LEADERSHIP EFFICIENCY AND SYNERGY BENEFITS OF …

LEADERSHIP EFFICIENCY AND SYNERGY

BENEFITS OF SELECTED MERGED COMPANIES IN MALAYSIA

By

SAIRA BANU BT SULAIMAN SINNAPAN

Project Paper Submitted in Partial Fulfillment of the Requirements

For the Degree of Master of Business Administration (Leadership)

Universiti Tun Abdul Razak

March 2020

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DECLARATION

The author hereby declares that this project paper is the original study undertaken by

her unless stated otherwise. The acknowledgement has been given to references

quoted in the list of references. The views and analysis in this study are that of author’s,

based on the references made, and this does not constitute an invitation to use this

study as a technical tool for management purpose.

Signature :

Name : Saira Banu Binti Sulaiman Sinnapan

Date :

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ACKNOWLEDGEMENT

I would like to take this opportunity to express my deepest gratitude of the almighty that

gives strength and ability to complete this thesis successfully.

First of all, I would like to dedicate my sincere appreciation to my supervisor, Professor

Dr. Ravindran for guidance, encouragement, valuable advice and time throughout the

whole period of this research. Without Prof. Dr. Ravindran’s continued support and

interest, this thesis would not have been the same as presented here.

Not forgotten all the lecturers, university Dean, management staffs and fellow alumni

friends for their assistance and support during the pursuant of this course successfully.

Last, but certainly not least, my special thanks also extends to my family members for

the continual encouragement and support.

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TABLE OF CONTENTS

Page

DECLARATION ii

ACKNOWLEDGEMENT iii

TABLE OF CONTENTS iv

LIST OF TABLES vii

LIST OF FIGURES viii

LIST OF ABBREVIATIONS ix

ABSTRACT x

CHAPTER 1: INTRODUCTION

1.0 Introduction 1

1.1 Problem Statement 3

1.2 Research Questions 4

1.3 Hypothesis 5

1.4 Objective of Research 5

1.5 Mergers and Acquisitions in Malaysia 6

1.6 A Historical Approach to Mergers & Acquisitions’ Development 8

1.7 Definition of Terms: Merger, Acquisition and Takeover 12

1.8 Types of Mergers and Acquisitions 14

1.9 Motives of why companies do mergers and acquisitions 16

1.10 Theories of Mergers & Acquisition 17

1.11 Challenges faced during merger and acquisition 21

1.12 Summary 24

CHAPTER 2: LITERATURE REVIEW

2.0 Background 25

2.1 Revenue analysis in pre and post-merger and acquisition 27

2.2 Dividend analysis in pre and post-merger and acquisition 28

2.3 Profit Before Tax (PBT) analysis in pre and post-merger and acquisition 29

2.4 Net Profit analysis in pre and post-merger and acquisition 30

2.5 Earning Per Share (EPS) analysis in pre and post-merger and acquisition 31

2.6 Net Tangible Asset (NTA) analysis in pre and post-merger and acquisition 31

2.7 Synergy benefits in Merger and Acquisitions 32

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2.7.1 Operational Synergy 33

2.7.2 Strategical Synergy 35

2.7.3 Financial Synergy 35

2.7.3.1 Tax Attributes in Malaysia for Merger and Acquisition 36

2.7.3.2 Transfer Tax 39

2.7.3.3 Tax for mergers and acquisitions 39

2.8 Leadership Efficiency in Merger and Acquisition 40

CHAPTER 3: METHODOLOGY

3.0 Research Design 42

3.1 Conceptual Framework 43

3.1.1 Population & Size 44

3.1.2 Sampling 44

3.1.3 Sampling Procedure 45

3.2 Data Collection 46

3.3 Data Descriptives 47

3.3.1 Boustead Heavy Industries Corporation Berhad & CAD 48

3.3.2 Boustead Holdings Berhad & Pharmaniaga Berhad 49

3.3.3 SP SETIA and I & P Group 52

3.3.4 DRB-HICOM & Zhejiang Geely Holding Group Co Ltd 53

3.4 Descriptive Statistics 55

3.5 Ethical Problems and Accessibility 57

CHAPTER 4: DATA ANALYSIS, RESULTS AND DISCUSSION

4.0 The pre-merger and post-merger financial performance analysis 58

4.1 Analysis on Merger and Acquisition of Boustead Heavy Industries Bhd 60

4.1.1 Descriptive Analysis on the Merger and Acquisition 61

4.1.2 Paired sample t-test for Revenue 63

4.1.3 Paired sample t-test for PBT 64

4.1.4 Paired sample t-test for Net Profit (NP) 64

4.1.5 Paired sample t-test for Earnings Per Share (EPS) 65

4.1.6 Paired sample t-test for Dividend 66

4.1.7 Paired sample t-test for Net Tangible Asset (NTA) 67

4.2 Analysis on Merger and Acquisition of SP Setia Berhad 68



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4.3 Analysis on Merger and Acquisition of Boustead Holdings Bhd 74








4.4 Analysis on Merger and Acquisition of DRB-Hicom Bhd 82







4.4.7 Paired sample -test for Net Tangible Asset (NTA) 88

4.5 EBITDA Analysis and Interpretation 89

4.6 Discussion on the Findings 92

4.7 Summary 96

CHAPTER 5: SUMMARY AND CONCLUSION

5.0 Introduction 97

5.1 Synergy and Leadership 97

5.2 Conclusion 102

5.3 Limitation 102

5.4 Recommendations 103

5.5 Implications 104

REFERENCES 105

APPENDICES 107

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LIST OF TABLES

Page

Table 1: Merger Waves Evolution 10

Table 2: Primary rates of annual and initial allowances 38

Table 3: The sampling size 46

Table 4: Indicators to Measure Financial Performance 59

Table 5: Summary of paired t-test sampling for Boustead Holdings 62

Table 6: Result of t-test for Revenue 63

Table 7: Result of t-test for PBT 64

Table 8: Result of t-test for NP 64

Table 9: Result of t-test for EPS 65

Table 10: Result of t-test for Dividend 66

Table 11: Result of t-test for NTA 67

Table 12: Summary of paired t-test sampling for SP Setia Bhd 69







Table 19: Summary of paired t-test sampling for Boustead Holdings 76







Table 26: Summary of paired t-test sampling for DRB-Hicom 83







Table 33: Short-term analysis for EBITDA 90

Table 34: The financial performance in average 91

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LIST OF FIGURES

Page

FIGURE 1: Value of M&A for Malaysia and ASEAN Countries 7

FIGURE 2: Conceptual Framework 43

FIGURE 3: Population and Sampling Method 45

FIGURE 4: Data collection technique 47

FIGURE 5: Boustead Heavy Industries Corporation Berhad financial performance 49

FIGURE 6: Boustead Holdings Berhad financial performance 50

FIGURE 7: SP Setia financial performance 53

FIGURE 8: DRB-HICOM financial performance 55

FIGURE 9: Boustead Heavy Industry financial performance chart pre and 61

post-merger

FIGURE 10: SP Setia Bhd financial performance chart pre and post-merger 68

FIGURE 11: Boustead Holdings financial performance chart pre and post-merger 77

FIGURE 12: DRB-HICOM financial performance chart pre and post-merger 82

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LIST OF ABBREVIATIONS

1. EBITDA Earnings Before Interest, Tax, Depreciation and Amortization

2. EPS Earnings Per Share

3. M&A Merger and acquisition

4. NP Net Profit

5. NTA Non-Tangible Asset

6. PBT Profit Before Tax

7. CEO Chief Executive Officer

8. DEA Data envelopment analysis

9. VRS Variable Return Scale

10. CFO Chief Finance Officer

11. DRB Diversified Resources Berhad

12. HICOM Heavy Industries Corporation of Malaysia.

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Abstract of the project paper submitted to the Senate of Universiti Tun Abdul Razak in

partial fulfillment of the requirements for the Master of Business Administration

(Leadership).

LEADERSHIP EFFICIENCY AND SYNERGY

BENEFITS OF SELECTED MERGED COMPANIES IN MALAYSIA

By

Saira Banu Binti Sulaiman Sinnapan

March, 2020

The main purpose of this research is to investigate the efficiency of merger and

acquisition to assess the leadership efficiency and financial achievements in few

companies from various sectors in Malaysia in order to ascertain and identify the

leadership success in the managerial during the post-merger period. The research also

conducted to measure the impact of merger and acquisition to the financial standings in

the post-merger period. This study involves case studies of few domestic and cross-

border mergers from various sectors. The synergy benefits are studied in five

parameters like revenue, profit before tax, net profit, earnings per share, dividend and

net tangible assets assessed through paired sample ‘t’ test to ascertain whether they

are improved or declined in the post-merger period. In case it improves, then the

merger is successful or else it will be deemed to be a failure. Pre and post-merger data

were retrieved from business websites such as malaysiastock.biz and Bursa Malaysia

Berhad. The cultural factors of merger and acquisitions have been discovered as one of

the key hiccups that can determine the collapse of countless merger and acquisitions.

Another key factor that contributes to the failure of this process is lack of leadership skill

to tackle the merged company as the size becomes larger in post-merger period. Some

theories pertaining to leadership efficiency in pre and post M&A also discussed in this

research.

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CHAPTER ONE

INTRODUCTION

1.0 Introduction

For the last few decades, merger and acquisitions has become a universal

phenomenon and a commercial strategic preference for organizational growth and

enlargement. Merger and acquisitions (M&A's) have been an expanding method of

establishment and maintaining company’s standing in global market. As it became

famous as the quick and efficient procedure of developing into fresh and new markets,

gain an aggressive profit, also acquiring new applied sciences and skill sets.

Most companies desire to maximize the profit and value in order to generate

sustainable growth. According to Haberlandt (p. 386, 1970), there are two ways that the

companies should follow in order to attain rapid growth and to become more competing

than their rivals. The first element is internal or also known as organic growing which

may take longer time or lengthy method to acquire growth by improving and gain more

market-shares by depending on its own manpower and resources, however it is

believed to be less risky. The second method is known as inorganic or external growth

which is considered to hold a great risk as it looks to achieve expansion in a short time

by merging with another organization. (Gaughan P.A, 2011, pp, 14-15).

Despite the growing popularity of merger and acquisitions, it’s also been proclaimed

that more than two over third of those deals slips. Researchers have discussed many

statements and brought up many findings and arguments for those great failure ratios of

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mergers and acquisitions, however few explanations which is frequently underestimated

is the cultural factor and leadership skills in M&A processes.

In pursuit of evaluating pertinent research, it is obvious that lack of good leadership has

been one of the utmost common reasons for the nonsuccess of mergers and

acquisitions. It is undeniable that merger and acquisitions do fail due to the rationality of

financial and economic factor; but building a merger or acquisition successful is more

difficult than predicted. Studies found that 80% of merger and acquisitions contracts fail

to generate favorable financial outcomes as people do an inconsiderable job of

engaging staffs and incorporating the culture of merging & acquiring companies

(Sperduto,2007). Undervaluing the importance of leadership skills and financial benefits

factors is the key problem of the fall any merger and acquisitions.

The shareholders and academicians are not the only ones who interested in the results

of merger and acquisition. The merger and acquisitions are always very precious and

valuable which tend to make them important for multiple stakeholders and investors.

For instance, suppliers, creditors also advisors have an economic fascination in the

M&A’s outcomes. Both executive and non-executive investors are also seeking gains

and profits from the activity of mergers and acquisitions.

This research also attempts to study and examine the efficiency and impact of M&A’s

on company profitability, shareholder’s wealth and leadership values pre and post

merging activities. The data and information mainly extracted from FTSE Bursa

Malaysia Kuala Lumpur Composite Index (FBMKLCI) and FTSE Bursa Malaysia EMAS

Index (FBMEMAS) are used as the benchmarks.

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1.1 Problem Statement

The M&A emerge globally due to the rational of profit growth, eliminate competition,

synergize the business, capitalize share, increase stock and tax exemption. According

to Bruner (2002), only about 20% of entire merger and acquisition have succeeded after

a thorough research made across the world. Many acquisition and mergers typically

diminish the shareholders profit and wealth also failed to secure any returns financially.

On the other hand, as per a study conducted by KPMG, it was acclaimed that about 83

percent of merger and acquisition around the world failed to offer synergy benefits for

the stakeholders or investors, however more than half destroyed the initial values. Many

interviews conducted with senior management who were involved in those M&A deals

for over a five-year period, mentioned that majority failure of M&A was due to lack of

leadership skills to cope with the changes, insufficient knowledge of merging companies’

operations, employees’ resistance and cultural differences. Hence, this study will

analyze why many post-merger cases in Malaysia shows lesser synergy benefits? Is it

due to leadership failure? Or any factors involved? These are the primary research

focus.

This research also discusses the performance effectiveness, synergy and value

creations for shareholders and leadership efficacy in few selected companies in

Malaysia. This study also aims for further contribution to existing studies and literatures

by furnishing evidence from my own findings using some reliable sources and tools for

mathematical analysis. This research focuses on both shareholder and acquirers’ side

in order to provide a beneficial outcome. The previous studies conducted in Malaysia

mainly focused on short term and long-term M&A performance in banks and financial

sectors with various type of methodology elements. However, there were significantly

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lesser research made on various sectors merger and acquisitions deals. In this study, it

tried to study M&A performances in various industries with secondary data extracting.

Moreover, according to Sharma & Ho (2002), claimed that generally researches

reporting decline in after mergers are typically applied financial based measurements,

however in this study it’s been included other factors such as shareholder’s profits ratio

also leaders influence in mergers performances.

The problem in post-merger performance requires further investigation and analysis to

serve as a better benchmark for future mergers, as described below:

a) Deficiency in Leadership integration in managing the M&A

b) Reasons for poor performance after merger

c) The synergy benefits attained from M&A

1.2 Research Questions

Relying on the existing theories and literatures on M&A deals, the below questions

been crafted to point out some potential factors influences the success and failures of

merger and acquisitions.

1. Is there any significant operational performance improvement in firm’s post-

merger and acquisitions?

2. Does the firms involved in M&A creates profit making synergies and value for

shareholders?

3. Is there any significant evidence to show efficacy of leadership in the success or

failure of merger and acquisition performance?

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1.3 Hypothesis

Null:

(i) There is no difference in pre- and post-merger period in Revenue

(ii) There is no difference in pre- and post-merger period in Profit Before Tax

(iii) There is no difference in pre- and post-merger period in EPS

(iv) There is no difference in pre- and post-merger period in Dividend

(v) There is no difference in pre- and post-merger period in Net Profit

(vi) There is no difference in pre- and post-merger period in Net Tangible Asset

(vii) There is no difference in pre- and post-merger period in EBITDA

Alternate:

(i) There are substantial improvements in the above items in post-merger

1.4 Objective of Research

The main reason for this research is conducted is with the objective of identifying the

efficiency of pre and post financial and leadership performance of merger and

acquisition in selected companies in Malaysia. Further, this study also aims to identify if

the merger and acquisitions deals creates or overturns the synergy benefits and value

to the shareholders respectively. On the other hand, a thorough research shall be

conducted to understand leadership skills that attribute for the success of the merger

companies.

Main Objectives

1. To determine and evaluate the various factors that affects the M&A performance.

2. To examine the financial performance of selected M&A companies in Malaysia

3. To compare pre and post-merger results to find significant differences

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Specific Objectives

1. To examine the influence of M&A on Revenue, Dividend, Profit Before Tax (PBT),

Net Profit (NP), Earning Per Share (EPS), Net Tangible Assets (NTA)

2. To investigate whether the EBITDA increased in the post-merger period

1.5 Mergers and Acquisitions in Malaysia

In the recent years, the Merger & Acquisition activity in Malaysia has remarkably

dragged down as the total number of accomplished M&A in Malaysia participates in

listed companies withdrawn from 338 in year 2013 compared to 78 transactions only in

year 2017. Despite this recession, 55% of the M&A deals in Malaysia was accreditable

to customers and financial segments from year 2012 to year 2015. According to

Raymond Mah and Cassandra Nicole Thomazios, (2019 Mah Weng Kwai & Associates)

the disclosed transaction value as per data in real estate Merger & Acquisition in

Malaysia was at RM14 billion mirroring 88% of the total transactional value in financial

phase in year 2015. On the other findings, the merger and acquisition trends in

Malaysia were more into healthcare, utility and energy industries in the year 2018.

