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Journal Of Economics, Technology, and Business (JETBIS)

Volume 3, Number 2 February 2024

p-ISSN 2964-903X; e-ISSN 2962-9330

THE EFFECT OF MERGERS AND ACQUISITIONS ON THE FINANCIAL

PERFORMANCE OF COMPANIES LISTED ON THE INDONESIA STOCK

EXCHANGE

Sukma Genta Buana

, Wahyu Purbo Santoso

Pustika Ayuning Puri

Universitas Siber Asia Jakarta, Indonesia

Email: [email protected]

, wahyupurbo@lecturer.unsia.ac.id

[email protected]

KEYWORDS:

Financial performance,

Indonesia stock exchange,

Company Value

ABSTRACT

Mergers and acquisitions (M&A) are becoming a common strategy

for business development in today's global marketplace. This study

aims to analyze the effects of M&A on the financial performance of

companies listed on the Indonesia Stock Exchange (IDX). Data is

collected from companies that experienced M&A during a certain

period, focusing on financial variables such as profitability, liquidity,

leverage, and sales growth. The study hypothesis was tested using

panel regression analysis. The findings indicate that M&A

significantly affects the IDX companies' financial performance. More

specifically, the results indicate that while liquidity tends to decline in

the near term following the deal, profitability, and sales growth

increase following M&A. Leverage may also fluctuate depending on

the capital structure and financial policies the company implements

post-M&A. This study provides valuable insights for stakeholders in

the Indonesian capital market, including investors, fund managers,

and regulators, to understand the implications of M&A on firms'

financial performance. The practical implications of this study can

assist firms in planning and evaluating their M&A decisions more

carefully to increase firm value and reduce the risks associated with

such transactions.

INTRODUCTION

Due to the high contagiousness of the coronavirus, often known as SARS-CoV, the globe

was taken aback by the epidemic in early 2020. The condition that causes it is called COVID-

19, or coronavirus disease 2019 (Yuliana, 2020). As of the end of December 2019, over 65

countries—including Indonesia—had been proven to have had this virus, according to WHO

data (2020). Because COVID-19 is the result of an outbreak of unnatural natural phenomena,

it is classified as a natural catastrophe. Not only have micro, small, and medium-sized

businesses in Indonesia been impacted by the COVID-19 pandemic, but numerous other major

corporations have also been impacted. An economy's use of the capital market is crucial. The

capital market does serve both financial and economic purposes simultaneously. Because it

serves as a vehicle or means of bringing together two groups of people with different

interests—parties in need of money issuers and parties with excess capital (investors)—the

capital market is said to have an economic function (Vipin & Manmadhan, 2022).

Parties with excess cash can utilize the capital market to invest their money in the hopes

of earning a return, and the issuer—in this case, the company—can use the money for investing

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and operating needs without having to wait for it to become available. released. derived from

business success (Putri & Yasa, 2020).

In today's fast-paced era of globalization, companies must be able to develop plans,

strategies, and innovations quickly to survive the competition in the global market. Many ways

can be done to ensure a business survives in global competition, one of which is by developing

merger and acquisition activities. Currently, trading activities in the market are developing not

only in the form of buying and selling goods but also in buying and selling businesses (assets).

The asset sales market is often called the corporate control market (Nurhayati, 2009).

Large Indonesian companies have been doing mergers and acquisitions, especially during

the economic crisis that led to the bankruptcy of many companies. Moreover, when the

COVID-19 pandemic broke out in Indonesia, many bankrupt businesses were forced to sell

their assets. According to (Sidik, 2023), one example of expansion activities that occurred

during the pandemic was the merger of Tokopedia with Gojek, which was later named GoTo.

The total value of the business combination (VAT) at the end of 2020 was more than 22 billion

USD. In addition to the GoTo merger, there was also the acquisition of PT Indosat and Tri

Indonesia in 2022 with a combined business value of $6 billion.

The reason companies tend to choose mergers and acquisitions over in-house growth as

a strategy is that mergers and acquisitions are seen as a quick way to achieve corporate goals

that companies cannot afford to lose. Synergies—a situation in which the combined value of

the companies after the merger and acquisition exceeds the combined worth of each company

before the merger and acquisition—are another benefit of mergers and acquisitions.

Furthermore, organizations benefit from mergers and acquisitions in the form of enhanced

research and marketing capabilities, technology transfer, management skills, and efficiency in

the form of decreased production costs (Gustina, 2017).

Mergers and acquisitions are at the core of controversies between regulators,

shareholders, public decision-makers, and academics. Mergers and acquisitions in Indonesia

occurred in 1970, conducted by banks in the hope of strengthening their capital structure and

reducing taxes. (Helmalia, 2016). The growth of mergers and acquisitions continues to this day.

If in a crisis where many companies have difficulty in financing their capital. The tendency

that occurs in Indonesia, the acquisition pattern is more widely practiced. This is because

business owners feel more comfortable owning large amounts of shares privately.

