity ratio (DER), gross 499
external obligations equity ratio (GEOER), which are defined in equations (11) and (12),
respectively.

DER ¼ Long-term debt=Total shareholders’ equity (11)

GEOER ¼ Total external obligations=Total shareholders’ equity (12)

(Total external obligations = Long-term debt þ Short-term debt þ other current liabilities)
(Total shareholders’ equity = Equity share capital þ Preference share capital þ Reserves
and surplus-Accumulated losses)

3.4 Liquidity analysis

The liquidity ratios provide relevant information about a firm’s ability to meet its short-term
(current) obligations in time. Depending on the method of payment involved in financing
cross-border deals, the liquidity position of the acquiring firm is expected to be affected by a
marked extent. In fact, in the post-acquisition period, the maintenance of adequate liquidity
without impairing profitability is the foremost requirement of the acquiring firm. Liquidity
analysis has been carried out in terms of achieving a satisfactory current ratio (CR) and acid
test ratio (ATR). CR takes into account five items of current assets including cash and bank
balance, sundry debtors, inventories, loans and advances and stock of other current assets.
CR and ATR have been computed using equations (13) and (14), respectively.

CR ¼ Current assets=Current liabilities (13)

ATR ¼ Liquid assets=Current liabilities (14)

(Liquid assets = Current assets – Stock – Prepaid expenses)

4. Data and sample

CBAs announced by Indian companies listed on CNX Nifty 500 index during 2004–2013
identified from Thomson Reuter’s EIKON database constitute the relevant data for the
study. After emerging economies opened themselves to the global market, CBAs by firms
from these markets kicked off in a sizeable number from 2004 onwards, providing a
rationale for the research period. A number of M&A studies (Adel and Alkaraan, 2019; Jain
et al., 2018a, 2018b; Ismail, 2008) have used Thomson Reuter’s database for collecting data
on M&A deals across the globe. In total, 2,215 cross-border deals have been announced by
Indian companies during the research period. For a deal to qualify as a merger, the acquirer
must have obtained at least 10% ownership in the target firm (UNCTAD, 1996); 25 deals
have not met this criterion. Subsequently, data screening has been done for acquisitions by
private companies (775), acquisitions by companies listed on other stock exchanges (173)
RIBS and deals withdrawn, pending, rumoured or having unknown status (464). Acquisitions are
30,4 undertaken by financial companies, owing to their different nature of assets and regulatory
requirements, as well as cases with incomplete information (15) have been excluded.

5. Results and discussion

Tables 1–3 enumerate the mean performance of a single (Panel A), as well as multiple (Panel
500 B) acquirers based on all financial ratios for pre- and post-acquisition years. Apart from
mean performance in each of the three years before and after the acquisition, the tables also
exhibit data for combined mean for pre-, as well as the post-merger period. M_pre, average
performance before the acquisition event, represents the yardstick for assessing change in
financial performance over the post-acquisition period; this change in financial and
operating performance against M_pre has been evaluated in five different sets. Firstly, the
performance in each of the three years succeeding the acquisition year [4] [(t þ 1), (t þ 2) and
(t þ 3)] has been compared with M_pre. Secondly, to understand the impact of “ongoing
integration process” on the performance of the acquiring firms, how emerging market
bidders excelled in the year of integration (t þ1 0 ) as compared to the combined performance
(adjudged to be the standard performance) over the pre-acquisition period has been
evaluated. Finally, the combined average performance over the pre- and post-merger period
has been compared. Data related to change across all performance measures over different
timeframes for both single (Panel A) and multiple (Panel B) acquirers have been depicted in
Tables 4–7.