Pursuance to the Malaysian 14th General Election held in May 2018, where there was

phenomenal ‘transformation in the ruling party for the very first time ever since the

independence back in 1957, it gives a glimpse of uncertainty among stakeholder and

investors involved in M&A activities in Malaysia also foreign investors mainly in

constructions and infrastructure sectors.

Figure 1 explains the value of Merger & Acquisition activities deals in Malaysia for the

period of 1990 to 2018. In comprehensive, the data shows an active merger and

acquisition undertakings in the country. The figure shows the early years of M&A during

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the period of 1990’s to 1995, the activity or M&A was lower compared to the recent

years. The value achieved during this era also recorded at USD10.66 billion only at the

end of 2015. The greatest value of merger and acquisition activities in Malaysia was

registered in the year 2014, at value of USD41.7 billion. However, in the year 2015,

2016 and 2017 the value has gradually decreased to USD13.9 billion, USD11.2 billion

and USD11.83 billion respectively. There are various reasons which might potentially

cause this disastrous fall of M&A value such as economic fluctuation and uncertainty,

poor market assessments, lack of leadership skills, employee turnover, leaders limited

knowledge, excess liquidity and increasing expenses also political uncertainties are

some of the factors involves in falling or M&A. These factors of decreasing value of

M&A deals shall be discussed in a sub-point later in this paper.

Figure 1: Value of M&A for Malaysia and ASEAN countries (Source: Institute for Mergers, Acquisitions and Alliances - IMAA)

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An eruption of Asian economic crisis in 1997, which was the major cause of the

currency depreciation on majority Asian countries has led to those badly affected

countries’ central government to expand interest rates and sold the foreign exchange

assets. Nevertheless, those methodologies have brought down the economic growth

and simultaneously equities became low attractive compared with interest-endurance

securities (Nanto, 1998). The Asian economy crisis has slashed the vulnerable and

small banks which failed to execute any of this contingency benchmark. Tan and Hooy

(2003) disclosed that those fragile banking associations tend to sustain the balance

sheets’ elements and to maintain a supreme level of principal instead of loans range

due to the appreciable impact of systematized risks which brought in by the Asian

economic crisis. The deficiency effects in loan undertakings outcome in heavier

financial recession due to the activity of intervention operation have been breached.

1.6 A Historical Approach to Mergers & Acquisitions’ Development

For over a century Merger and Acquisition has transformed to a promising and

prevalent growth methodology in the corporate sector. Merger and acquisitions have

been embraced by many leading corporate companies across the world as an important

expansion strategy, Kumar (2012). The evolution of M&As throughout this period of

time defined as “Merging Waves”, which refers to a circumstance where the

competitiveness game is transformed by fluctuations of economy, technology

developments, global influence and also by transformation in regulatory procedures,

(Faulkner, Teerikangas, & Joseph, 2012); (Vancea, 2012).

It has been identified that there were six merger waves which was geographically

focused across the globe. Each wave is said to comprise dissimilar characteristics,

which was said to be improved by the fluctuating variations in terms of economy,

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regulatory procedures, technology advancements as well as improvements in laws.

Hence, there are distinctive groupings of merger, where those waves create both

oligopolistic and monopolistic markets in the world. Gradually, mergers also have

transformed their way of approach from being an antagonistic to a better deliberated

with the objective to adapt into a transforming environment.

The regulation and policy factors were measured during the era of 1890’s, 1920’s and

1980’s, as the first two era’s enforces antitrust law as the key motivation wherein the

market deregulations are said to be the major incentives for mergers and acquisitions

during the era.

According to Vancea (2012), the later era’s deregulations have evolved in specific

areas, hence, merger waves was created based fundamentally on the business industry.

Other than that, macroeconomics plays a major role in nearly all merger and

acquisitions waves, especially through its factors of interest rate and current economic

situation. Table 1 below shows the merger and acquisition waves ever since it was first

introduced in the 1890’s and its empirical evidences. Faulkner, Teerikangas and Joseph

(2012, p. 23)

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Table 1: Merger Waves Evolution

Wave Period Events coinciding with beginning

of wave

Events coinciding with end of wave

Wave 1 1890's - 1903

Economic expansion, industrialisation processes, introduction of new state legislations on incorporations, development of trading in NYSE and radical changes in technology.

Stock market crash, economic stagnation and beginning of First World War.

Wave 2 1910's - 1929

Economic recovery after the market crash and the First World War and strengthen enforcement of antimonopoly law

Stock market crash and beginning of Great Depression

Wave 3 1950's - 1973 Economic recovery after the Second World War and tightening of anti-trust regime in 1950.

Stock market crash, oil crisis and econoomic slowdown.

Wave 4 1981 - 1989

Economic recovery after recession, changes in anti-trust policy, deregulation of financial service sector, new financial instruments and markets (e.g. junk bonds) and technological process in electronics.

Stock market crash

Wave 5 1993 - 2001

Economic and financial markets boom, globalization processes, technological innovation, deregulation and privatisation.

Stock market crash and 9/11 terrorist attack

New wave

2003 - ? Economic recovery after the downturn in 2000 - 2001

n.a

Source: Cleverism.com

1890s – 1904: First Wave

First Wave – This was the period when many horizontal merging companies create

primary steel, mining, oil, telephone, rails and road, as well as basic transportation and

manufacturing industries in United States. Due to the panics occurred between 1904 to

1907, the supreme court of United States decides to enact the Antitrust Laws which

applicable to horizontal merger and acquisitions in the year 1904. However, the I World

War claimed to be the reason cause the end of this first wave era.

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1919s – 1929: Second Wave

Second Wave - This era shows increased combination and merging among companies

in the industries mentioned in first wave. The main automobile industrialists emerged

during this period. For example, Ford was diverged from car finishing to railroads, steel

mills, ore boats and iron mines. The crash and depression occurred in 1929 claimed to

be the reason of this first wave era came to end.

1955s – 1973: Third Wave

Third Wave - This era was believed to be the period when conglomerate method was

widely accepted and major companies like IT&T (Harold Geneen), LTV (Jimmy Ling),

Teledyne (Henry Singleton) and Litton (Tex Thornton) were established. Messrs.

Geneen, Ling, Singleton and Thornton were accepted as the heroes of fresh and new

method of business management. Many established organizations welcomed the

concept and reconstructed to new industries. The conglomerate method crashed

between year 1969 to 1970 and the reconstructed companies claimed did not attained

the benefits derived from diversified method.

1974 – 1989: Fourth Wave

Fourth Wave – In general, this period is widely referred as the takeover wave period.

However, its root touches year 1974s when the very first hostile takeover made by Inco,

Morgan Stanley took over ESB. The hostile bid was successful, and it opened the door

and new opportunities for other companies to implement the hostile takeovers

especially in banking and finance sectors. In the United States, this was the era that

hostile bids were widely applied in almost every sector in a little harsh way which leads

to poison pill method in 1980s.

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1993 – 2000: Fifth Wave

Fifth Period ––This wave began in 1993s is famously known for its globalization, big

boom in share markets and great deregulation held in that period. Other than that, it has

many greater transactions, but the negative history contributed by fourth wave which

had more levered merger activities was quite obvious, therefore transactions during that

period was more strategic and focused in long term outcomes and results and do not

hold a high leverage. Most of the transactions was financed by more reasonable

consolidation of equity and debt

2002 – to date: Sixth Wave

In this phase, the merger and acquisitions activity have significantly increased from $1.2

trillion from the fifth merger wave to the total amount of $3.4 trillion at the end of year

2006. The top primary factors that contributes to this growth are, governments

encouragement in some countries e.g. Italy, France and Russia, globalization, actively

participating shareholders, lower interest transactions and other reasons. The spike in

the amount of transactions was pertinently to achieve or create M&A champions in the

world market. This era also shows number of buyout activity increased significantly

especially in management buyouts.

1.7 Definition of the Terms: Merger, Acquisition and Takeover

Generally, M&A are applied in English as a typical global terminology without any local

counterparts indicating contrasting forms of corporation and arrangements of business

without a properly established principal in business practice and economic and financial

theory. Gaughan (2005, p. 3).

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In spite of being applied as synonyms in the corporate context, “Merge”, “Acquisition”

and “Takeover”, actually impose different constitutional meaning. When Takeover and

Acquisition operate almost like equivalents in most practice and theories, merging has

totally different theoretical meaning in a business context. Acquisition and Takeover are

known as engagements where acquiring companies gains a most part of the equity in

the company, but nevertheless, the target business will maintain its legal elements

[(Hubbard,1999, p. 6); (Lucks & Reinhard, 2002, p. 23)].

Furthermore, Stallworthy and Kharbanda (1988) draw another distinction between

Takeover and Acquisition, where Takeover negotiations are considered as typically

hostile and advanced in an aggressive and antagonistic context, while Acquisitions are

considered as commonly friendly where all companies involved will have mutual

agreements and benefits. Nonetheless, Singh (1971) defines merger as a fusion of two

or more companies where a new legal entity arises, represented symbolically as

A + B = C; whereas

the generally accepted definition of the merger is represented symbolically as

A + B = A or B

However, on the other definition by Singh (1971) claims merger as combination of few

companies where a fresh legal entity or institution arises, symbolically represented as

1 + 2 = 3; meanwhile

the commonly accepted classification of the M&A is symbolized typically as

1 + 2 =1 or 2

Believing such contrasting approaches to all those 3 elements; Merger, Takeover and

Acquisitions terminology and taking into consideration the purpose of this research, I

will use the term Mergers and Acquisition in the commonly accepted format and

significance also Takeover will be determined as pure substitute for term Acquisition.

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1.8 Types of Mergers and Acquisitions

Mergers and acquisition are categorized into 3 different outlines discussed in literature

and differentiated thru various value series when the merger entity is placed, and they

have defined proportionately as below:

1. Horizontal Mergers: This kind of merge happens among 2 companies with

same objective to maximize the synergy benefits and to increase their market

profits and shares. The two companies also share the same value equally in the

industry. (Arnold, 2011, p. 278). These companies could be rivals or competitors

which offers same kind of products and services. Hence in order to slash the

competition, they will decide to merge and create a greater business. According

to Arnold (2011, p. 278) argues that the supervision of government was stricter

during this period of merge as they are believed to reduce the altitude of

competition and enhancement of the tendencies of monopolistic in an industry.

A good example to explain Horizontal Merger is the consolidation of Pepsi and

Coca-Cola. The main motive behind this merger is to destroy competition and to

create new and larger business with higher market shares. As these two

companies’ shares similar business operations, it is easier to identify more

opportunities to collaborate such as in manufacturing operations, marketing,

new packaging, employee and leaders’ skills and many other benefits which

decrease the costs.

2. Vertical Mergers: This type of merger happens between companies in the

same industry which have a seller-buyer or supplier-consumer relationship or in

a different term vertical merging happens between corporations placed in

different episodes in the process of production (Cameron & Green, 2012).

According to Gurusamy, 2009, p. 195, the distinguished literature is when two

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subcategories of vertical merging either downstream or forward and upstream or

backward with similar objective to enhance and defend supply inventors and

distribution as well as to enter deeper in global market. More often, the main

reason for this type of merger is to enhance synergies and expand market

power rather than operating as a single entity. The best example which can

explain Vertical Merger is Pepsi is merging with a food chain company e.g. KFC,

McDonalds or other similar food chains, offering their drinks as a supplementary

product when a set meal is ordered. This type of merger would guarantee a

steady business for both companies.

3. Conglomerate Mergers or Diagonal: This merger happens among firms which

has totally nonrelated businesses. When companies are from dissimilar

industries, there will be no competition between both firms as well as no seller-

buyer or supplier-consumer relationship. This kind of merger has two different

types which are mixed and pure. Mixed conglomerate merging will engage firms

that are eagerly looking for market and product extensions. Pure conglomerate

merging involves companies with no common business or activities. One great

example of this type or merger which happened recently was when Amazon

acquired Whole Foods in year 2017 for $13.4b. This acquisition is set to

consolidate Amazon’s position as a giant in the world of online shopping in an

established service of Food & Beverages. This enables the online retail

business owner, Amazon to have physical grocery shops across regions.

Conglomerate merging is useful for organizations to expand their reach in the

market, to earn synergistic benefits and to expand product range and services.

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1.9 Motives of why companies do mergers and acquisitions

Since the first wave merger, the question of why mergers occur and what are the

benefits or motives behind it was the main concern of researchers according to

(Richard & Myers, 2001); (Ross, Westerfield, & Jaffe, 2002, p. 824).

Generally, corporate companies will commit for merger & acquisition as one of their

strategy to gain expansion in both internal and external of the organization (Haberlandt,

1970, p. 386).Organic or internal growth is considered as a low risk approach as the

firm will gain higher growth by enlarging own business and achieve higher market share

totally depending on its present resources despite the fact this strategy consumes more

time to bring good and positive results (Schwenker & Bötzel, 2007, p. 26).Inorganic or

external growth was elevated by former researchers as it a greater risk strategy wherein

companies will achieve massive growth in shorter period by attaining a firm from a

particular industry in country they plan to expand (Gaughan P. A., 2011, pp.14-15).

A study conducted to understand if merger and acquisition will lead to profit gain or

wealth decreasing for merging companies and its shareholders. As a result, and

empirical research have disclosed that merging and acquiring tend to deliver mixed

production and performance to both investors and shareholders involved in the deal.

This paper studies about the mixed performance outcomes during M&A deals in

general and Malaysian context.

Once an M&A activity is being announced, a considerable amount of data and

information will be released pertaining to M&A activity wherein this collective

information are used to determine stock market reactions against the merge and

acquisition accountments. As such M&A have constructed an intense competitiveness

17

among the companies. In this period, merging and acquisition will be increasing rapidly

and bid up at greater rate.

Fundamentally the core aim of merging deals is mainly to increase growth and gains via

expenses reduction, increasing market power, and decreasing in evaporation of

incomes. Mergers or acquisitions in any industry can escalate the worth by costs

reduction and revenue increasing. Reductions of costs can be acquired by the abolition

of unwanted managerial posts and cessation of overlaying branches of the company.

An increase in revenue can be achieved through its products and services cross selling

that the company offers.

However, a thorough analyzation of various type of merging theories that can be

relevant for my case is needed in order to acquire a comprehensive explanation

regarding the rationale of the merger and acquisition motives. The literature

differentiates the two approaches which are value accelerating and value declining

agency approach (Weitzel & McCarthy, 2011, p. 252). Those theories will be discussed

in my analysis.

1.10 Theories to Mergers & Acquisition

There are several theories explaining the possible sources of gains following corporate

acquisitions. Three of the common theories are the synergy or efficiency theory, the

market for corporate control theory and the free cash flow theory. All the theories

predict enhanced operating performance through some sort of efficiency.

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(i) The Market Theory

There is a prominent recognition claiming that company acquisitions offer a more

structured and effective mechanism for management of the acquiring firm’s assets

(Manne, 1965). The corporate control theory refers to few teams will compete to grab

the opportunity to manage the company. Hence, theoretically the competition between

those teams will ensure the firm is managed by the most team. Therefore, the market

will expect the newly appointed team will serve a better management than the previous

team.

A continuous improvement in financial and operational performance will result from the

effectiveness and efficacy of the new management team and will gain more trust from

the shareholders. In one study, share prices shows continuous improvement and

company’s consistency in performance with the change management Martin and

McConnell (1991), and Bugeja and Walter (1995) provides an evidence in Australian

context in consistent with this school of thought.

