Liquidity Analysis of Indian Cross-Border Acquisitions in Developed Nations

The aim of this study is to assess the liquidity of Indian multinationals opting for cross-border acquisitions with special reference to the Indian acquirer firms when the target belongs to a developed nation like United States, Italy, Germany, France etc. the study examines the impact of acquisition on the liquidity of the co. which is measured by analyzing current ratio and quick ratio of 24 sample companies. The study examines whether there is an improvement in the overall financial health of the company after acquisition. Different ratios, liquidity parameters and averages have been used to evaluate financial performance of the sample firms before and after the acquisition. For the said purpose, three years Pre and post acquisition liquidity analysis of 24 sample companies who has made acquisitions during the period of 2000-2005 has been tested using both parametric and non-parametric tests. Liquidity, measured by current ratio and quick ratio, for the sample firms have declined significantly. It was observed that more than 2/3rd of the firms have reported a fall in these ratios. This fall can be interpreted as increase in debt by the acquiring firms post acquisition.