Year relative to the acquisition FATR CATR COGSR OER

Panel A: single acquirers (n = 119)

(t
1) 3.97 1.89 0.56 0.25
(t
2) 3.81 1.83 0.57 0.25
(t
3) 3.68 1.74 0.56 0.26
t0 3.18 1.80 0.55 0.28
(t þ 1 0 ) 3.05 1.88 0.56 0.28
(t þ 1) 3.20 1.86 0.55 0.29
(t þ 2) 2.90 1.84 0.57 0.30
(t þ 3) 2.88 1.81 0.57 0.28
Mean annual performance (M_pre) 3.79 1.83 0.57 0.26
Mean annual performance (M_post) 2.96 1.82 0.56 0.29
Panel B: multiple acquirers (n = 92)
(t
1) 3.08 1.74 0.51 0.10
(t
2) 3.47 1.76 0.48 0.10
(t
3) 3.46 1.68 0.47 0.10
t0 3.13 1.76 0.48 0.11
(t þ 1 0 ) 3.09 1.76 0.49 0.16
(t þ 1) 3.12 1.74 0.49 0.12
(t þ 2) 2.78 1.72 0.48 0.11
Table 1. (t þ 3) 2.83 1.78 0.50 0.10
Performance of Mean annual performance (M_pre) 3.34 1.73 0.49 0.10
Indian (single and Mean annual performance (M_post) 2.91 1.73 0.49 0.11
multiple) acquirers Notes: (t
1), (t
2) and (t
3) indicate three years immediately prior to the year of acquisition (t0). (t þ
based on efficiency 1 0 ) indicates the year of integration subsequent to the year of acquisition. (t þ 1), (t þ 2) and (t þ 3) indicate
ratios, 2001–2017 three successive years after the year of integration (t þ 1 0 )
Year relative to the acquisition CR ATR DER GEOER
Cross-border
acquisitions
Panel A: single acquirers (n = 119)
(t
1) 3.03 2.22 0.93 1.55
(t
2) 3.25 2.44 0.98 1.61
(t
3) 3.32 2.53 0.85 1.49
t0 2.72 1.99 1.05 1.81
(t þ 1 0 ) 2.60 1.85 1.12 1.94 501
(t þ 1) 2.15 1.49 1.05 2.04
(t þ 2) 2.03 1.45 1.31 2.56
(t þ 3) 2.00 1.35 0.03 0.15
Mean annual performance (M_pre) 3.19 2.39 0.92 1.55
Mean annual performance (M_post) 2.07 1.43 0.82 1.63
Panel B: multiple acquirers (n = 92)
(t
1) 3.06 2.54 0.93 1.44
(t
2) 2.81 2.30 0.96 1.60
(t
3) 2.41 1.92 1.09 1.81
t0 2.05 1.63 1.10 2.01
(t þ 1 0 ) 2.17 1.73 1.13 2.21
(t þ 1) 1.90 1.53 0.53 0.91
(t þ 2) 1.63 1.31 0.92 2.05 Table 2.
(t þ 3) 1.58 1.27 1.05 3.35 Performance of
Mean annual performance (M_pre) 2.76 2.25 0.99 1.62 Indian (single and
Mean annual performance (M_post) 1.70 1.36 0.82 2.09 multiple) acquirers
Notes: (t
1), (t
2) and (t
3) indicate three years immediately prior to the year of acquisition (t0). (t þ based on liquidity
1 0 ) indicates the year of integration subsequent to the year of acquisition. (t þ 1), (t þ 2) and (t þ 3) indicate and solvency ratios,
three successive years after the year of integration (t þ 1 0 ) 2001–2017