(ii) Free Cash Flow Theory

As per Jensen's (1986) theory of ‘Free Cash Flow’ describes that leaders tend to invest

`free cash flow' in undermining net value ventures, which is contrasting to shareholders'

profits and maximization of their wealth. Jensen (1986) explains, this agency issue is

particularly critical for companies with considerable free cash flow and potential growth

limit, and the acquisition consideration is equity than cash or debt. According to

Servaes (1991) identifies that more value can be created if debt or cash method is

considered for the merger and acquisitions instead of equity. This is due to the merger

and acquisition activity and load of debt is parallelly created during the process. It also

sets the limit of management and leaders’ freedom to utilize the upcoming cash flows,

hence reducing the probability of the free cash flows misuse. On the other hand, the

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continuous spiking of fixed interest towards the debt also forces leaders to be more

systematic and dynamic. Comparatively, as per Jensen's (1986) theory of free cash

flow explains, post-merger and acquisitions performance must be improved equally or

higher than the pre-merger and acquisition phase especially for cash and debt

purchased mergers.

(iii) Agency Theory

According to (Jensen and Meckling, 1976) agency theory refers to the dissimilarity and

conflict in interest among leaders and owners. The primary hypothesis of agency theory

is the agents and principals are both rational and seeking for wealth maximization as

well as looking to increase their own functions in the organization. In accordance to

corporate governance, the principal refers to shareholders and agent refers to leaders

and directors. As per neoclassical theory of the participating companies assumes that

the key objective of the deal is maximization of profit, however as per recent economic

studies claims that manager’s satisfactory behavior which is better known as behavioral

theory of the organization since the management have diversified.

The control and ownership separation within the organization makes it challenging and

pricey to evaluate and monitor the efficacy of the management proficiently. Hence,

managing and regulating the agency relationship is vital in assuring that companies are

functioning in the interest of public accordingly.

One of the key solutions to manage agency issues is the implementation of an incentive

program to encourage leaders or directors to act in accordance to the interest of

shareholders. It was noted that, the compensation programs vary between the

organizations as they strive to acquire different commercial goals.

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The most actively used long term incentive or remuneration scheme is to award a

number of fixed shares of the firm at a fixed price determined at the point of merging

period to the leaders who have rendered their best performance throughout the award

phase. By implementing this method, leaders and directors will try their best to improve

the shares value in order to enjoy the benefits from this scheme, therefore increasing

the market value of the organization.

Empirically, it is proven that those firms initiated the long-term plans to evaluate the

leader’s performance which directly tied with firm’s wealth is parallel with shareholder’s

benefits. This is because the firm compensate the leaders with their shares valuing their

performance and in return, they experience a significant improvement in the stock

market. A contract which is appropriate will certainly minimize the agency issues.

(Tehranian et al., 1987, p. 74)

(iv) Hubris Theory

The hubris theory identifies the behavioral description for firms’ mergers and

acquisitions. Roll (1988, p. 249) claims that the acquiring firm’s management are either

contaminated by arrogance and over pride. Thus, they trust that their valuation of the

target company is right, despite the target company’s true value of economy is much

lower than predicted.

Collectively, the bargaining design structured by Barnes, Chakravarty and Haslam's

(1990) which argues any merger and acquisition will never acquire a positive return in

event they underestimate the synergy or placed their self-interest first. Hence, should

this occur then the performance of post-merger and acquisition will never show any

improvement than the pre-merger period. This hypothesis was consistent with the

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findings of Gregory (1997) who studies the negative returns on post-merger and

acquisition for firms in UK, yet it concluded the evidence of the theory of hubris.

1.11 Challenges faced during merger and acquisition

The complex process of merger and acquisition leads to great mistakes in some deals.

The most crucial outcomes discovered are the incapability to captivate potential

synergies, failure to acquire the expected performance, fail to maintain customer base

or garner new customers, also the inefficacy in sustaining the productiveness of the firm.

Below are the few common and pricey mistakes that can lead to failure of deals:

1) Unreasonable Planning – Fail to screen and evaluate the target company using

an appropriate channel aligned with strategies to maximize value

2) Time Management – Time can be the most precious factor in any merger and

acquisition process of discovery. All aspects of value propositions and documents

as well as risk management reports must be made clear within a stipulated time

frame to avoid waste of excess time in acquisition. Time management can be one

of the synergies as time determines the value of a firm. From the acquirer’s point of

view, it is important to leverage the consolidated information, resources, tools to

identify potential synergy in order to validate value of the target firm and simplify

the process of discovery.

3) Lack of Due Diligence – An extensive process of due diligence is vital to

understand the complete picture required to evaluate a merger and acquisition

activity. For instance, the process of due diligence able to validate any information

gathered and assumptions presumed around the revenue and costs synergy. It

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focuses on operational strategy, information technology, invisible debts of the

target company. It helps to uncover possible issues relates to legal and regulations,

employee retentions, balance sheet, invisible liabilities etc.

4) Information Security Absence - Information security is a very crucial factor to be

considered during the process of merger and acquisitions discovery and bargaining.

Both the acquirer and seller must secure their confidential business records and

documents which holds private, sensitive and copyrighted details that could be

leaked out if handled in improper way or it may fell to the wrong and illicit hands. A

well measured deals of M&A are often resulting in success. Some details are

crucial to be visible for both parties while some documents which contains

sensitive information such as proprietary details should be reserved for the final

acquirer. Failing to adhere to this element will increase the risk of exposure of

confidential information

5) Paying significantly higher than fair value – This is a universal mistake which

happens commonly in every merger and acquisition deals. Firms and its

managements are not able to proceed with the proposed deal without being well

prepared to decline the offer if the deal is notably end failure. Despite, both parties

are in agreeing term consoled by the reasonable return by acquiring the target. It

must have a clear report which shows every shareholder will earn a fair profit with

the transaction. The CEO’s overpower attitude may result in paying higher than the

actual worth of the target in order to make the M&A deal a success.

6) Unrealistic expectations and inflated assumptions – During the process of

discovery, various expectations and assumptions arise pertaining to the value of

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transaction, synergies, opportunities, target growths, return on investment (ROI),

share prices etc. All those expectations and assumptions should be rationale and

realistic provided the due diligence and measurement data. The merger and

acquisitions evaluation should be as realistic as possible in order to identify the

potential risk and rewards.

7) Fail to deliver the expectations in post-merger and acquisition – With all the

unrealistic assumptions and expectation created prior to merger, merger and

acquisitions deals shatter when no results are seen. Potential synergy, profit return,

promised gains, increase of revenue need to be at the center and front during the

process of merger execution. In the case the results aren’t achieved, there will be a

loss of energy, credibility, employee commitment declines will take place in the firm.

This failure will lead to losing customer base, customers may lose trust, decline in

business performance as well as damage to the business core. Due to the poor

sight on synergy targets, it can result in loss of trust, disappointment and other

issues.

8) Underrate Organizational Culture and Peoples Concerns – Even though there

are other important factors discussed above on mistakes often occur during M&A

process, one of the most underrated elements is organizational culture and its

people’s issue. Any cultural and employee domestic issues must be identified and

settled. Human Capital plays a very important role in identifying employees’ issues.

Ascertaining, motivating and identifying talents is the key driver for the success of

the deal. Lack of focusing on people may result in employee retention which can

lead to make the business to turn down. It is very crucial to ensure that the leaders

align with employee in every level in order to boost their performance. Performance

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bonus, incentives and rewards should be offered to those who is critical for the

success of post-merger activity.

1.12 Summary

This thesis is presented five chapters. It begins with a brief introduction and continued

with the literature review which introduces the reciter to a brief context of merger and

acquisitions, followed with evaluation of the present trend and empirical understanding

on M&A in general and its motives in precise. The third chapter discusses about the

objective of this research and few hypotheses which been formulated to define the

limitations of this investigation. The chapter fourth presents the data and information

findings and the discussions which followed by the fifth chapter which delivers the

conclusion and identification of areas for extended or further studies.

This research uses secondary data as an important tool in methodology which used

content and data analysis by analyzing through several recurring annual/quarterly

reports of the audited as well as unaudited yearly financial statements, internal or

managerial reports which available every monthly, quarterly, semi-annually and yearly

provided by the company website and Bursa Malaysia webpage on listed companies

lists.

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CHAPTER 2

LITERATURE REVIEW

2.0 Background

Merger is a process of combining two businesses liabilities and assets, typically similar

in size, formed one business unit. Whilst, an acquisition is when a company takes

control of ownership of another company in terms of subsidiaries, assets, plants,

facilities or divisions, by purchasing the entire company. The merger or acquisition

mainly depends on business activity and strategic approach to bid the controls in the

process of amalgamation. Many firms have done this to beat the competition or to

maintain the reputation of the brands or rebranding the business model across the

globe.

M&A represents a mutual occurrence in business globally during economic calamities.

Subsequently, M&A’s have transformed into a progressive significant element of

corporate tactics for ultimate growth and the studies epitomizes extensive integrative

areas of investigation. (Bernile, Lyandres, & Zhdanov, 2012, pp. 517-518).

A merger and acquisition between two companies creates a greater value than the

individual company operating as stand-alone. This is a strategic move to create

combined effect which can be seen many companies are doing lately. Besides, the

momentum gained to beat the competition in local and global market is the targeted

outcome out of merger and acquisition. Merger and acquisition between companies

from various background, style of work, policies, countries and corporate regulations

create a cultural gap between these two different people. However, there are many

companies that failed to success in terms maintaining the resources, revenue and

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profitability after merger and acquisition taken place. The main factor of failing to

comply the standard and achieve the projected sales are due to financial, marketing

and operational issues. Aside from this, leadership management are facing intense

problem during merger and acquisition, which are the key factor to successful merger

and acquisition.

The economies serious fall in 2007 and 2014 had emerged business organizations to

revamp their business model in order to sustain and face the globalization effect. Hence,

new business ventures developed by giant companies till small enterprise to achieve

the business objective. Merger and acquisition is one of the best approach to tackle

business competition and re-establishing the business in different path to maintain as

key player in market.

Merger companies have their intentions to enter into agreement such as shareholder

expansions, managerial advantages, economies of scale, economies of scope, cost

savings, productivity, tax exemption, broadening the business, increase business

networking and improve research and development.

In the process of merger and acquisition, two organizations will have differences in

terms of socio-economy. The management and leaders must work with different level of

employee, method of workflow, benefits and welfare. Most of the issues pertaining the

merger and acquisition process is dealt with organizational cultural differences issues.

Employee’s issues should not be ignored, as this will escalate to major disaster in the

company.

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Most companies give less importance to human resources issues during process of

merger and acquisition, which can be catastrophic. This will cause failure to maintain

manpower, retrenchment, resignation of skilled and unskilled staff, employee jump to

competitor companies due to dissatisfaction, and protest in companies.

2.1 Revenue analysis in pre and post-merger and acquisition

Revenue can be referred as the amount of fund that a business is capable to earn in its

general business by selling its own products and services and in term of state

government, revenue is the total figure of income which was generated after taxes and

this stays unfiltered from any reductions. It will be an unfiltered money such as gross

figure (not included in deductions) gained by a firm or a government body.

The primary goal of merger and acquisition is to increase the value of stock. To acquire

this objective, in general many companies target to increase revenue through merging

with other company which is in equal size. (Ma et al., 2010). Among the primary

benefits of merger and acquisition derives from revenue maximization which illustrates

a consolidated firm may generate higher revenue than two separate and individual firms.

The greater and better revenue may potentially arise from management strategic,

marketing profits as well as market power (Ross et al., 2008). The first benchmark of

financial efficiency is the net revenue.

One study conducted by Fakarudin Kamarudin to analyze on financial performance of

merging banks in Malaysia during the period of 1995 – 2009. The database was

downloaded from BankScope as the main information source of banks data. About 34

banks were analyzed which involved 14 domestic and 20 foreign banks. The research

explains that there is significant relation of merger and acquisition in revenue

28

enhancement in the post-merger activity. The research has used tools such as linear

programming, DEA efficiency system and better known as Excel Solver in the VRS

model established by Zhu (2009).

On another study, Sufian et al. (2012) identified that there is no significant relationship

in revenue enhancement in pre and post-merger and acquisition. This study involves

registered banks in Malaysia covering data from 1996 – 2009 using chi-square test and

correlation tools.

2.2 Dividend analysis in pre and post-merger and acquisition

Dividend refers to the companies share from its available profits and being divided to

the shareholders respectively in cash (if applicable) or stock (if applicable) or both

(Nwude, 2012). It is considered as a happy news for the shareholders and investors as

the financial year ends, they can enjoy the remaining profit after the deduction of all the

expenses applicable. This in a way enhances the organizations share value in the

global market.

In any merger and acquisition deals, the main objective of those deals is to maximize

the wealth of shareholders through regular dividend payments. This will give an idea to

those shareholders that the deals are fruitful. One way to increase the shareholder’s

wealth is by regular and increased payment of dividend. (Wikipedia, 2012).

According to Dr. John Wazamda Kwazhi and Dr. Ahmed Modu Kumshe who conducted

a research on M&A’s effect on dividend payment in Nigerian Banks finds that there is

significant consistency in dividend payment during the post-merger period. Data

analyzed here were obtained from secondary sources. The study extracted primary

29

data from the financial annual reports. The data extracted were categorized into pre-

and post-merger. The first hypothesis was to establish the effects of mergers and

acquisitions on dividend payments to shareholders. To establish the effects, Simple

Regression Model method was used.

The pre-merger outcome claims that there has been consistency in the payments of

Dividend to the shareholders and investors before the mergers were committed.

However, the outcome of the post-merger study shows decrease in the payment of

Dividend during the period after merger may be due to the global crises which affected

most of the large firms and financial institutes. Despite this, there are other studies

shows positive outcomes on both pre and post-merger. We can determine the results

for Malaysian context in the Findings and results chapter.

2.3 Profit Before Tax (PBT) analysis in pre and post-merger and acquisition

Sinha and Gupta (2011) conducted a study during the years of 1993 to 2010 on Merger

and Acquisitions in the banking sector of India focusing on financial assessment of M&A.

The result of study proved that the PBT (profit before tax) were enhanced, however

there was significant reduction in the liquidity of the company. On the other study by

Karenski (1996) and Caprion (1999) provided evidence in both before and after M&A

that the deal has influenced the PBT efficiency positively in most of the financial

institutes. They basically employed 3 methods to evaluate before and after merger PBT

performance which are ratio and comparison analysis, paired t-test sample and DEA

method to identify trustable data.

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2.4 Net Profit analysis in pre and post-merger and acquisition

This is the profit which is obtain from when interest and taxes is been deducted from the

gross profit in other words it’s the profit generated from all the phrases of the venture.

Therefore, according to Thomson (2011) and organization with a consistently high net

margin shows that the firm with one or more competitive advantages to their

competitors and provide the firm with a cushion in the event of downturns (Zollo &

Kerrigan, 2012).

Net profit refers to the profit secured from the gross profit after the deductions of taxes

and interests. Consequently, as per Thomson (2011) a firm with high net profit margin

consistently shows that the firm has more competitive advantages to their rivals and it

could be a cushion in case of downturns (Zollo & Kerrigan, 2012). According to Li and

Pan (2013) assumed that the combination value of two firms will be greater than their

value as individual entity. As per Maranjian (2009), when the firms having greater net

profit margin, it indicates their stableness. The companies will have a competitive

advantage opposing their rivals as companies with high net profit able to offer lower

prices to consumers which directly may impact and pressure their rivals who couldn’t

afford to offer lower price (Maranjian, 2009).

On top of that, merger and acquisition typically used as one of the strategies to obtain

profit financially Fluck and Lynch (1999). As per (Wang & Moini, 2012) have used

paired t-test sample to evaluate the net profit differences before and after merger and

acquisition and provided evidence that there is improvement in net profit in post-merger

activity in some selected companies in the U.S.

