Merger: Valuation Process and Evaluation of Financial Performance in Case of United Insurance Company and Shama Plc
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Date
2008-01
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Addis Ababa University
Abstract
This paper entitled “Merger: Valuation process and Evaluation of Financial
Performance” circulates around the key issues in merger valuation and financial
performance of merged companies before and after merger.
The objective is to identify the rationales of merger, strategic and financial intents of
mergers and evaluate the performance of merged companies before and after merger.
The data used in the study was obtained through questionnaire and interview with the
executives of merged companies. In addition, the deed of merger and financial statements
are thoroughly investigated to understand the merger process and financial performance
of the merged companies. The performance 5 years before merger and 5 years after
merger are investigated using financial statement analysis. In order to substantiate the
result t- test was used for hypothesis testing
The study finding indicates that the major merger motive is enhancing profitability. It is
also found that the merger process is simply pooling the audited financial statements of
companies going for merger.
The study analysis made both by financial statements analysis and the hypothesis testing
made shows that performance of firms after merger has not increased as compared to the
performance of firms before merger
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Keywords
Financial Performance, Insurance company, Shama Plc