The data indicated in Table 1 pertain to the operating performance of a single (Panel A) and
multiple (Panel B) acquirers with respect to efficiency (turnover [5]) measures. It has been
observed that acquiring firms (regardless of first-time or frequent acquirers) have been
operating efficiently as far as the utilisation of current and fixed assets are concerned;
FATR, as well as CATR, have been noted to be more than one, that is over and above
satisfaction both before and after the acquisition. Moreover, the decline in these ratios in the
post-merger period does not turn out to be significant, implying the efficiency of the firm
remain unaffected of cross-border acquisition activities (Table 4). It is amusing to notice a
parallel (similar) state of affairs for both single and multiple acquirers in so far as the efficient
deployment of fixed and current assets are concerned. In brief, CBAs have not brought out
any significant change in managerial efficiency with respect to the utilisation of the
combined firm’s resources.
Similarly, COGSR and OER virtually remain unchanged after acquisition for both types
of acquiring firms. However, multiple acquirers are more cost-efficient as compared to single
bidders throughout the observed period; it may be because of scale economies and/or
flexible managerial approach due to geographically distributed operations.
Tables 2 and 5 contain data pertaining to liquidity and solvency position of Indian
acquiring firms segregated into first-time (Panel A) and frequent acquirers (Panel B). The
actual performance on these parameters during three years before and after acquisition
constitutes the subject matter of Table 2; change (delta) in these measures during the post-
acquisition span has been outlined in Table 5. Prior to the acquisition, the liquidity position
of single, as well as multiple acquirers is apparently gratifying at least to short-term lenders
RIBS GPM OPM NPM EBITDAM EBITDA/Total ROA ROCE
30,4 Year relative to the acquisition (%) (%) (%) (%) assets (%) (%) (%)

Panel A: single acquirers (n = 119)

(t
1) 44.88 17.20 12.81 20.46 15.42 10.73 14.77
(t
2) 44.25 17.90 13.48 21.24 15.73 11.22 15.59
(t
3) 44.56 16.39 17.27 20.56 15.17 11.54 16.33
502 t0 45.61 13.77 10.81 18.11 12.64 8.96 13.14
(t þ 1 0 ) 46.00 12.89 9.29 17.09 12.18 8.30 12.14
(t þ 1) 47.14 9.86 4.89 14.83 10.49 6.07 22.34
(t þ 2) 45.10 3.36 0.68 8.97 8.52 4.65 7.90
(t þ 3) 44.41 9.04 3.44 14.40 9.74 5.69 9.02
Mean annual performance (M_pre) 44.19 17.06 14.47 20.66 15.43 11.18 15.57
Mean annual performance (M_post) 45.77 6.66 2.45 12.07 9.41 5.32 12.63
Panel B: multiple acquirers (n = 92)
(t
1) 48.99 17.11 13.66 21.61 15.34 11.11 15.97
(t
2) 52.04 28.18 21.79 32.40 16.65 12.30 16.57
(t
3) 52.59 16.53 11.92 21.43 13.96 9.75 13.80
t0 51.65 12.39 7.08 17.93 12.17 7.53 9.69
(t þ 1 0 ) 50.70 4.08 42.18 10.04 10.56 6.76 10.30
(t þ 1) 50.50 9.60 4.89 16.21 10.87 6.53 9.89
(t þ 2) 51.93 9.78 4.60 15.86 10.85 6.32 8.11
Table 3. (t þ 3) 50.42 10.84 5.14 16.17 11.37 6.97 6.93
Performance of Mean annual performance (M32_pre) 50.84 20.92 15.76 25.43 15.32 11.05 15.45
Indian (single and Mean annual performance (M_post) 50.70 9.91 4.58 15.96 10.93 6.53 8.26
multiple) acquirers Notes: (t
1), (t
2) and (t
3) indicate three years immediately prior to the year of acquisition (t0). (t þ
based on profitability 1’) indicates the year of integration subsequent to the year of acquisition. (t þ 1), (t þ 2) and (t þ 3) indicate
ratios, 2001–2017 three successive years after the year of integration (t þ 1 0 )