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2.5 Earning Per Share (EPS) analysis in pre and post-merger and acquisition

As per Black, Wright and Davis (2011), Earning per Share (EPS) is considered the most

crucial and powerful variable to measure the financial performance especially in merger

and acquisition deals. Companies tend to save the EPS than paying it in the form of

dividend which always reflects higher Earnings Per Share from year to year and will be

able to increase the company’s capital without any borrowings. This will lead to assets

rise with higher EPS and higher gaining.

According to Chatfield, Dalbor, & Willie (2008), the future EPS analysis determines the

shareholder’s profits from the firm critically. However, by evaluating only accounting

analysis and its effect on Earnings Per Share, if its decreasing or increasing after

merger and acquisition may be irrelevant. Rappaport (2005) claims that EPS can

decide and forecast the performance of the merged companies and leaders may have

performed greatly to achieve the EPS enhancement. On the other hand, the leader’s

capability can be measured with the increasing EPS performance. In that study which

involves about 40 listed companies in Australia Rappaport (2005) used percentage

calculation and paired t-test samples to determine the results.

2.6 Net Tangible Asset (NTA) analysis in pre and post-merger and acquisition

Net tangible assets are meant to represent a company's total amount of physical assets

minus any liabilities. The calculation of net tangible assets takes the fair market value of

a company's tangible assets and subtracts the fair market value of its liabilities.

Tangible assets can include items such as cash, inventory, accounts receivable, and

property, plant, and equipment (PPE). Liabilities include accounts payable, long-term

debt, and other similar obligations.

https://www.investopedia.com/terms/a/accountsreceivable.asp

https://www.investopedia.com/terms/l/longtermdebt.asp

https://www.investopedia.com/terms/l/longtermdebt.asp

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The merger deal between HINDALCO and India Foils declared fail due to the huge

amount of bad debts from consumers in the balance sheet of the previous which was

identified by the buyer. An AGE analysis can provide a clue to the quality liableness of

the seller. It can be concluded that the net tangible asset valuation model can only

provide a guide to the minimum limit of valuation of the company. As an acquirer or

merging company, in order to be defensive, it is advisable to revalue the assets in the

motive of fostering the market value.

2.7 Synergy benefits in Merger and Acquisitions

In neoclassical theory, it is widely believed that one of the utmost factors influencing

merger and acquisition is the synergy elements that potentially can be gained. Synergy

element will exist once both the companies are combined and have higher return than

they gain as individual firms previously because of efficacy improvements, escalation in

market power for the acquired or merging firms, financial performances etc.

There is a principle behind any deal of merger and acquisition where the term 2+2=5 is

often discussed. Typically, the synergy value will be created by the combination or

amalgamation of two firms. Those synergy benefits can be visible through increased

revenues, lower expenses, and lower cost of capital in overall. (March–April 2017 issue

(pp.145–149) of Harvard Business Review).

One of the main synergies mentioned in relation to M&A is operational synergy, this is

due to the ability to source a generous kind of products. Another synergy is known as

financial synergy between the companies which have over plus capital and less

expanding opportunities while the other has higher growth possibilities and lower capital

hence, by combining they can achieve greater profits.

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As per Harford (2005), Merger and Acquisition could be determined by economic and

technology shocks to the economics. A leader must react to the continuous change in

the global market in order to enhance the firm’s performance to achieve sustainability.

For example, if there’s a new technology been introduced in market to which the firm

don’t have an access, merging to the company which has the access to this technology

proficiency may create a positive technological synergy.

In majority cases, synergies are the key objective of any merger and acquisition deals.

In general, synergies refer where performance of two merging companies are improved

when they engage and work together, and their combined value is higher than their

individual values. Example of affirmative synergies are market share increase,

performance improvement, financial and operational benefit possibilities. According to

(Sharma & Ho 2002), these synergies can be categorized to four elements operational,

strategic, financial and managerial. These synergies will be thoroughly explained in the

below context.

2.7.1. Operational Synergy

Operational synergy occurs when both companies’ combined and increase profits from

operations and lesser the operations costs. For instance, marketing improvements,

sharper power of pricing, greater margins and other strengths of functional lead to

greater earnings. Operational synergy can be obtained via both vertical and horizontal

M&As. Scale of economies is usually a profit gained via horizontal merge and

acquisitions however vertical consolidation also marks in gaining economic profits as it

can influence operations and activities related to be easier. Both the associated firms

will become more cost saving and efficient also more financially rewarding.

Consolidated firms also earn expanded power of negotiation and they could better

34

negotiate agreements with their dealers or suppliers as well as reduce their

expenditures. (Damodaran 2005; Ross et al. 2013).

Operational synergy can also be acquired in the shape of greater growth in existing or

new market. According Damodaran (2005) who claims that a firm domestically can

acquire greater growth in new market by merging with a firm which is already well

known and recognized overseas firm and utilize this strength to expand the sales.

The merging companies hopes to minimize the average per unit cost which better

known as scales of economy method in where the revenue will be higher than the costs

incurred. Costs overhead and other associated costs can be greater than the revenue

in some firms, hence why the merger and acquisitions occur. The cost efficiency can be

achieved by an expansion of firms in the form of merge and acquisitions.

Prior to merging, the two or more similar companies may have various duplicate jobs

undone. In post-merger the new company can eliminate those duplications and

minimize the expenditures whilst constantly keeping the revenue at par. The resources

are more efficiently utilized and increase profitability. Hence, obviously it creates

opportunity to abolish duplications in M&A between the related companies. The

consolidation among two similar size companies creates a more powerful firm with

lesser competitors. The new firm may enjoy the advantage of this expansion in market

power by imposing higher prices for their goods and may pay less to suppliers.

Another synergy comes from transfer of technology knowledge. Most companies hope

to acquire additional benefits from technological expertise for the firm’s improvement.

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2.7.2 Strategical Synergy

For any merging and acquisition activity, a strategic choices or decisions such as

attaining presence of global, market power persuasion, acquire a supplier and

competitor are being increasingly ordinary key drivers. Escalated globalization and

deregulation are also played a vital role, specifically during period of fourth and fifth

merging waves (Martynova & Renneboog 2008a). Goold & Campbell (1998) claims

mergers could support the invention of fresh businesses. Combinative of skills and

knowledge of two different companies may potentially invent strategic synergy. As per

Porter (1985) who refers to P&G (Procter & Gamble) as a perfect example of strategic

synergy. P&G acquired a paper firm and was able to invent and introduce various

products using papers varying from hygiene goods to diapers. In many circumstances,

strategical synergy is considered like options than traditional investing. Strategical

synergy is difficult to achieve as well as difficult to quantify (Ross et al. 2013).

2.7.3 Financial Synergy

As per Damodaran (2005), mentioned that if any two firms can acquire greater value

than they do individually then the companies are believed to achieve financial synergy.

Financial synergy commonly will result in expanding capital amount and potentially

lesser the capital costs. This will result in size expansion of the company after an

activity of merging and acquisition. According to Ross et al. (2013), usually value of

assigning equity and debt are habitually lesser for greater issues. The author claims

that financial synergy can happen in the design of benefits of tax. The benefits of tax

can occur from the utilization of net operation losses, capacity of debts and funds

surplus. For instance, assuming an acquiring firm is an unprofitable firm, it can show the

net operation losses to reduce the taxes.

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On another word, in order to improve tax benefits which related to debt financing

transactions, it is possible to structure or design the deal to bring down the financing

debt to the acquired target to decrease the burden of tax that may be imposed to the

acquirer (possibly to the target as well) via the deduction of interest. Hence, in order to

execute a proper tax planning, it is advisable to invent a tax professional team who will

work closely with the firm’s CFO and his team throughout the process of M&A. The

outcome of the tax findings report must be approved by the board of directors, and at

some point, approvals from the firm’s shareholders and investors also may be required.

Any firms which intends to involve in merger and acquisition activity should structure a

due diligence process in order to avoid any potential risks that may arise. In case if any

fraudulent or misleading information are given, then the legal professionals should

advise on pertinent resolutions to the related parties for a safer transaction.

2.7.3.1 Tax Attributes in Malaysia for Merger and Acquisition

In Malaysia, as it is a British Commonwealth’s member, it follows their British tax

system. During the colonialist ruling period, British have invented taxation to the then

Malayan Federation which is known as Income Tax Ordinance, 1947. Hence the

Malaysian legal structure has the root of English laws.

Tax attributes in Malaysia are governed by the ITA, The Income Tax Act 1967, which

was known as Income Tax Ordinance 1947 during the colonial ruling period of British.

The ITA, provides imposition and income tax collection. Other bodies which are

governing tax systems in Malaysia is Stamp Duty Act 1949 also the Real Property Gain

Tax Act 1976. Stamp Act 1949 will be imposed to several instruments. The RPGT is

levied on profits gained from real properties disposal in Malaysia and shares from real

37

property companies (IRPC). Usually, the stamp duty value on share transfers are lower

than asset transfers stamp duty value, where 1% imposed on share transfers while 3%

imposed for assets depending on the transactions value.

Malaysia has continuously reduced its taxes in the recent years. It has gradually

decreased the corporate taxes from 27% to 26% in year of assessment of 2008 and 25%

to 24% in YA 2016 till to date. This reduction constantly encourages investors and

shareholders to continue invest in Malaysia.

Merger and Acquisition in Malaysia can be implemented in various kind of ways. Most

commonly firms will purchase assets, purchase common and general shares, shares

exchanging for assets and share exchanging for shares. It is advisable that a thorough

analysis and considerations on key tax attributes that available in Malaysia for merger

and acquisition is vital before involving in any M&A activity.

The income Tax Act 1967 contains terms for granting the commencing and annual tax

depreciation subsidies to a qualified acquiring and constructing companies. The primary

rates of annual and initial allowances are as below:

38

Table 2: Primary rates of annual and initial allowances

On top of the above listed allowances, the income tax act also allows the below listed

benefits for the taxpayers:

a) A tax reduction for capital expenses on substitute assets which have a life span

of at least two years or less and used for the rationales of the payer’s business

b) A capital allowance which equals to the total amount of expenses for smaller

value assets which each may cost up to RM1300 where the total expenditure of

said assets which is not higher than RM13000

39

2.7.3.2 Transfer Tax

In Malaysia, stamp duty will not be imposed for the property disposals such as stocks,

shares, securities which are marketable, accounts receivables or certain debts and it

will be based on the transaction value. The other rates imposed on other activities have

been outlined in the Stamp Act under the clause of First Schedule.

There are several types of tax relieve offered outlined in Stamp Act, and the most

important reliefs pertaining to M&A as below:

a) As per Section 15, Stamp Act 1967 offers an amount of stamp duty relief for the

companies which intends to merge, reconstruct or amalgamation providing it

adheres to the conditions set by the act such as the transferee firm must be a

Malaysian registered which also has increased capital with an intention of

acquiring a particular company

b) Not lesser than 90% of the acquisition consideration consists of the issue of

shares (when an undertaking is to be acquired) in the transferee company to the

existing company or to holders of shares in the existing company issue of

shares

2.7.3.3 Tax for mergers and acquisitions

In Malaysia, there is no tax scheme applied for capital gains except for the activity of

RPGT (Real Property Gain Tax). RPGT applies to any transaction related to shares and

land in RPC’s where these types of transactions are not obliged to ITA.

For any merger and reorganization of companies, the tax schemes in Malaysia permits

limited reliefs in accordance to the following situations:

40

When the asset transfers for capital allowance or depreciation claimed is within

the ITA regulations and controls, those assets can be transferred.

When the transfer of shares or assets is within the Stamp Act sec 15 and 15A

also meets the required conditions hence the stamp duty for the transaction is

relieved

The Ministry of Finance is purely empowered to eliminate stamp duty from

certain transaction, however this term is rarely practiced

The government can issue certain exemptions from some taxes e.g. stamp duty,

income tax in some situations.

Pertaining to RPGT, with the prior approval of the Directors, assets which is

chargeable are transferred between firms and transferee firm is based in

Malaysia

2.8 Leadership Efficiency in Merger and Acquisition

Discussing about leaderships, it is often difficult to argue with the concept that leaders

play a vital role in fruitful merger and acquisitions. For instance, great leaders can be

exceptionally adept at defeating disruptions in approved ways of work on things and at

outlining organizational values and cultures that can be different amidst the merging

companies - the important challenges that organizations face during M&A. But till today,

not many frameworks available to assess on how leaders influence M&A success be it

in Malaysia and around the globe.

In the recent Towers Perrin studies, paired with experience of more than 400 merging in

year 2006, leadership attributes which foster effective M&As, namely leaders who:

Sets the right precedence and construct positive enterprise impulse and discipline

41

Imbue staffs with the essential level of responsibility, engagement, self-assurance

and pleasure to work over challenging transitions

Inspire an emotion of purpose, intelligibility, community and faith that sets

employees to continue be focused and greatly engaged on the work.

Leadership is the key to every organization to produce a positive result out of multiple

resources and norms. In this research, it was significant on what really matters for both

leaders and leadership. The individual leaders plan, execute, manage, put things in

actions and reiterate the strategy in individual capacity manner.

Meanwhile, organizational leadership occurs when the organization builds a cadre of

future leaders who have the capacity to shape an organization's culture and create

patterns of success. A leader is a person who demonstrate their proficiency and ability

at assigned group or project by focus on the knowledge, skills, and values of.

Meanwhile, a leadership give attention to quality of leading an organization and their

capability endures over time. The author mentioned that leadership should be from the

outside-in, not the inside-out. Leadership from the outside-in is a way for leadership

branding.

To become a very influenced leader in a post-merger company, he or she should

understand the effectiveness of other employees which is basically the common rules

that all leaders mastered. Filipovic, Vrankic and Mihanovic (2014, p. 23)

42

CHAPTER 3

METHODOLOGY

3.0 Research Design

This research has adopted the descriptive method and explanatory depiction design

which has been used to decide the fundamental effects of merger and acquisition on

the financial performance in selected companies in Malaysia in the last 10 years. The

causal research method is in line with the research’s objectives and hypothesis

questions. The entire data was considered repeatedly in order to answer the objective

of this study, therefore we used paired t test and EBITDA calculations. This matrix

repeats the sample’s measurement overtime in order to the changes and progress can

be identified and tracked appropriately.

On the other hand, in order to find out the relationship and impact of Merger and

Acquisition in terms of leadership and financial performance, the study design is merely

focused on the wealth of shareholder. Hence, we used correlational study design in

order to identify statistical correlation which can be found in two or more variables, the

unveiled associations can be ascertained and learn via significant research design

(Mligo, 2016).

This research applies Paired ‘t’ test and Descriptive Statistics analysis for mean and

standard deviation for identified variables to evaluate the financial performance of the

selected firms. This paper uses three years pre- and post-merger and acquisition

activity to examine the hypothesis, total of 6 years. This research carried out using

secondary data approach to find an exact value. In order to measure a precise outcome

in M&As performance its crucial to at least have 6 years data. This study included the

43

deals in Malaysia which were concluded and had their data and details published in

Bursa Malaysia Berhad and other reliable sources. After identifying the descriptive

statistics, the paired ‘t’ test parameter computed on those variables. Those analyses

been done with the motive to assess the performance either it has shown improvement

or depreciation before and after merger and acquisition deals in Malaysia in various

sectors.

3.1 Conceptual Framework

The sampling process refers to identifying and choosing few elements which possibly

represent the populations involved in any research. The key reason behind selecting

those samples is because they may represent the characteristics which is similar to the

whole population. One of the advantages of applying sampling procedure is, it does not

consume more time and save efforts of collecting data as well as helps to normalize the

findings for the whole set. (Kothari, 2007).