Mergers and acquisitions are still often considered controversial decisions because they

are so powerful and complex. Many parties suffer, but also benefit from mergers and

acquisitions. Overall, we see a negative impact on employees, as these policies are often

accompanied by massive layoffs. For example, in the case of Bank Mandiri, more than 11,000

employees had to opt for early retirement, while the reduction in the case of the Bank Permata

merger was 2,350 employees (Moin & Salhi, 2007).

Further controversy can be seen in the emergence of various conspiracies and scandals

behind mergers and acquisitions. Various forms of engineering are achieved through mergers

and acquisitions. For example, these vehicles are used to avoid taxes, inflate the value of

company assets, change the management of the acquired company, or increase compensation

for the managers themselves. Furthermore, M&A decisions are not free from problems (Sută,

1992), the cost of implementing M&A is very expensive and the results are not necessarily as

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expected. Acquisitions can also hurt the financial position of the acquiring company if the

acquisition structure involves cash payments or loans. In mergers and acquisitions, there are

two things to consider, namely the value created by the acquisition and who benefits most from

it. With the acquisition, it is expected that synergies will be created to increase the value of the

company.

The performance of the target company should be considered by mergers and acquisitions

managers. Considering that the company's success may decide whether it is eventually acquired

or not. Operational efficiency is calculated using financial ratios, which are obtained from the

profitability, debt, liquidity, operating, and market ratios. (Moin & Salhi, 2007) states that you

can compute market ratios using earnings per share, liquidity to current ratios, operating ratios

using revenue total assets, and debt ratios using debt ratios and return on equity. These

techniques can also be used to calculate the rate of return. Economists, scientists, and business

professionals in Indonesia vigorously debate the topic of mergers and acquisitions (M&A).

Regulators and financial theorists have offered numerous explanations for the large volume of

merger activity. Synergies, tax implications, fractional value, diversification, buying assets at

replacement cost, and incentives for individual management are the primary drivers of mergers

(Saleh & Kohar, 2020).

The focus of this research is on external tactics. To quickly expand into new markets for

new products without having to start from scratch, mergers and acquisitions are examples of

external expansion tactics. In general, an acquisition is the process of purchasing all or a portion

of a company's assets, whereas a merger is the combination of two or more businesses in which

one of the participating companies' names is kept in use while the other is dropped. Businesses

occasionally favor external expansion through mergers and acquisitions above internal

expansion. Hitt, 2002. Therefore, it is claimed that the goal of merging through mergers and

acquisitions is to achieve synergy, which is the situation in which the combined worth of the

two firms is greater than it was before the merger and acquisition. Purchasing. Furthermore,

organizations can gain a great deal from mergers and acquisitions, such as enhanced research

and marketing capabilities, management skills, technology transfer, and efficiency in the form

of lower export production costs Hit (2002).

Different findings are drawn from a large number of studies that evaluate financial

performance metrics before and after mergers and acquisitions. Despite variations in return on

assets (ROA) and net profit margin (NPM) amongst companies listed on the IDX, total asset

revenue (TATO) and liabilities to total assets DAR remain unchanged before and after mergers

and acquisitions (Kurniati & Asmirawati, 2022). Salwa Inayatullah Fannani and Nurfauziah

contend that while the current ratio (CR) is constant, the return on equity (ROE) and return on

assets (ROA) of companies listed on the IDX fluctuate when they merge or acquire one another.

Financial (2020) states that there isn't a discernible variation in the current ratio (CR), net profit

margin (NPM), and

Total asset turnover (TATO) did, however, change before and after mergers and

acquisitions. It is expected that you will examine organizations that engage in mergers and

acquisitions after carefully considering the rationale provided above. Since it is anticipated that

mergers and acquisitions will increase the company's performance and create synergy.

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Researchers aim to compare the effects of mergers and acquisitions on organizations before

and after the transactions to test the influence of these business decisions, building on earlier

research. Furthermore, the impact of mergers and acquisitions, accounting for long-term

synergies, on long-term financial success. Based on these unique features, the researcher

intends to research the thesis topic, "The Effect of Mergers and Acquisitions on Financial

Performance."

This study looks to discover if there are any variations between the pre- and post-merger

and acquisitions periods using return on assets and net profit margin analysis. Advantages of

Research A research project is supposed to yield something valuable. The study's conclusions

will help the academic community since they will make clear how mergers and acquisitions

affect the bottom lines of companies that are listed on the Indonesia Stock Exchange. In

addition, it is envisaged that the study will be a valuable resource for analysis, development,

and comparison in the future for studies in related or related fields and problems (Saleh).

RESEARCH METHODS

This study uses a type of comparative analysis with a quantitative approach that uses

secondary data analysis. According to (Sugiyono, 2009), quantitative research is research that

focuses on testing research variables based on numbers. This comparative research aims to

compare several data groups or two data groups. The type of comparative test used in this study

is to compare two samples with the same subject but different data.