as the average CR is 3.19:1 and 2.76:1 for single and multiple types of bidding firms,
respectively, before CBAs. Similarly, ATR, on an average, has been observed to be 2.39:1
and 2.25:1 for first-time and frequent acquirers, respectively, in the pre-merger period
(Table 2). However, in general, CR of 2:1 and ATR of 1:1 is recommended. Therefore, such
higher liquidity ratios are not without a cautionary note and need a critical assessment. On
one hand, these are indicative of a safety cushion (margin) to trade creditors and other short-
term lenders and, thereby, an optimistic scenario of the ability of the firm to meet its short-
term obligations in time. On the other, these point to excess and idle liquidity lying in the
firm, which causes a dent in its profitability. Nevertheless, CBAs have augured well for both
categories of Indian acquiring firms by far their liquidity position is concerned. In other
words, overseas acquisitions have positively and significantly improved the liquidity
condition of first-time, as well as frequent acquirers, such that after executing CBAs, CR has
been noted to be 2.07:1 and 1.70:1 and ATR to be 1.43:1 and 1.36:1 for single and multiple
acquirers, respectively. The obvious reason is that excess liquidity has been used for
financing the overseas expansion activities, thereby, effecting a favourable and significant
change in CR and ATR over different time periods after the acquisition.
CBAs have essentially provided Indian multinational firms with the opportunity to
exploit their excess financial resources in pursuing their internationalisation strategies.
Also, the target firm’s shareholders desire to be compensated in cash for sacrificing their
share of ownership (Rossi and Volpin, 2004). Nevertheless, these companies should exercise
a cautionary approach in their endeavour to use abundant liquidity in overseas operations.
 FATR CATR COGSR OER
Pairs forcomparison Mean difference t-value Mean difference t-value Mean difference t-value Mean difference t-value

Panel A: single acquirers (n = 119)

(t þ 1 0 )
M_pre
0.74
1.05 0.05 0.47
0.01
0.30 0.02 0.82
(t þ 1)
M_pre
0.59
0.82 0.03 0.29
0.02
0.68 0.04 1.36
(t þ 2)
M_pre
0.88
1.31 0.01 0.10 0.00 0.01 0.04 1.46
(t þ 3)
M_pre
0.91
1.37
0.02
0.14 0.00
0.05 0.03 1.01
M_post
M_pre
0.83
1.25 0.00
0.04
0.01
0.24 0.03 1.22
Panel B: multiple acquirers (n = 92)
(t þ 1 0 )
M_pre
0.25
0.29 0.03 0.23 0.00 0.04 0.05 1.55
(t þ 1)
M_pre
0.22
0.26 0.01 0.07 0.00 0.10 0.01 0.85
(t þ 2)
M_pre
0.56
0.73 0.00
0.03
0.01
0.32 0.00 0.09
(t þ 3)
M_pre
0.51
0.65 0.05 0.38 0.00 0.12 0.00 0.00
M_post
M_pre
0.43
0.56 0.01 0.04 0.00 0.04 0.00 0.25

Note: *and **significance at 5% and 1%, respectively

ratios, 2001–2017
based on efficiency
performance of
Change in
Table 4.

multiple) acquirers
Indian (single and
503
acquisitions
Cross-border
 30,4

504
RIBS

Table 5.
Change in

2001–2017
performance of
Indian (single and

based on liquidity
multiple) acquirers

and solvency ratios,

CR ATR DER GEOER
Pairs for comparison Mean difference t-value Mean difference t-value Mean difference t-value Mean difference t-value

Panel A: single acquirers (n = 119)

(t þ 1 0 )
M_pre
0.58
1.78
0.53
1.91 0.20 1.42 0.39 1.94
(t þ 1)
M_pre
1.03
3.37**
0.90
3.47** 0.13 0.89 0.49 1.74
(t þ 2)
M_pre
1.16
3.48**
0.94
3.17** 0.38 1.40 1.01 2.39*
(t þ 3)
M_pre
1.19
3.06**
1.04
3.44**
0.89
1.20
1.40
1.04
M_post
M_pre
1.12
3.41**
0.95
3.46**
0.10
0.45 0.08 0.17
Panel B: multiple acquirers (n = 92)
(t þ 1 0 )
M_pre
0.59
1.69
0.52
1.50 0.14 0.60 0.60 1.56
(t þ 1)
M_pre
0.86
3.25**
0.72
2.75**
0.47
1.04
0.71
0.69
(t þ 2)
M_pre
1.13
5.10**
0.94
4.23**
0.08
0.38 0.44 1.28
(t þ 3)
M_pre
1.18
5.30**
0.98
4.36** 0.05 0.18 1.73 1.52
M_post
M_pre
1.06
4.74**
0.89
3.92**
0.17
0.65 0.47 0.75