Figure 2: Conceptual Framework

PRE

POST

M & A Financial

Performance

Revenue

Dividend

Net Profit

PBT

EPS

44

3.1.1 Population & Size

This study targets population in those companies listed in Bursa Malaysia and

involved in merger and acquisitions in the last 10 years, from the year 2001

onwards. The size of the study is about 5 companies, which are selected

fundamentally from the entire population in the Bursa Malaysia stock exchange and

the data downloaded from 3 years before the merger and 3 years after the merger.

As there were less merger and acquisition deals occurred in Malaysia in the last 10

years, this study has been limited to analyze 5 companies which holds a complete

data and evidences suitable for a research. The samples were mainly extracted

from few industries such as defense manufacturing, Plantation and Industrial,

Property Development and Investment, Automotive.

3.1.2 Sampling

This research outlined samples from five different sectors in Malaysia, namely oil

and gas, manufacturing, construction, banking and GLC. The total companies

involved in this study is ten which consists five acquirers or target companies. Most

data required for this research has been extracted from financial performance report

and annual reports which are readily available in the company websites, some

reliable online sources such as Stockbiz.Malaysia and Bursa Malaysia Berhad.

Some details in leadership efficiency and its contribution to M&A success and

failures are determined by identifying share price fluctuations due to unavailability of

leaders to conduct an interview.

45

3.1.3 Sampling Procedure

There are two important procedures of sampling used in this study which are

probability sampling and non-probability sampling. Probability sampling is a

systematic sampling which provides details on companies that merged with high

transaction value in Malaysia. Nonprobability sampling is based on quota sampling

on specific subgroup which not able to perform mathematical calculation but

provides convenience and justification samplings for example in measuring

Leadership efficiency. The research sampling framework as per authors findings as

below:

Figure 3: Population and Sampling method (Source: Authors Research Findings)

46

Table 3: The sampling size

Stock Exchange (Listed) Number of M&A in 10 years Sample Size

Bursa Malaysia Berhad 20 4 companies

3.2 Data Collection

The main method of data collection applied to this study is secondary data where the

data is extracted from involved company’s financial statements, annual reports, sales

reports which is available from the respective companies publishing itself. This type of

data collection is also known as internal data collection. Another type is external data

collection wherein required information gathered outside the company such as

governments statistical reports, trade publications and journals e.g. Harvard Business

Review journals, Bloomberg Business, Thomson Reuters Business Review and other

reliable internet-based research such as Stockbiz Malaysia and Bursa Malaysia website.

The data collected from mergers and acquisitions activities ranging three years pre and

three years’ post. The total population of this study is 10 transactions of M&A that

occurred between 2001 and 2018 and listed in Bursa Malaysia Berhad.

47

Figure 4: Data collection technique (Source: Authors Research Findings)

3.3 Data Descriptives

In order to determine the effects of Merger and Acquisition on company performance,

this research has intensely used data from companies based in Malaysia. There are 5

public listed firms are considered to pursue this research and those are as below:

1) Boustead Heavy Industries Corporation Berhad

2) Boustead Holdings Berhad

3) SP Setia Berhad

4) DRB Hicom Berhad

48

3.3.1 Boustead Heavy Industries Corporation Berhad & CAD

Boustead Heavy Industries is involved in energy and defense manufacturing industry

which is also a subsidiary of Boustead Holdings Berhad. This company recognized as

conglomerate and public listed firm on the Bursa Securities Main Board. Boustead

Heavy Industries involved in various business activities such as aerospace, maritime,

security and defense as well as energy and commercial industries

Bousted Heavy Industries Corporation Berhad extended its wing diving into aviation and

air defense sector by acquiring Contraves Advanced Devices Sdn Bhd (“CAD”).

According to their annual financial report year 2011, BHIC-DT had also acquired a 51%

equity share in Contraves Advanced Devices Sdn Bhd (CAD) from Rheinmetall Air

Defence AG, a subsidiary company of Rheinmetall AG. The acquisition of CAD is

expected to provide a platform for both BHIC and Rheinmetall to serve new markets

and enable technology transfer that will benefit the relevant Malaysian commercial and

defence industry, as well as open additional opportunities for exports.

The sale of equity to BHIC-DT commenced with the signing of the Share Sale

Agreement on 7 June 2010 and concluded with the signing of the Shareholders

Agreement on 13 August 2010. The Share Sale Agreement with Rheinmetall Air

Defence AG (“RHAD”) was for the proposed acquisition of two million five hundred and

fifty thousand (2,550,000) ordinary shares of Ringgit Malaysia One (RM1.00) each in

Contraves Advanced Devices Sdn Bhd (“CAD”) (a subsidiary of RHAD) by BHIC

Defense Technologies Sdn Bhd (“BHIC-DT”), a wholly-owned subsidiary of BHIC,

representing fifty one percent (51%) of the total issued and paid-up capital of CAD (Sale

Shares). The below table explains the market trend of Boustead Heavy Industries

Berhad from the year 2007 to 2019.

49

Figure 5: Boustead Heavy Industries Corporation Berhad financial performance

(Source: Stockbiz Malaysia)

3.3.2 Boustead Holdings Berhad & Pharmaniaga Berhad

Boustead Holdings Berhad is one of Malaysia's ealiest conglomerates, as its roots back

to 1828. Sir Edward Boustead first found a modest trade firm in Singapore, after Sir

Stamford Raffles developed the British Settlement in year 1819.

Its primary business during those revolutionary days was mainly on export and import,

and in insurance and shipping agents. With business growing among the two districts

and the Malacca Straits became more important as a primary waterway between

Europe and the Far East, Edward opened a branch in Penang in 1864.

At the turn of the 20th century, Boustead in the year 1911 diversified its business

interest and began trading in rubber. Moving up the value chain, the company

expanded into the management and ownership of rubber estates while exporting sheet

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Revenue PBT (RM,000) Net Profit EPS (Cent)

Pre-merger Post-merger

50

rubber and latex. As the new nation, Malaya grew rapidly, Boustead expanded its

business interest to import and distribution of a variety of goods.

In 1961, Boustead consolidated its various businesses to form a new public listed

company known as Boustead & Co. Limited. In 1966, the entity changed its name to

Boustead Holdings Berhad and in 1976, the Group became a wholly owned Malaysian

entity.

The below table explains the market trend of Boustead Holdings Berhad from the year

2007 to 2019. It acquired Pharmaniaga in 13th Aug 2010 and its financial performance

pattern shall be discussed in Results and Discussion chapter in this paper.

Figure 6: Boustead Holdings Berhad financial performance (Source: Stockbiz Malaysia)

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51

Boustead Holdings Berhad (Boustead Group) have determined to strengthen its stance

in the new industry which is pharmaceutical industry through the buyout of

Pharmaniaga Berhad. This pharmaceutical firm is a member of UEM Berhad.

The acquiring process has involved the Boustead group buying out about 86.81 percent

of the capital share of Pharmaniaga for a total cash amount of RM534mil. Delegates

represented from both UEM Berhad and Boustead Group have both agreed for the

acquiring agreements and approves the deal with mutual understanding. This type of

acquiring is named as Friendly Acquisition.

The acquirement of Pharmaniaga Berhad in the year 2011, the Boustead Group have

expanded and developed its pharmaceutical production capability and involved in the

buying, storage and allocation of medical and pharmaceutical goods to the government

clinics, hospitals and private organizations.

On the same year, the Boustead Group also involved in supplying of air carriage, flight

assistance, aircraft training, technical and engineering services to most oil and gas

businesses. There are no significant changes noted in the activities throughout the

financial year of the acquiring.

Boustead Group has acquired approximately 92,868,619 of shares in Pharmaniaga

Berhad which represents 86.81% from the company. Boustead Group’s interest in

Pharmaniaga has increased to about 97.81%.

52

3.3.3 SP SETIA and I & P Group

S P Setia Berhad is a well-known investment firm in Malaysia. The firm is involved in

multiple businesses via its subsidiaries such as construction, property development,

wood manufacturing and infrastructure.

Through the acquisition in December 2017, the I&P Group has rendered the SP Setia

Group with beneficial opportunities including substantial GDV boost from the

enhancement of its massive banks of land. With the consolidation of I&P Group, directly

SP Setia has gotten the access to about 14 current projects across the Klang Valley. In

fact, there was a major profit earned by SP Setia group in its diversification through

merging with I&P Group.

According to the firm’s annual report dated 1st December 2017, both companies have

successfully completed the acquisition with mutual agreement. As a result of the

consolidation, both entities share a common accounting ledger to benefit from the new

business.

53

Figure 7: SP Setia financial performance (Source: Stockbiz Malaysia)

3.3.4 DRB-HICOM & Zhejiang Geely Holding Group Co Ltd

DRB-HICOM group was the first idealistic merger and became the only firm in the

country which has involved in automotive ecosystem also the only firm in country that

offers end-to-end services of logistics, vehicle inspection, Islamic banking, waste

management, automotive industry, territory education and vocational training. In the

market of property, the company has built a solid reputation and a quality advancement

under the brand of Glenmarie.

The DRB-HICOM group holds the brand of Malaysian national car, which is PROTON

and undergone a change which results in the entry of Zhejiang Geely Holding Group

Co., Ltd. (“Geely Holding”), a prominent and fast growing automotive manufacturer in

the world which is based in China as a strategic overseas partner. An agreement was

signed and endorsed on 23rd June 2017 named as Geely Holding to acquire 49.9% of

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Post-merger Pre-merger

54

equity in the PROTON Holdings Berhad. This foreign partnership has shown an

extremely optimistic development in PROTON Holdings Berhad. After a thorough due

diligence process and intense analyze, thee partnership results in potential synergies

and benefits upon merging. The Chinese car manufacturing firm to subscribe about

49.9% equity in PROTON Holdings Berhad. This deal enables PROTON to venture into

Geely Holdings Group for a massive range of platforms and channels to access the

global market as it looks for an export opportunity.

As per the agreement signed and endorsed on 24th May 2015, Geely have acquired

49.9% of equity, meanwhile another 51% shares were acquired by sports car producer,

Lotus Group International Limited which is based in Norfolk, UK. As part of the

agreement, Geely can leverage PROTONs present underutilized manufacture facility

located in Tanjung Malim as their main global hub to produce all its products includes

Volvo.

55

Figure 8: DRB-HICOM financial performance (Source: Stockbiz Malaysia)

3.4 Descriptive Statistics

Descriptive analytics is the interpretation of historical data to better understand changes

that have occurred in a business. Descriptive analytics describes the use of a range of

historic data to draw comparisons. Descriptive analytics uses a full range of data to give

an accurate picture of what has happened in a business and how that differs from other

comparable periods. These performance metrics can be used to flag areas of strength

and weakness to inform management strategies.

The collective data must be analyzed and interpreted in a very comprehensive way and

rational so that it can be easily understood and accepted. Hence, in this research, we

have used a descriptive statistics technique to analyze the data which provides

numerical and non-numerical data in a clear, precise and understandable manner. As

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DRB-HICOM Market trend


Post-merger Pre-merger

56

per Siers (2010) mentioned that descriptive statistics is an instrument which provides

small results when a sample of collected data is inadequate. On the other hand, a

paired t-test sample been used in order to determine the association between before

and after merger and acquisition deals.

A paired t-test is a kind of derivable statistics utilized to ascertain if is a significant

variation between the related two groups mean, which could be related in some

features.

Basically, a paired sample t-test permits us to evaluate the median values of the two

sample sets of data and determine if it comes from the similar type of population. On

the other hand, mathematically the test brings samples from both sets and determines

the problem statement by presuming null hypothesis that the set of samples are equal.

As per the applicable methods, values are assessed and compared with the standard

values and the assumed hypothesis will be accepted or declined accordingly. The test

is used to compare the actual mean sample with the theorized population and the

significance of the test in order to ascertain if the average mean is related pre- and

post-merger observation (Harmon, 2011). Therefore, the sample t-test formula is more

suitable to be utilized to avoid reduce the smaller subjects since the obtaining subjects

are difficult and consume more time.

Hence, this paper implemented descriptive statistics and explanatory method, which is

applied to evaluate the underlying effect among mergers and acquisitions on the

economic performance of Malaysian companies between the years of 2008 to 2018

according to data extracted from reliable sources. The fundamental research method is

constant with the study’s aim and questions, which intends to examine the effect of

57

merger and acquisition on the company’s financial performance in its Dividend,

Revenue, EPS, Net Tangible Assets, Profit Before Tax and Net Profit. Moreover, the

data is measured frequently overtime in order to answer the objective of the study.

The second analysis technique used in this study is estimating the EBITDA for the

short-term percentage assessments of the firm’s financial performance in overall

whether it has been improved or not. The EBITDA calculation measures the profitability

proportion on how much profits does the firm is making before taxes, interest,

amortizations and depreciation as a ratio of revenue. The selected companies EBITDA

has been calculated in order to evaluate the company’s performance in the short term

to determine if those firms have achieved the targeted synergy.

3.5 Ethical Problems and Accessibility

In terms of the ethical problems, ethical must be concerned in any research as it is

crucial to prevent any errors; exclusions against inventing, misrepresenting data and

encourages the fact as well as reduce error or faking risks (Resnik, 2015). As a

secondary study, the issues of ethics are inadequate since it’s not relating observes like

interviews and practical surveys which is human performance, thus the only problem

that concerned is the legal admission and copyrights to access some books, journals

and articles which has been prohibited with the help of citations and references (Smith,

2003). Hence, all the statistical data collected for this project is available easily as it was

obtained from the company’s annual reports and financial statements, which was

published in the company’s portal magazines, websites and other online sources.

58

CHAPTER 4

DATA ANALYSIS, RESULTS AND DISCUSSION

4.0 The pre-merger and post-merger financial performance analysis

In this chapter, the descriptive analysis, result interpretation and findings based on

retrieved data are discussed. The analysis software used for this research is generated

by Analysis Toolpak VBA. This software is very helpful to analysis the data especially

the t-test for Paired Two Sample for Means.

The research was divided into pre-merger and post-merger study and the descriptive

statistics for each is period is shown by table to compare the performance and also

evaluate the means. Basically, the data interpretation is consisting information of mean,

median, variance, Pearson correlation, P test and t test and standard deviation.

Besides, the research also consisting of number of observations and number of years

on data averaging, which in this case is five (5) companies were taken as case study to

evaluate the pre and post-merger in Malaysia context.

The financial performance such as Revenue, Profit Before Tax (PBT), Nett Profit,

Earnings Per Share (EPS), Dividend and Net Tangible Asset (NTA) were used as

financial indicators to measure the financial ratios.

59

Table 4: Indicators to Measure Financial Performance

Variables Ratio(s) / Indicators

Profitability & Efficiency

Revenue = Gross revenue - Directly related selling expenses

Profit Before Tax (PBT) = Revenue - Cost of Goods Sold (COGS) - Depreciation Expenses - Operating Expenses - Interest Expenses

Net Profit = Gross Profit - Expenses Earnings Per Share (EPS) = Net profit after tax / No. of ordinary

shares

Dividend = Total dividend for the period / Net income available to common stockholders

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

= Revenue - Operating Expenses - Salaries - Rent - Amortization - Depreciation

Liquidity Net Tangible Asset (NTA) = Total assets – Intangible assets – Total liabilities

T-Test: Paired Two Sample for Means: Taking average of pre and post M&A

performance t-Test measure the significant difference at 5% significant level between

pre and post M&A of each ratio collectively for all the companies which are taken as a

sample for the study. For each pre and post M&A financial ratio P-value (two-tail) is

taken to check the significant impact. Below in the fourth column of Table 4 P-value is

shown for each ratio. If the P-value is less than 0.05, it means there is a significant

difference in the financial ratios between pre and post M&A. In other case if the P-value

is greater than 0.05, there will be insignificant difference between the financial ratios for

pre and post M&A. The mean results are also discussed for each ratio.

60

A hypothesis is evaluated by confidence level, whereby:

Null : There is no difference in pre and post-merger period in Sales, EBITDA,

EBIT, EPS, DPS, Tax etc

Alternate : There are substantial improvements in the above items in post-merger

4.1 Analysis on Merger and Acquisition of Boustead Heavy Industries

Corporation Berhad

Category: Heavy Industry

Company core business: Naval, shipbuilding, offshore structures fabrication, vessels

maintenance and defence technology.