Note: *and **significance at 5% and 1%, respectively

Cash-financed acquisitions are not perceived positively by emerging markets owing to the Cross-border
fact that foreign target firms are often reluctant to use stock swap method of investment in acquisitions
case they perceive acquiring firms to be lacking in professional management skills; this is
somewhat (perhaps) true in the Indian context where majority share is owned and controlled
by promoters. Further, it is revealing to note that no significant improvement has been noted
in the liquidity of both types of acquiring firms during the integration year (t þ 1 0 ),
consequently providing partial support to the hypothesis that financial performance is
unlikely to improve in the integration year.
505
The proportion of long-term debt vis-à-vis owner’s funds in financing the total assets of
the firm seems within an acceptable range (DER < 1) for single (0.92 and 0.82), as well as
multiple (0.99 and 0.82) bidders over pre- and post-acquisition period, respectively. A
relatively high stake of owners after merger signifies an improved margin of safety for
lenders and creditors in situations of liquidation etc. Further, albeit, DER, on an average, has
recorded a notable decline in the post-merger vis-à-vis pre-merger phase for both categories
of business entities, this, however, has not been caused by CBAs as findings have not
emerged out to be statistically significant. Prima facie solvency position (based on DER)
provides solace to lenders.
It merits mention here that DER per se does not deem fit as an exhaustive yardstick of
outsider’s claims; in fact, it has a built-in bias to yield lower debt component. Non-inclusion
of short-term debt and other current liabilities present a distorted picture of solvency ratios
to lenders; the reason being, at the time of financial crisis, says the liquidation of the
business entity, short-term debt holders (including current liabilities) will be entitled (to the
extent of their claims) to the business assets. Hence, a solvency measure inclusive of current
liabilities and short-term debt ensures seems a rational choice to determine the true share of
the debt.
Having said that, it has been observed that contrary to DER, a more comprehensive
measure of capital structure, namely, GEOER divulges a rather disappointing scenario.
Firstly, on average, it has been observed to be more than 1.5:1 across all time periods. A
marginal increase from 1.55 to 1.63 has been observed for single acquirers in the post-merger
period. The change is significant in (t þ 2) year, indicating that the capital structure of single
acquirers has been adversely affected by CBAs. Also, a substantial increase (albeit

ROA ROCE
Pairs for comparison Mean difference (%) t-value Mean difference (%) t-value

Panel A: single acquirers (n = 119)

(t þ 1 0 )
M_pre
2.88
3.69**
3.43
2.84**
(t þ 1)
M_pre
5.11
5.50** 6.77 0.52
(t þ 2)
M_pre
6.53
5.22**
7.67
3.24**
(t þ 3)
M_pre
5.48
6.51**
6.55
4.82**
M_post
M_pre
5.86
6.46**
2.93
0.60
Table 6.
Panel B: multiple acquirers (n = 92) Change in
(t þ 1 0 )
M_pre
4.30
4.87**
5.14
4.10** performance of
(t þ 1)
M_pre
4.52
4.63**
5.56
3.85** Indian (single and
(t þ 2)
M_pre
4.74
4.59**
7.34
2.76**
(t þ 3)
M_pre
4.09
4.55**
8.51
1.63
multiple) acquirers
M_post
M_pre
4.53
5.11**
7.19
3.05** based on profitability
from investments,
Note: *and **significance at 5% and 1%, respectively 2001–2017
 30,4

506
RIBS

Table 7.
Change in

2001–2017
performance of

from operations,
Indian (single and
multiple) acquirers
based on profitability
GPM OPM NPM EBITDAM EBITDA/Total assets
Pairs for comparison Mean difference (%) t-value Mean difference (%) t-value Mean difference (%) t-value Mean difference (%) t-value Mean difference (%) t-value

Panel A: single acquirers (n = 119)

(t þ 1 0 )
M_pre 1.81 0.57
4.17
2.28*
5.17
2.06*
3.57
2.12*
3.25
3.27**
(t þ 1)
M_pre 2.95 0.94
7.20
3.88**
9.57
3.74**
5.83
3.40**
4.94
4.53**
(t þ 2)
M_pre 0.91 0.29
13.70
3.60**
13.78
3.95**
11.69
3.34**
6.91
5.18**
(t þ 3)
M_pre 0.22 0.07
8.02
4.69**
11.03
4.38**
6.26
3.97**
5.69
5.70**
M_post
M_pre 1.58 0.52
10.40
4.37**
12.01
4.44**
8.59
3.99**
6.02
5.70**

Panel B: multiple acquirers (n = 92)

(t þ 1 0 )
M_pre
0.14
0.04
16.84
2.32* 26.42 0.73
15.39
2.21*
4.75
4.37**
(t þ 1)
M_pre
0.33
0.10
11.32
2.74**
10.87
3.08**
9.22
2.40*
4.44
3.91**
(t þ 2)
M_pre 1.09 0.32
11.14
2.87**
11.16
3.54**
9.58
2.50*
4.46
3.65**
(t þ 3)
M_pre
0.42
0.12
10.08
2.59**
10.62
3.25**
9.27
2.39*
3.95
3.52**
M_post
M_pre
0.14
0.04
11.02
2.87**
11.18
3.54**
9.48
2.53*
4.39
4.02**

Note: *and **significance at 5% and 1%, respectively

insignificant) in this ratio has been noted for multiple (1.62 to 2.09) category of bidding firms Cross-border
during the same period; however, the change is statistically insignificant. It suggests that acquisitions
CBAs have not effected any change in the solvency position of the multiple types of
acquiring firms. Nonetheless, the matter is of grave concern that a substantial (60–68%) a
chunk of firm’s financing needs, in the normal course of business, are being met by outsiders
(long-term and short-term lenders) vis-à-vis owners. It can perforce be stated that DER in
comparison to GEOER gives a false impression of a firm’s capital structure by understating
the actual debt component. Being so, executives should evaluate the real solvency position 507
of firms based on a broader concept of GEOER and not DER.
Table 3 presents the mean financial and operating performance of both types of
acquiring companies, that is, first-time (Panel A) and frequent (Panel B) bidders in terms of
profitability. The average profitability of multiple acquirers has diminished on all
parameters. For single acquirers, only GPM seems to provide some solace with a marked rise
in the post-merger period, albeit the rise is insignificant [Table 7(A)].
Further, as per the data contained in Tables 6 (Panels A and B) and 7 (Panels A and B),
post-acquisition profitability from both investments and operations (barring GPM) has
worsened significantly for first-time, as well as frequent categories of acquiring firms
consistently across all time periods being analysed; it is dismal to note that international
expansion has brought about a decline in the profitability of firms as the change in
profitability ratios has turned out to be statistically significant at 5%. In other words, CBAs
have inflicted a significant deterioration in the performance of acquiring firms throughout
the post-merger period; the findings are in agreement with those of Alaaraj et al. (2018), who
noted a positive association between entity’s declined performance after the acquisition and
managerial vested interest. Further, it is revealing to note that overseas acquisitions, in the
long run, turn out to be wealth eroding (loss-making) strategic decisions for not only first-
time acquirers but also for frequent acquirers, thereby, H1 stands rejected; the acquiring
firms have failed to realise the desired synergy benefits. The results are further revealing
when such strategic actions have enhanced the valuation of the acquiring firms in the short
run (Jain et al., 2017, 2018a, 2018b; Gubbi et al., 2010).
The empirical findings challenge the dubious and rhetoric claims of the management
that international acquisitions are indeed in the long-term strategic interest of the acquiring
firm. Ng (2009) has documented that the operating performance of frequent acquirers
declines significantly in the long-term. Similarly, the results are in concurrence with
Rahahleh and Wei (2012), Ahern (2008); Billett and Qian (2008), Ismail (2008); Aktas et al.
(2007) and Doukas and Petmezas (2007), who have noted diminishing returns to frequent
acquirers and in most studies, hubris hypothesis inter alia seems to be the dominant
explanation for the observed return pattern. However, the results are in stark contrast with
studies such as Galavotti et al. (2017), Zakaria et al. (2017); Rabbiosi et al. (2012) and
Haleblian and Finkelstein (1999), which indicate an improvement in the long-term
performance of cross-border acquirers.