Boustead Heavy Industries Corporation Bhd (Malaysia) had entered a strategic

agreement with Rheinmetall Defence of Düsseldorf (Germany) in July 2010, for

launching and joint ownership company known as Contraves Advanced Devices Sdn

Bhd. The agreement was made in such a way that Boustead Heavy Industries

Corporation own 51% stake, while Contraves Advanced Devices retained 49% share.

The collaboration was intended to enable technology transfer in Malaysian military

defence division and to nurture high-tech production in Malaysia to reinforce the

defence technology for both imports and exports market.

61

Figure 9: Boustead Heavy Industry financial performance chart pre and post-merger

4.1.1 Descriptive Analysis on the Merger and Acquisition

The below table results show p-value and mean of each ratio for all the financial

indicators. The summary of results for Boustead Heavy Industries was prepared to

show the significant differences between pre and post M&A.

-150 -100 -50 0 50 100 150 200 250

1-Jun-07

1-Jun-08

1-Jun-09

1-Jun-10

1-Jun-11

1-Jun-12

1-Jun-13

1-Jun-14

1-Jun-15

1-Jun-16

1-Jun-17

1-Jun-18

1-Jun-19

RM (mil)

BOUSTED HI Pre-Merger & Post-Merger

EPS (Cent)

Net Profit

PBT (RM,000)

Revenue

Post merger period

Pre merger period

62

Table 5: Summary of paired t-test sampling for Boustead Holdings

Period Mean Variance Pearson Correlation

P(T<=t) one-tail

t Critical one-tail

P(T<=t) two-tail

t Critical two-tail

Revenue

Pre-merger 119,316.31 3,498 Mil -0.09 0.35 1.75 0.71 2.13

Post-merger 111,826.88 2,246 Mil

d -7,489.44 -1,251 Mil Confidence level: 65%

PBT

Pre-merger -6,724.67 527 Mil -0.01 0.02 1.76 0.05 2.14


d 57,094.73 967 Mil Confidence level: 98%

NP

Pre-merger -6,042.33 398 Mil 0.05 0.03 1.76 0.06 2.14


d 60,439.53 722 Mil Confidence level: 97%

EPS

Pre-merger -2.71 85.44 0.06 0.04 1.76 0.09 2.14

Post-merger 25.01 3,384.40

d 27.72 3,298.97 Confidence level: 96%

Dividend

Pre-merger 0.83 4.85 0.51 0.48 1.76 0.95 2.14

Post-merger 0.87 4.09

d 0.03 -0.76 Confidence level: 52%

NTA

Pre-merger 1.32 0.05 -0.86 0.46 1.76 0.92 2.14

Post-merger 1.34 0.11

d 0.01 0.06 Confidence level: 54%

63

4.1.2 Paired Sample t-test for Revenue

Table 6: Result of t-test for Revenue

t-Test: Paired Two Sample for Means Pre-merger Post-merger

Mean 119,316.31 111,826.88 Variance (mil) 3,498 2,246 Observations 16.00 16.00 Pearson Correlation (0.09) Hypothesized Mean Difference 0.00 Df 15.00 t Stat 0.38

P(T<=t) one-tail 0.35 65% Confidence level

t Critical one-tail 1.75 P(T<=t) two-tail 0.71 t Critical two-tail 2.13

The above Table 6 shows the difference in revenue of before and after merger of the

said company. It shows the p value for the mean and its ratio. There is no significant

difference between before and after the merger and acquisition period among this two

companies in terms of revenue generation. As the p-value shows 0.35, hence the

confidence level has reached 65%. The null hypothesis is recognized here for this ratio

as the P-value is higher than 0.05 and the confidence level has gone low. The

recommended p-value must be at or lesser than 0.05 and the confidence level should

be greater or equal to 95% to determine the positivity of the deal to the revenue.

Therefore, in terms of revenue, the M&A of these companies were considered not

successful as planned and no synergy benefits acquired.

64

4.1.3 Paired Sample t-test for PBT

Table 7: Result of t-test for PBT


Mean -6,724.67 50,370.07

Variance (mil) 527 1,494

Observations 15.00 15.00 Pearson Correlation -0.01 Hypothesized Mean Difference 0.00 df 14.00 t Stat -2.17

P(T<=t) one-tail 0.02 98% confidence level


The above table results show significant difference between pre and post M&A financial

performance, as the P-value is lesser than 0.05. As seen in the table, the p-value

shows 0.02, henceforth the confidence level is calculated to be 98%. The M&A

happened had significantly increase the PBT, therefore, the alternate hypotheses are

recognized here. From this situation, it was observed that Bousted Holdings had higher

mean PBT than reported before. The synergy benefits are positive, mainly contributed

by the leadership attribution of running the operation with lesser cost and efficiently.

4.1.4 Paired Sample t-test for Net Profit (NP)

Table 8: Result of t-test for NP


Mean -6,042.33 54,397.20 Variance (mil) 398 1,120 Observations 15.00 15.00 Pearson Correlation 0.05 Hypothesized Mean Difference 0.00 df 14.00 t Stat -2.04



65

Table 8 shows the analysis for the Net Profit (NP) calculated using paired sampling t-

test. The NP before the merger had been - RM 6,724.67 which increased to RM

50,370.07 after the merger. The paired t-test and significance value (0.03) shows that

the NP had enhanced significantly after the merger, thus, the confidence level rose to

97%. This proof the alternate hypotheses is accepted here. The positive t statistics are

due to optimistic correlation with company proficiency. Indirectly, this have positive

attribution for the synergy of both companies along with management change.

4.1.5 Paired Sample t-test for Earnings Per Share (EPS)

Table 9: Result of t-test for EPS


Mean -2.71 25.01 Variance 85.44 3,384.40 Observations 15.00 15.00 Pearson Correlation 0.06 Hypothesized Mean Difference 0.00 df 14.00 t Stat -1.84



EPS witnessed major changes in post-merger period compared to pre-merger period.

From the above table, the paired t-test result is 0.04. Consequently, this increase the

confidence level to 96%. The significant improvement (RM0.27) in the company EPS

proof the alternate hypotheses defined earlier in Chapter 1. The evaluation saw the

leadership strategy on increasing the profitability even though the revenue has no

difference. With cost decrease and net profit increase, the greater portion of revenue

were flow down to earnings which is good for mutual synergy profits.

66

4.1.6 Paired Sample t-test for Dividend

Table 10: Result of t-test for Dividend


Mean 0.83 0.87 Variance 4.85 4.09 Observations 15.00 15.00 Pearson Correlation 0.51 Hypothesized Mean Difference 0.00 df 14.00 t Stat -0.06

P(T<=t) one-tail 0.48 52% Confidence level

t Critical one-tail 1.76 P(T<=t) two-tail 0.95

t Critical two-tail 2.14

The results obtained from paired t-test for the dividend before and after merger of

Boustead are tabled above. The dividend ratio has no significant improvement, thus

proofing the null hypotheses. The mean dividend rate before and after merger did not

show any major difference. The calculated confidence level is 52%, which is very less

to support the merger initiatives. From previous research, when a company reduces its

dividend, this will mainly due to conserve the cash to reinvest in the company or buy

back stock. From the analysis, the leadership strategic can be considerate efficient, but

in terms of company synergy, at long run, the merger will not be profitable and company

may cease the merger partners with lowest stake at one point.

67

4.1.7 Paired Sample t-test for Net Tangible Asset (NTA)

Table 11: Result of t-test for NTA


Mean 1.32 1.34 Variance 0.05 0.11 Observations 15.00 15.00 Pearson Correlation -0.86 Hypothesized Mean Difference 0.00 df 14.00 t Stat -0.11


t Critical one-tail 1.76 P(T<=t) two-tail 0.92


There is no significant difference observed form the table above for NTA indicators

while performing the paired t-test for before and after merger. Thus, the hypothesis is

considered NULL. The mean value only increased (0.02) after merger, substantially

decided there is no significant improvement. The confidence level is 56% which is

considered not a positive deal. If the company is making loss over the year, the NTA

will gradually decline every year. This indicator is not very critical for investors, however,

it is important to decide whether the company is overvalued or undervalued. The

synergy benefits are influenced by NTA performance as well, and in this case, it is

contributing negative synergy and lack of leadership approach to manage change of

management.

68

4.2 Analysis on Merger and Acquisition of SP Setia Berhad

Category: Property development, REIT

Company core business: Construction, infrastructure, wood-based manufacturing,

and trading

S P Setia Bhd has signed a conditional share purchase agreement to acquire I&P

Group Sdn Bhd from its controlling shareholder Permodalan Nasional Bhd (PNB) for

RM3.65 billion cash in Mar’2017. For the massive acquisition, S P Setia is proposing a

cash call plus private placement to raise the required funding. The synergistic

acquisition will further strengthen Setia’s brand presence in Malaysia and help pave the

way for the creation of greater shareholder value for S P Setia. The proposed merger if

combined undeveloped land banks would total up to 9,417 acres making S P Setia the

third largest property developer in Malaysia by the size of land banks.

Figure 10: SP Setia Bhd financial performance chart pre and post-merger

0 500 1,000 1,500 2,000

Quarter

31-Mar-19

30-Jun-18

30-Sep-17

31-Dec-16

31-Mar-16

31-Jul-15

31-Oct-14

31-Jan-14

30-Apr-13

31-Jul-12

31-Oct-11

31-Jan-11

30-Apr-10

31-Jul-09

31-Oct-08

31-Jan-08

RM (mil)

SP SETIA Pre-Merger & Post-Merger

EPS (Cent)

Net Profit

PBT (RM,000)

Revenue

Pre-merger period

Post- merger period

69



indicators. The summary of results for SP Setia was prepared to show the significant

differences between pre and post M&A.

Table 12: Summary of paired t-test sampling for SP Setia Bhd

Period Mean Variance Pearson

Correlation P(T<=t) one-tail

t Critical one-tail

P(T<=t) two-tail

t Critical two-tail

Revenue

Pre-merger 981,834.90 58,966 Mil 0.13 0.02 1.83 0.03 2.26

Post-merger 1,293,703.60 95,898 Mil Confidence level: 98%

d 311,868.70 36,931 Mil

PBT

Pre-merger 243,249.90 20,248 Mil -0.23 0.27 1.83 0.55 2.26

Post-merger 283,341.50 13,160 Mil Confidence level: 73%

d 40,091.60 -7,087 Mil

NP

Pre-merger 164,055.00 15,553 Mil -0.28 0.36 1.83 0.71 2.26


d 21,704.80 -5,579 Mil

EPS

Pre-merger 4.00 13.86 -0.30 0.07 1.83 0.14 2.26

Post-merger 7.02 12.40 Confidence level: 93%

d 3.02 -1.46

Divident

Pre-merger 2.81 13.59 -0.29 0.24 1.83 0.48 2.26


d 2.07 35.78

NTA

Pre-merger 2.99 0.01 0.72 0.02 1.83 0.00 2.26


d -0.37 0.03

70




Mean 981,834.90 1,293,703.60

Variance (mil) 58,966 95,898

Observations 10.00 10.00

Pearson Correlation 0.13

Hypothesized Mean Difference 0.00

df 9.00

t Stat -2.68


t Critical one-tail 1.83

P(T<=t) two-tail 0.03


From Table 13, the results show the difference in revenue of before and after merger of

the said company. It shows the p value for the mean and its ratio. There is significant



confidence level has reached 98%. The alternate hypothesis is recognized here for this

ratio as the P-value is less than 0.05 and the confidence level has gone high. Therefore,

in terms of revenue, the M&A of these companies were considered successful as

planned and synergy benefits acquired by SP Setia after acquiring I&P group.

71




Mean 243,249.90 283,341.50

Variance (mil) 20,248 13,160


Pearson Correlation -0.23


df 9.00

t Stat -0.63





The resulting table above results show no significant difference between pre and post

M&A financial performance, as the P-value is greater than 0.05. As seen in the table,

the p-value shows 0.27, henceforth the confidence level is low by 73%. The M&A

happened had significantly decrease the PBT, therefore, the NULL hypotheses are

recognized here. From this situation, it was observed that SP Setai Bhd had lower

mean PBT than reported before. The synergy benefits are negative, mainly due to lack

of leadership strategy in reducing the operation cost and increase productivity.




Mean 164,055.00 185,759.80

Variance (mil) 15,553 9,973




df 9.00

t Stat -0.38





72

Above Table 15 shows the analysis for the Net Profit (NP) calculated using paired

sampling t-test. The NP before the merger had been RM 164,055.00 which increased to

RM 185,759.80 after the merger. The paired t-test and significance value (0.36) shows

that the NP had no significant improvement after the merger, thus, the confidence level

lowered to 64%. This proof the NULL hypotheses is recognized here. The negative t

statistics are due to sceptical correlation with company proficiency. Indirectly, this have

negative attribution for the synergy of both companies along with management change.




Mean 4.00 7.02

Variance 13.86 12.40




df 9.00

t Stat -1.63






From the above table, the paired t-test result is 0.07. Respectively, this increase the


proof the alternate hypotheses is certain in this case. The evaluation saw the leadership

strategy on increasing the profitability even though the revenue has no difference. With

cost decrease and net profit increase, the greater portion of revenue were flow down to

earnings which is good for mutual synergy profits.

73




Mean 2.81 4.87

Variance 13.59 49.37




df 9.00

t Stat -0.74





The paired t-test sampling for the dividend for before and after merger of SP Setia is

tabled as above. The dividend ratio has no significant improvement, thus proofing the

NULL hypotheses. The mean dividend rate before and after merger did not show any

major difference. The calculated confidence level is 76%, which is very less to support

the merger initiatives. From previous research, when a company reduce it’s dividend,

this will mainly due to conserve the cash to reinvest in the company or buy back stock.

From the analysis, the leadership strategic can be considerate efficient, but in terms of

company synergy, at long run, the merger will not be profitable and company may

cease the merger partners with lowest stake at one point.

74




Mean 2.99 4.19

Variance 0.01 0.04


Pearson Correlation 0.72


df 9.00

t Stat 7.86





The table above analyzed for NTA ratio by paired t-test shows that there is significant

improvement for the NTA comparably before and after M&A. Thus, the hypotheses is

considered alternate. The mean value increased (1.20) after merger, substantially

improved the asset valuation. The confidence level is 98% which is considered as a

positive deal. The synergy benefits are influenced by NTA performance as well, and in

this case, it is contributing positive synergy and good leadership approach to manage

change of management.

4.3 Analysis on Merger and Acquisition of Boustead Holdings Berhad

Category: Conglomeration

Company core business: Plantation, property & industrial, pharmaceutical, heavy

industries, and trading, finance & investment.

75

Boustead Holdings Berhad (Boustead Group) is set to strengthen its position in the

pharmaceutical industry via the proposed acquisition of Pharmaniaga Berhad

(Pharmaniaga), a member of UEM Group Berhad (UEM) in Feb’2011.

The proposed exercise will involve the Boustead Group acquiring 86.81% of the issued

and paid-up share capital of Pharmaniaga from UEM for a total cash consideration of

RM534 million. Representatives from Boustead Group and UEM inked the relevant

legal agreements at a signing ceremony today. The Board of Directors were confident

to exercise this M&A that foreseen will place them on a stronger footing to further build

our pharmaceutical arm which is a part of the Group's Manufacturing and Services

Division. Besides, Bpusted Holdings also were expecting to benefit from cost

improvements as a result of the streamlining and optimisation of manufacturing

facilities, production capacities and cross fertilisation between the Boustead Group and

Pharmaniaga plants.

Figure 11: Boustead Holdings financial performance chart pre and post-merger

-1,000 0 1,000 2,000 3,000 4,000

1-Dec-08

1-Sep-09

1-Jun-10

1-Mar-11

1-Dec-11

1-Sep-12

1-Jun-13

1-Mar-14

1-Dec-14

1-Sep-15

1-Jun-16

1-Mar-17

1-Dec-17

1-Sep-18

1-Jun-19

RM (mil)

EPS (Cent)

Net Profit

PBT (RM,000)

Revenue

BOUSTED HOLDINGS Pre-merger & Post-merger

Post merger period

Pre merger period

76



indicators. The summary of results for Bousted Holdings Berhad was prepared to show

the significant differences between pre and post M&A.

Table 19: Summary of paired t-test sampling for Boustead Holdings



t Critical one-tail

P(T<=t) two-tail

t Critical two-tail

Revenue

Pre-merger 2,616,610.00 139,530 Mil 0.55 0.02 1.83 0.00 2.26


d 822,307.50 -114,316 Mil

PBT

Pre-merger 173,910.00 3,950 Mil -0.17 0.17 1.83 0.33 2.26


d 67,735.90 611 Mil

NP

Pre-merger 120,870.00 3,195 Mil -0.30 0.35 1.83 0.70 2.26


d 69,320.70 -948 Mil

EPS

Pre-merger 11.80 29.99 -0.31 0.31 1.83 0.61 2.26


d 0.00 -9.15

Divident

Pre-merger 9.35 20.50 0.28 0.17 1.83 0.34 2.26


d -1.65 -4.21

NTA

Pre-merger 4.59 0.04 0.57 0.01 1.83 0.00 2.26


d -0.21 -0.01

77




Mean 2,616,610.00 3,438,917.50 Variance (mil) 139,530 25,213 Observations 10.00 10.00 Pearson Correlation 0.55 Hypothesized Mean Difference 0.00 df 9.00 t Stat 11.83



From Table 20, the results show the difference in revenue of before and after merger of

the said company. It shows the p value for the mean and its ratio. There is significant



confidence level has reached 98%. The alternate hypothesis is recognized here for this

ratio as the P-value is less than 0.05 and the confidence level has gone high. Therefore,

in terms of revenue, the M&A of these companies were considered successful as

planned and synergy benefits acquired by Boustead Holdings Berhad after acquiring

Pharmaniaga.

78




Mean 173,910.00 241,645.90 Variance (mil) 3,950 4,561 Observations 10.00 10.00 Pearson Correlation -0.17 Hypothesized Mean Difference 0.00 df 9.00 t Stat 1.02



The above table results show no significant difference between pre and post M&A

financial performance, as the P-value is greater than 0.05. As seen in the table, the p-

value shows 0.17, henceforth the confidence level is calculated to be 83%. The M&A

happened had significantly decrease the PBT, therefore, the NULL hypotheses are

recognized here. From this situation, it was observed that Boustead Holdings had lower

mean PBT than reported before.



t-Test: Paired Two Sample for Means


Mean 120,870.00 190,190.70 Variance (mil) 3,195 2,246 Observations 10.00 10.00 Pearson Correlation -0.30 Hypothesized Mean Difference 0.00 df 9.00 t Stat 0.40



79


test. The NP before the merger had been RM 120,870.00 which increased to RM


the NP had no significantly improvement after the merger, thus, the confidence level

only 65%. This proof the NULL hypotheses is accepted here. The attribution for the

synergy of both companies along with management change has no positive deal after

the merger took place.









EPS witnessed significantly not much changes in post-merger period compared to pre-

merger period. From the above table, the paired t-test result is 0.31. Consequently, this

lower the confidence level to 69%. The no significant improvement (RM1.35) in the

company EPS proof the NULL hypotheses as defined earlier in Chapter 1. The

evaluation saw the leadership strategy is challenging to increase the profitability.

80




Mean 9.35 7.70 Variance 20.50 16.29 Observations 10.00 10.00 Pearson Correlation 0.28 Hypothesized Mean Difference 0.00 df 9.00 t Stat 1.01





The results obtained from paired t-test for the dividend before and after merger is tabled

above. The dividend ratio has no significant improvement, thus proofing the NULL

hypotheses. The mean dividend rate before and after merger did not show any major

difference. The calculated confidence level is 83%, which is very less to support the

merger initiatives. From previous research, when a company reduce it’s dividend, this

will mainly due to conserve the cash to reinvest in the company or buy back stock.

From the analysis, the leadership strategic can be considerate efficient, but in terms of

company synergy, at long run, the merger will not be profitable and company may

cease the merger partners with lowest stake at one point.

81



t-Test: Paired Two Sample for Means







From the table above, there is significant improvement observed for the NTA indicators

while performing the paired t-test for before and after merger. Thus, the hypotheses is

considered alternate. The mean value only increased (4.15) after merger, substantially

decided there is major significant improvement. The confidence level is high as 99%

which is considered as a positive deal. If the company is making loss over the year, the

NTA will gradually decline every year. The synergy benefits are influenced by NTA

performance as well, and in this case, it is contributing positive synergy and strategic

leadership approach to manage change of management.

82

4.4 Analysis on Merger and Acquisition of DRB-Hicom Bhd

Category: Automotive industry

Company core business: Automotive manufacturing, assembly and distribution

industry

In Dec’17, DRB-HICOM BHD and Zhejiang Geely Holdings Group have signed the final

agreement, which sees the latter acquiring 49.99% of car manufacturer Proton and 51%

of luxury sports car brand Lotus in a deal worth RM1bil. Zhejiang Geely is buying the

Proton stake for RM460.30mil, of which RM170mil is cash and the remaining RM290m

will be in form of a transfer of the former's sports utility vehicle (SUV) platform Boyue for

RM290mil. Following this strategic partnership, Proton will have the ability and

resources to turn itself around and become an example of Malaysian success. The

partnership with DRB-Hicom will enable Proton to become the industry leader in

Malaysia and a top three brand in Southeast Asia.

Figure 12: DRB-HICOM financial performance chart pre and post-merger

-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000

Quarter

31-Dec-18

31-Dec-17

31-Dec-16

31-Dec-15

31-Dec-14

31-Dec-13

31-Dec-12

31-Dec-11

31-Dec-10

31-Dec-09

31-Dec-08

31-Dec-07

31-Dec-06

RM (mil)

DRB-HICOM Pre-merger & Post-merger

EPS (Cent)

Net Profit

PBT (RM,000)

Revenue

Pre merger period

Post merger period

83



indicators. The summary of results for DRB-Hicom Bhd was prepared to show the

significant differences between pre and post M&A.

Table 26: Summary of paired t-test sampling for DRB-Hicom



t Critical one-tail

P(T<=t) two-tail

t Critical two-tail

Revenue

Pre-merger 3,217,980.89 80,237 Mil 0.03 0.15 1.86 0.31 2.31


d -168,967.67 61,213 Mil

PBT

Pre-merger 210,988.56 69,951 Mil 0.14 0.08 1.86 0.15 2.31


d -94,605.00 45,829 Mil

NP

Pre-merger 97,478.44 61,311 Mil 0.27 0.03 1.86 0.06 2.31


d 53,234.11 41,278 Mil

EPS

Pre-merger 5.04 164.04 0.27 0.03 1.86 0.06 2.31


d 2.75 110.44

Divident

Pre-merger 0.33 1.00 -0.17 0.29 1.86 0.58 2.31


d 0.02 1.44

NTA

Pre-merger 3.46 0.00 0.24 0.26 1.86 0.52 2.31


d 0.08 0.12

84




Mean 3,217,980.89 3,049,013.22 Variance (mil) 80,237 141,451 Observations 9.00 9.00 Pearson Correlation 0.03 Hypothesized Mean Difference 0.00 df 8.00 t Stat 1.09



The above Table 27 shows the difference in revenue of before and after merger of the

said company. It shows the p value for the mean and its ratio. There is no significant



confidence level has reached 85%. The NULL hypothesis is recognized here for this

ratio as the P-value is higher than 0.05 and the confidence level has gone low. The

recommended p-value must be at or lesser than 0.05 and the confidence level should

be greater or equal to 95% to determine the positivity of the deal to the revenue.

Therefore, in terms of revenue, the M&A of these companies were considered not

successful as planned and no synergy benefits acquired.

85




Mean 210,988.56 116,383.56 Variance (mil) 69,951 115,781 Observations 9.00 9.00 Pearson Correlation 0.14 Hypothesized Mean Difference 0.00 df 8.00 t Stat 1.59



The above table results show less ignificant difference between pre and post M&A

financial performance, as the P-value is greater than 0.05. As seen in the table, the p-

value shows 0.08, henceforth the confidence level is calculated to be 92%. The M&A

happened had significantly increase the PBT but not much difference, therefore, the

NULL hypotheses are recognized here. From this situation, it was observed that DRB-

HICOM had average mean PBT with not much difference than reported before. The

synergy benefits are positive, mainly contributed by the leadership attribution of running

the operation with lesser cost and efficiently.




Mean 97,478.44 150,712.56 Variance (mil) 61,311 102,589 Observations 9.00 9.00 Pearson Correlation 0.27 Hypothesized Mean Difference 0.00 df 8.00 t Stat 2.14



86


test. The NP before the merger had been RM 97,478.44 which increased to RM


the NP had enhanced significantly after the merger, thus, the confidence level rose to

97%. This proof the alternate hypotheses is accepted here. The positive t statistics are

due to optimistic correlation with company proficiency. Indirectly, this have positive

attribution for the synergy of both companies along with management change.










From the above table, the paired t-test result is 0.03. Consequently, this increase the


proof the alternate hypotheses is recognized. The evaluation saw the leadership

strategy on increasing the profitability eventhough the revenue has no difference. With

cost decrease and net profit increase, the greater portion of revenue were flow down to

earnings which is good for mutual synergy profits.

87









The results obtained from paired t-test for the dividend before and after merger of DRB-

HICOM are tabled above. The dividend ratio has no significant improvement, thus

proofing the null hypotheses. The mean dividend rate before and after merger did not

show any major difference. The calculated confidence level is 71%, which is very less

to support the merger initiatives. From previous research, when a company reduce it’s

dividend, this will mainly due to conserve the cash to reinvest in the company or buy

back stock. From the analysis, the leadership strategic can be considerate efficient, but

in terms of company synergy, at long run, the merger will not be profitable and company

may cease the merger partners with lowest stake at one point.

88




Mean 3.46 3.54 Variance 0.00 0.12 Observations 9.00 9.00 Pearson Correlation 0.24 Hypothesized Mean Difference 0.00 df 8.00 t Stat -0.67





There is no significant difference observed form the table above for NTA indicators

while performing the paired t-test for before and after merger. Thus, the hypotheses is

considered NULL. The mean value only increased (0.088) after merger, substantially

decided there is no significant improvement. The confidence level is 74% which is

considered not a positive deal. If the company is making loss over the year, the NTA

will gradually decline every year. This indicator is not very critical for investors, however,

it is important to decide whether the company is overvalued or undervalued. The

synergy benefits are influenced by NTA performance as well, and in this case, it is

contributing negative synergy and lack of leadership approach to manage change of

management.

89

4.5 EBITDA Analysis and Interpretation

The selected companies for this research were evaluated in Earnings Before Interest,

Taxes, Depreciation, and Amortization (EBITDA) perspective. This analysis will be

required to measure the company’s profitability (net income including certain expenses)

to evaluate the decision made on merger and acquisition is significantly worth the effort

and investment plan. Especially, the investors and beneficiary utilize the EBITDA as an

exposure ratio to weigh the amount of debts or major investment for assets. To

calculate EBITDA, below formula were used:

EBITDA = EBIT + Depreciation + Amortization (Simply Cash Profits)

whereby,

Earnings before earnings and tax (EBIT) = Revenue – Expenses

Company valuation measure is best described using EBITDA for both mature industries

and small firm. For this research purpose, all the selected companies financial

performance data were taken via https://m.malaysiastock.biz. The data were compiled

and to calculate the EBITDA, the quarter before and after (pre-merger and post-merger)

were retrieved and collectively tabulated as per Table 33 below. The financial

performance was evaluated from after M&A perspective to understand if there is any

significant improvement for the acquiring company in terms of revenue, PBT, EPS,

dividend, NTA etc. In addition, the table below represent the short-term analysis to

observe the immediate effect of M&A. The set back of EBITDA calculation is that the

metric is not including paid out interest, taxes and equipment cost. However, EBITDA is

a good measure if lookout in short-term to check the credibility of company performance.

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The results interpretation shows mix performance of the acquirer on the financial

improvement after M&A. Even though, the variable difference is slightly moderate, in

average overall improvement increased especially on revenue and NTA as calculated

and represented in Table 34 below. For the PBT, Net Profit and EPS, depend on the

company, some company show good performance like Boustead HI and Boustead

Holdings, where else SP Setia is moderately low and DRB-Hicom had negatively

impacted due to the merger.

Table 34: The financial performance in average

The EBITDA valuation can be concluded to be having significant impact on the overall

performance after M&A, as the focus on operational synergies improve the earnings,

sales and profitability. However, in case of DRB-HICOM and SP-Setia, the failure of

merger cause reject on the hypothesis on the synergy and leadership effectiveness.

This is mainly due to asynchronous of initiative and capability to manage the different

business model and cross culture.

Variables BOUSTED HI SP SETIABOUSTED

HOLDINGSDRB-HICOM

Revenue (RM,000) 158% -55% 32% -4%

PBT (RM,000) 90% -65% -1% -448%

Net Profit (RM,000) 72% -68% -11% -324%

EPS (Cent) 72% -68% -11% -324%

Dividend (Cent) 0% -75% -100% 0%

NTA (RM) 8% 4% 3% 13%

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4.6 Discussion on the Findings

This section of the research will cover an insightful discussion of the results coming out

from the research questions in which an interpretation of the meaning of the findings as

they relate to theory, previous research, and/or expectations will be performed.

Moreover, an attempt to relate the findings of the research project to the ideas and

issues that were discussed in the literature review will be undertaken.

As already discussed in the literature review corporations consider engaging in mergers

as a strategy for quick external growth despite the higher risks compared to the internal

growth.

Moreover, it was explored that different theories explaining the motives and scopes that

are intended to be achieved through mergers which were organized in two main

approaches: the value-increasing, efficient market approach and the value-decreasing.

The merger event discussed in this case study shares more common features with the

value-increasing theoretical approach as it will be demonstrated in the following

analysis. In addition, the contextual development of our merger case lacks the very

fundamental premises for the value-decreasing agency approach to explain it.

In an overview, M&A had provided growth advantage to the industries sectors, as well

as domestically and globally. Every companies envision to grow over the year,

however, due many challenges in operation and functionality, the growth had been

hindered. M&A is one of best way to develop a company revenue and profit without

much loss time and resources. Diversification of business is one of the factors for the

reason why M&A happened and still happening around the world, as new chain of

products and services can be introduced or integrated in existing business model.

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Synergy benefits due to M&A is significantly perceived based on the history from major

companies around the world namely Exxon and Mobil, Vodafone and Mannesmann,

and The Walt Disney Company and Twenty-First Century Fox, Inc. The combination of

operations and resources would result into great value for the collective manpower,

assets, facilities, funds and region for sell the services or products. Aside from this, the

market dominance by beating the competitors cause a significant increase in market

share is one the factor of synergy.

Other considerations that M&A should be encouraged are the technology transfer by

enhancing the product, improve scientific research and expand the production capacity.

The taxation relieves by allowing the accumulated losses of flop units by absorbing the

units and converted as loss by merger, is one the factor to pay less for tax or exempted

in special case.

In terms of efficiency, it is depending on which firm had the best efficiency when M&A

took place. This is where the leadership power will be much needed to integrate both

companies and establish a new culture of work. Managerial synergy is a potential factor

for a merged company to perform well or fall. Leadership style of managing the

company after merger such as understanding the risk and factors, improving all the

loopholes, mitigating new policy, get the right resources, transparency and ensure

investors satisfaction are the key aspects that leaders should adopt a merged company.