6. Conclusion and managerial implications

The objective of the paper has been to ascertain whether frequent acquirers perform better
than first-time acquirers in the long-term. Being so, the analysis of the financial performance
of acquiring firms has been conducted by segregating them into two categories. Based on
empirical analysis, it is revealing to note that the trend of change in performance for single
and multiple acquiring firms virtually remains the same. Multiple acquirers do not have an
edge over single acquirers. Thus, it can rationally be concluded that neither frequent
acquirers enjoy any benefits of prior-acquisition experience and/or having a functional
RIBS presence in multiple countries nor the first-time acquirers should be apprehensive of
30,4 venturing into international markets. Long-term performance analysis suggests that the
success of the acquiring firms is contingent on other important factors than prior-acquisition
experience.
The investigation into long-term financial performance has strengthened the viewpoint
that M&A decisions are not driven by the motive of profit (wealth) maximisation of
508 shareholders. Not only this, but it also challenges the asset-augmentation proposition
of EMFs, particularly of multiple bidders. A declining trend of profitability, in the case of
frequent acquirers, presents a gloomy picture about their asset-seeking perspective and
subsequently wealth maximisation motive. After all, how long can a loss-making firm
endure the globally competitive environment despite possessing a vast repertoire of
innovation and intellect? Therefore, for frequent acquirers, the rationale of asset-
augmentation lacks justification, consequently mandating deeper delving, perhaps, into
other non-financial motives of these multiple types of acquiring firms. In fact, the state of
affairs of frequent acquirers actually opens up a Pandora’s Box wherein even the true (real)
intent of first-time international bidders is debatable.
In other words, the sub-sample (classified) analysis has essentially unfolded an
intriguing question as to why CBAs, despite causing a huge dent in the profitability of
acquiring firms (especially multiple acquirers) from emerging economies, are being
rigorously embraced by these firms. The reason could be the prevalence of the agency
problems or managerialism (Seth, 1990; Seth et al., 2000) wherein managers pursue CBAs to
maximise their own benefits at the cost of equity-holders of the firms. As executive
compensation is directly determined by the size of the firm, managers are more likely to be
inclined towards growth in assets than in firm profits. Further, managers may overestimate
or wrongly evaluate the value of the target firm, eventually ending up in paying higher
takeover premiums, that is, CBAs are triggered by a hubris intent (Roll, 1986). More so,
acquirers from developing vis-à-vis developed economies often pay higher premiums to
procure resources form advanced economies because of “national pride” (Hope et al., 2011).
Moreover, the availability of excess cash flows further stimulates them to undertake projects
with negative net present value (Jensen, 1986). Managers should learn that in a highly
competitive market for corporate control, their hubris-driven motives are unlikely to prosper
in the long-run. The managerial practices of over-confidence should be strictly monitored
and disciplined, as in developed markets, to protect the interest of shareholders. Further,
post-acquisition integration challenges especially organisational culture (Yang et al., 2019)
and people integration might be reasons for the dismal performance. Another important
implication of the present study implies that financial and strategic motives are, perhaps,f
not guiding the corporate decision of international acquisitions.
The scope of the present study is limited to the analysis of the long-term financial and
operating performance of acquirers using data drawn from financial statements. Future
research should investigate and establish the relationship between short-term
announcement returns and the long-term financial and operating performance of acquiring
firms. Further, the acquisition experience has been used as a dummy variable. The amount
of experience should be important. Similarly, kind of experience – acquisition of emerging
market firm and developed marked firm – is likely to bring additional insights. Thus, the
kind of experience made should be investigated. The sample is restricted to CBAs executed
by Indian companies only. Future research can build upon by including acquisitions from
other emerging market firms, to provide an overall perspective on the performance pattern
of both single and multiple emerging market acquirers. Prospective research questions can
also be framed in other disciplines, that is, beyond the financial impact of CBAs. Amongst
non-financial factors, marketing-related aspects such as changes in the value of a brand, the Cross-border
effect of the consumer-brand relationship on the brand portfolio fit of the transacting acquisitions
entities, how consumer and suppliers’ portfolios are affected can be analysed over a period
of time (Christofi et al., 2015). Similarly, the impact on research and development capabilities
(Dezi et al., 2018) of acquiring entities may be investigated for a better explanation of post-
acquisition performance. Finally, for a better exposition of post-acquisition performance, a
blended or mixed methodology, encompassing both qualitative and quantitative analysis
can be used. 509