Based on previous research, it was observed that it is rather difficult to manage a

merged company that merged due to cross cultural difference than start a new

company. Underperforming companies can improve the performance by getting

additional input from managerial and direct employment. Operation synergy can be

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achieved in horizontal, vertical or even conglomerate mergers. The objective and the

motives to pursue the merger is to increase the efficiency and synergy effects, reduce

costs, increase of dual customers’ number, competitiveness, a stronger market position,

and as result increase the revenues. For small firms, mergers are primarily an exit

strategy for firms in financial trouble, as indicated by few marketed products and low

cash-sales ratios.

In the process of merger and acquisition, two organizations will have differences in

terms of socio-economy. The management and leaders have to deal with different

people style, way of working, benefits and welfare. Most of the issues pertaining the

merger and acquisition process is dealt with organizational cultural differences issues

mainly. People issues should not be ignored, as this will escalate to major disastrous in

a company. Most companies give less importance to human resources issues during

process of merger and acquisition, which can be catastrophic. This cause failure to

maintain manpower, retrenchment, resignation of skilled and unskilled staff, employee

jump to competitor companies due to dissatisfaction, and protest in companies.

Leadership is the key to every organization to produce a positive result out of multiple

resources and norms. In this research, it was significant on what really matters for both

leaders and leadership. The individual leaders plan, execute, manage, put things in

actions and reiterate the strategy in individual capacity manner. Meanwhile,

organizational leadership occurs when the organization builds a cadre of future leaders

who have the capacity to shape an organization's culture and create patterns of

success. A leader is a person who demonstrate their proficiency and ability at assigned

group or project by focus on the knowledge, skills, and values of. Meanwhile, a

leadership give attention to quality of leading an organization and their capability

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endures over time. The author mentioned that leadership should be from the outside-in,

not the inside-out. Leadership from the outside-in is a way for leadership branding.

Firstly, in order to develop an integrated leadership to keep harmonized the

organization cultural influence, few steps should be taken to create a leadership brand

is by create a case for leadership, articulate a clear leadership brand statement, access

leadership, invest in lenders, measuring leadership, build awareness and integrate

leadership. The second principle was the basic guideline show be known to leaders,

execute the basic and self-develop towards the basic requirement. To become a very

influenced leader in a company, he or she should understand the effectiveness of

others that was basically the same and the common rules that all leaders mastered.

a) Effects of Management Cultural Integration on Merger and Acquisition

Failures

• Managers must have knowledge of the target company’s industry was critical for

a successful M&A, as managers must know and implement methods to cultivate

this knowledge. (Grave, Vardiabasis, & Yvas, 2012).

• The firm’s environment, employee skills, and managerial passion contribute to

organizational performance, and may therefore translate to M&A successes

(Kleanthis, Nicolaidis, & Tsirikas, 2014; Leekha Chhabra, & Sharma, 2014).

• During and after an M&A, managers must consider the demographic and

geographic factors affecting an employee’s skills and organizational fit with the

culture (Colombo & Turati, 2012).

• M&A failures disappoint investors and may require active participation in

activities to promote a unified organizational culture. Kehoe and Wright (2013)

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Based on four selected companies for this research, the major findings observed from

the results are inconsistency of M&A performance. In another words, capital adequacy

and business earning ability do not effect on company efficiency in pre and post-merger

periods. However, the post-merger period results of liquidity and operational risk are in

stark contrast to that of pre-merger period. The liquidity and operational risk do

not affect the company efficiency in pre-merger periods, but affect the efficiency with

negative relationship in post-merger periods.

Company like DRB-HICOM had major depletion in the PBT, mainly due the factor of

leadership changes and could not cope with cultural difference. This is a good lesson

learnt that every company should have done a very good due diligence and background

check before merger and acquisition. Overall, the leadership efficiency in Malaysia still

at moderate level due to lack of transparency, integration problem and assimilation

issue. However, the synergy benefits still upright in Malaysia as market are vast to

explore and there are many potential opportunities.

4.7 Summary

Four mergers have been analysed. In many cases it is found that the revenue increases

in the post-merger period except for SP Setia and Boustead Holdings Berhad shows

significant increase in revenue. However, in some companies there are no significance

changes or improvements in terms of EPS, dividend, Profit Before Tax, Net Tangible

Assets and Net Profit. This situation explains the inability of the leaders and their

ineffectiveness in managing the company in post-merger period. Leadership efficiency

and their talent in crisis management and adapt the new environment and technology

development is crucial to ensure the growth of those variables and to show profit to the

stakeholders.

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CHAPTER 5

SUMMARY AND CONCLUSION

5.0 Introduction

This section provides summary and conclusion of the findings based on chapter fpur

and discussions of the analysis, recommendations and limitations based on the findings

of this research. The main objective of this research was to evaluate and explore

whether there is any synergy benefits of the merger and acquisition deals and

leadership efficacy towards the success or failure of the deals in selected merged

companies in Malaysia.

5.1 Synergy and Leadership

This research was conducted mainly to analyze and examine the effects of leadership

efficacy and synergy benefits achieved on the deals of merger and acquisitions of

selected Malaysian companies in the last 10 years. The variables chosen was Revenue,

Dividend, Earnings Per Share, Net Profit, Net Tangible Assets and Profit Before Tax in

order to determine the exact synergy benefits acquired by the firm. The size of samples

was about 4 companies from various industries that has endured merger and

acquisition in Malaysia as there wasn’t much companies were involved in this deal in

the last 10 years.

Synergy benefits in merger and acquisition can be achieved through the added value

from the amalgamation of 2 firms in greater than the firms operating as individual

entities. The financial synergy can be positive or negative. The positive synergy is

determined when there is an increased benefit in profitability, taxes, debt capacity and

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revenue increased. Meanwhile, the negative synergy is detected when the merged

value of both firms has decreased than the value of their individual entities.

Therefore, in this chapter, a subsequent analysis is conducted to investigate the

effectiveness of the study objectives are attained and accomplished. The primary

objective was to examine the effects of merger and acquisitions in the financial

performance and leadership effectiveness. By utilizing the paired t test and EBITDA

calculations, the results obtained shows that most firms used as samples in this study

have encountered significant reductions and increments in all variables used to

measure the effectiveness. Hence it can be summarized that there is a mixed

performance detected in overall analysis of those merger and acquisition deals.

According to previous chapter, it is determined that there is a major reduction and

significant increment in all the variables of each company. Therefore, it can be

concluded that merger and acquisition deals have significantly impacts a firm’s

performance. The results discussed in earlier chapter signified that the acquired

companies in the sample size have faced both decreasing and increasing values in

each variable used to measure the effectiveness of the deals. The results show the

differences in terms of financial performance both in pre- and post-merger period.

The first objective is to analyze if the synergy achieved in the revenue. The revenue

may decline once two companies are merging as the business has overlay in the similar

market and same customer base. In order to create benefits for the shareholders, there

must be some opportunities for cost saving in order to compensate the decline in

revenue. On another word, the synergies acquired from the deal of merger and

acquisition must surpass the primarily lost value. The revenue can be increased by

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introducing and sell different and new products or services using a widened product

circulation or distribution methods. This is one way which can help the firm to challenge

for new customers which initially not their clients.

The second objective is to examine the impact of M&A on Profit Before Tax. This

element in merger and acquisition measures a company’s profit even before the firm

must pay income taxes. Profit before tax has much value in offering internal and

external management of financial data with a firm’s operational performance. By

accepting income tax, Profit Before Tax reduces an additional variable which may hold

contrasting indicators that encourage or influence the financial data reading way.

Therefore, Profit Before Tax is a tool of measurement of performance that emphasize

the usual business operations. This research proves that, there is a mixed performance

detected in those firms in acquiring the synergy in terms of PBT. Two sample

companies garner positive PBT results, meanwhile the other two firms acquired

negative PBT results.

For third objective, which is to analyze the M&A impact on Net Profit margin as per the

paired t test and EBITDA shows two firms achieved significant differences and another

two firms finds insignificant changes in the net profit both pre and post-merger period.

The research illustrates that the firms involved in M&A in the research sample size

faced a decline and increment equally in all 4 samples on net profit margin pre and post

M&A. The t test and EBITDA show significant and insignificant values respectively for

all samples used. Therefore, it can be summarized that the net profit value has both

mixed performance on merger and acquisition activities.

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The fourth objective was to evaluate the effectiveness of merger and acquisition on

Earning Per Shares (EPS), the outcomes of the study shows that merged and acquired

firm from the sample size have encounter a decline on earning per share from pre to

post M&A deals. There is no significant difference detected in EPS both before and

after M&A although there is slight increment in DRB-Hicom with the significant P-value

of 97% and 96% for Boustead Heavy Industries, however the significance for the entire

study is low. Any M&A deal is considered a success if the merger and acquired

company’s EPS has increased after the M&A activity. However, if the result causes a

decline in acquiring the Earnings Per Share then the deal is counted as dilutive.

Shareholders and investors must be careful with the analysis of this factor as not all

deal is necessarily good. As the main goal of merger and acquisition is to expand the

company’s EPS to achieve synergy benefits. This is a primary responsibility of the firm’s

manager or leader to ensure that both merged firms achieve this synergy. Hence, this

clearly explains the importance of leadership in acquiring synergy benefits through the

process of M&A. A leader plays a vital role in identifying and work towards achieving

common goals of shareholders and investors.

The fifth objective was to examine the effect of merger and acquisition on dividend.

According to the paired t test and EBITDA calculations performed, it shows that every

sample size used in this research has no significant improvement in dividend in merger

and acquisition deals involved the sample companies. The significant value for dividend

shows negative for all 4 companies involved, hence there is no notable profit in terms of

dividends to the shareholders obtained. The dividends have and alarming effect to the

shareholders and investors which explains about the company’s financial performance

and conditions which can potentially attract them. Dividend is a form of earnings

amount distributed to all investors and shareholders. Dividend is considered as an

101

important factor for shareholders and investors to assess the firm’s financial situation as

they expect returns of their investments and the company which pays consistent

dividends will certainly attract the investors. Again, a leader’s role is countable in this

situation as their primary objective and supreme goal is to maximize the investors and

shareholders wealth as they are primary agents of the firm. Shareholder and investors

wealth are determined in the market price of shares which can be the result of the firm’s

investment, financing and dividend policies. Hence, a leader again plays an important

role in order to ensure the company declares positive dividend post-merger activities to

gain trust of those stakeholders.

The final objective was to evaluate the M&A’s impact on Net Tangible Assets. This

element is the value of all identifiable and physical assets of the firm after minus all

liabilities in the business. Net tangible assets are also known as the total assets the

company holds after its minuses its intangible assets and liabilities. It is important for a

management of involved companies to know that Net Tangible Assets allows the

management to evaluate and determine its assets value positions without regarding

intangible assets. A firm with high Net Tangible Assets can easily obtain acquiring

financing since it owns identifiable assets which can be used as security for loans

applied. NTA can also be used to evaluate the firm’s risk level in terms of liquidity. As

per this study, Boustead Holdings and SP Setia Group has acquired significant

difference and accepted the alternative hypothesis of this study. With the significant p

value of 99% and 98% respectively. The other two companies, namely Boustead Heavy

Industries and DRB Hicom shows insignificant differences showing p-value of 54% and

74% respectively, which clearly explains the negative value post-merger in NTA. Hence,

it can be concluded that a mixed performance detected in those sample companies in

terms of acquiring NTAs in their M&A deals.

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5.2 Conclusion

Synergy is noticed in few cases and not in every case. The leadership in the post-

merger is not as effective as expected hence there are some fluctuations in the profit

and instability of management in post-merger period. A dynamic and good leadership

highly influence the success of the merger and acquisition. This research provided

numerous insights in Merger and Acquisitions activities in Malaysia. Whilst providing

those contributions to the previous studies in this field, it must be acknowledged that

there is some limitation to the study have been identified along the journey of the

research completion. The data extraction was limited due to less companies have

involved in merger and acquisition activity in Malaysia in the last 10 years. Hence, there

was limited information that can be accumulated to perform the financial analysis. This

was difficult to show the pattern of M&A deals in Malaysia to the future researchers.

5.3 Limitation

There was some improper information of other companies except those have been

chosen to analyze in this paper, delimited this research. Hence why only five

companies can be considered eligible to be analyzed.

Besides those limitations, this research is based on secondary data collected which can

be divided into two parameters; paired ‘t’ test and descriptive statistics using

percentage calculation. It is recommended for future studies to explore more tools and

parameters to analyze the performance of companies involved in Merger and

Acquisitions in Malaysia. External attributes such as geographical condition, economic

situations and government influence are also limiting this research. Due to unavailability

and the unwillingness of leaders who have previously and currently involved in M&A

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deals to cooperate in conducting an interview also delimits the findings in Leadership

attributes to M&A success and failures.

Nonetheless, the presence of limitation is common in every experiment and this

research also had its specific limits. Basically, a limited and small sample size is

selected due to the unavailability of data and suffices information from some companies.

Also, the time frame given for the research is four months, which was quite short to

conduct the study. In secondary, the complexity of acquiring the right information was

there because the author had inadequate knowledge and experience concerning on

how to administer the required measurement tools to operate and examine the data

acquired from various source.

5.4 Recommendations

Recommendation suggested for upcoming researchers is to examine and investigate

other elements to measure involved firms’ financial performance as different variables

can be applied in the study to show significant and insignificant impact of M&A in

Malaysia. They can explore more industries such as healthcare, manufacturing,

education, construction and etc to determine their values in terms of financial and

leadership roles. Variables such as return on equity, financial leverage, capital returns,

significant abnormal returns can be employed. The population sample size can be

enlarged by future researchers with a wider time frame, which may lead to a greater

outcome as the result can be better seen in the long run compared to a short period.

Moreover, the comparison studies of stock exchanges between two firms from different

countries are also suggested so that a wider and interesting result may be generated.

Additionally, two or more sectors from Malaysia can be extracted and compared to

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determine the differences during pre and post mergers and acquisition activities. On the

other hand, more variables can be included to identify a leader input and contribution

towards a successful merger an acquisition. An upcoming researcher also can examine

the manager or leader’s decision-making abilities brings negative or positive impacts to

the company’s financial synergies and wealth benefits for shareholders.

5.5 Implications

As global market becomes more competitive and globalized is more crowded, merger

and acquisitions are one of the important elements to grow together and acquire

sustainability in the long run.

Hence, this study can be benefited to those who are looking for expansion in business

and diversifications. Few other who can benefit from this research are as below:

1) Research students from universities, colleges and other educational institution

2) New possible entrants in new markets who are keen to merger with potential

target

3) Companies and firms which is looking for synergy benefits expansions and

profitability by merging

4) Firms which targets to offer more variety of products and services by acquiring

smaller firms or equal size companies without any negative impacts

5) Managers and Leaders who are involved in merger and acquisition processes in

their respective companies, who are also required to conduct a research on how

an M&A deals offers benefits to the firm

6) Other regulators who may gain benefit from this research can be MNC

companies, government bodies and agencies

105

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APPENDICES

108

APPENDIX A

Boustead Heavy Industries Corp M&A Announcement

109

APPENDIX B

Boustead Holdings Berhad M&A Announcement

110

APPENDIX C

SP SETIA Berhad M&A Announcement

111

APPROVAL PAGE

TITLE OF PROJECT PAPER : LEADERSHIP EFFICIENCY AND SYNERGY

BENEFITS OF SELECTED MERGE COMPANIES

IN MALAYSIA

NAME OF AUTHOR : SAIRA BANU BT SULAIMAN SINNAPPAN

The undersigned certify that the above candidate has fulfilled the condition of the

project paper prepared in partial fulfillment for the degree of Master of Business

Administration (Leadership).

SUPERVISOR

Signature : _______________________

Name :

Date :

ENDORSED BY:

______________________________

Dean

Graduate School of Business

Date:

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