Notes
1. According to this definition, a company is a single (first-time) acquirer, in case it has not
undertaken any cross-border acquisition during the past three or more years immediately
preceding the latest deal; 18 companies undertaking 60 acquisitions lie in this category of single
(first-time) acquirers.
2. Earnings before interest and tax plus depreciation and amortisation.
3. Due to insufficient data pertaining to short-term debt, total external obligations has been
substituted for gross debt (long-term plus short-term debt).
4. Excluding the year of integration.
5. These are also called turnover ratios as they measure the extent with which assets or resources
have been turned or converted into sales.

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RIBS About the authors
30,4 Samta Jain is a Doctoral Scholar in Finance at the Department of Management
Studies, Indian Institute of Technology Delhi, India. She is a dual postgraduate
(MBA and M.Com) in the area of Finance. She has presented a few research papers
at international conferences. Her research focusses on Cross-border M&A, Corporate
Finance and Post-acquisition integration practices. Samta Jain is the corresponding
author and can be contacted at: samtajain.iitd@gmail.com
514
Smita Kashiramka is an Assistant Professor in the area of Finance at the
Department of Management Studies, IIT Delhi. She holds a PhD from Birla Institute
of Technology and Science, Pilani in the area of M&A. She has more than a decade
long academic experience along with a brief corporate experience in the insurance
industry. Her areas of interest include M&A, Financial Markets and Financial
Management. She has published papers in international and national journals of
repute. She has also presented several papers in international peer-reviewed
conferences.
P.K. Jain is an Emeritus Professor of Finance at the Department of Management
Studies at the Indian Institute of Technology Delhi, India. He earlier served as the
Head of the Department of Management Studies. He was Modi Foundation Chair
Professor and Dalmia Chair Professor. He has more than 45 years of teaching
experience in subjects related to Financial and Management Accounting, Corporate
Finance, Financial Analysis and Cost Control. He had taught at the Foundation for
Technical Institute, Basrah and University of Basrah, Iraq. He was visiting faculty
at the University of Paris I School of Management, Asian Institute of Technology,
Bangkok and Howe School of Technology Management, Stevens Institute of Technology, New
Jersey. He has published 10 textbooks and 15 research monographs. He has contributed more than
200 research papers in journals such as Long Range Planning, Journal of Derivatives and Hedge
Funds, Decision Support System, Journal of Advances in Management Research, Vikalpa, IIMB
Management Review, Journal of Financial Management and Analysis, Vision, GIFT Journal, as well
as nearly five dozen papers in national and international conferences. He has also contributed more
than 40 papers to financial/economic newspaper.

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