It is believed that this research will shed light on whether differences exist between two

or more groups of data by comparing multiple groups of observed data. In this instance,

researchers will contrast the firms' financial results before and during mergers and acquisitions.

According to (Prof. Dr. Sugiyono, 2019), the object of research is everything that has a

form and is determined by the researcher to study to obtain information on the research and

then draw conclusions. From the above understanding, it can be concluded that the research

object is a description of the scientific target that will be explained to obtain information and

data with specific purposes and uses. The object of research can also be defined as the thing to

be analyzed or researched. The study's goal is to investigate how mergers and acquisitions,

specifically those involving companies listed on the Indonesia Stock Exchange, affect a

company's financial performance both before and after the transaction.

A data source is anything that could offer information about data. Depending on the

source, data can be divided into two categories: main data and secondary data. Primary data is

information gathered by researchers expressly to address the issues they are addressing. Data

that has been gathered for objectives other than resolving the current issue is referred to as

secondary data. The study makes use of secondary data based on the data source. The study's

data sources were the financial reports found on each company's website and www.idx.co.id.

The nature of this study requires the authors to conduct quantitative data research because

the information they gather will be numerical (Edi & Rusadi, 2017) claim that because

quantitative methods are utilized to evaluate data and stress testing theory through numerical

variable measurement, the type of data used is quantitative. Cross-sectional time is used in this

study since it examines the research object throughout several years. In the meantime, ratios

are the data employed because this study uses this style of assessment to examine financial

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performance both before and after the merger.

Data Collection Technique

To choose or focus problems such that sample selection is more focused on the study's

aims, data gathering or sampling techniques are used. Non-probability sampling approaches

were utilized in the sampling process for this investigation. A sampling strategy known as

nonprobability sampling denies each sample equal opportunity. Purposive sampling is the

nonprobability sampling method that is employed. One kind of sampling that is based on

certain criteria is called purposeful sampling.

RESULTS AND DISCUSSION

Test Description

Descriptive tests were used in this study to examine the mean, standard deviation,

minimum, and maximum values. Additionally, this analysis is done to give a summary of the

corporate data that was utilized for this research. Two descriptive analyses, one for data

collected before the merger and acquisition and the other for data collected post the merger and

acquisition, are conducted and described as follows:

Descriptive Test of Data Before Mergers and Acquisitions

The following are the results of descriptive statistical testing for data before mergers

and acquisitions:

Table 1

Statistical testing results

Descriptive Statistics

Minimum

Maximum

Mean

Std. Deviation

NPM

-4.58

.48

-.3534

1.71436

ROA

-.06

15.09

1.8920

5.33290

DER

.05

88.23

14.9554

29.71333

ROE

-.48

11.02

1.3660

3.90549

TATO

.01

.06

.0256

.02072

.01

1.19

.4616

.40769

EPS

-72.10

24198.91

3202.7341

8491.46908

Valid N (listwise)

It is evident from the given data that the Net Profit Margin variable has a minimum value

of -4.58 or PT BDG. The highest value, however, is 0.48 and is held by PT BBRI Pension. The

standard deviation value of 1.71436 and the average value of -0.3534 suggest that the average

NPM data before the merger could not adequately capture the entirety of the NPM data. With

a mean value of -0.3534, it is evident that the company's average net profit margin was not in

good shape before the merger.

For the ROA variable, the minimum value is -0.06 which is at PT BDG. While the

maximum value = 15.09 owned by BBSI. The average value of 1.8920 and the standard

deviation value of 5.33290 indicate that the average data before the merger on the ROA variable

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is not able to represent all ROA data before the merger. With a mean value of 1.8920, it shows

that the average ROA of companies before the merger was in a positive condition.

For the DER variable, the minimum value is 0.05 which is in BBRI PENSION. While

the maximum value = 88.23 owned by PT BDG. The average value of 14.9554 and the standard

deviation value of 29.71333 indicate that the average data before the merger on the DER

variable is not able to represent all DER data before the merger. With a mean value of 14.9554,

it shows that the average company before the merger had a greater level of debt than equity.

From the data above, it can be seen that for the ROE variable, the minimum value is -

0.48 which is at PT BDG. While the maximum value = 0.11.02 is owned by BBSI. The average

value of 1.3660 and the standard deviation value of 3.90549 indicate that the average data

before the merger on the ROE variable is not able to represent all ROE data before the merger.

With a mean value of 1.3660, it shows that the average Return on Equity of companies before

the merger is at a positive point.

From the data above, it can be seen that for the TATO variable, the minimum value is

0.01 which is in BBSI. While the maximum value = 0.06 owned by BBCA. The average value

of 0.0256 and the standard deviation value of 0.02072 indicate that the average data before the

merger on the TATO variable can represent all TATO data before the merger. A mean value =

0.0256 indicates that the average company before the merger had a positive asset turnover.

From the data above, it can be seen that for the CR variable, the minimum value is 0.01

which is in BBSI. While the maximum value = 1.19 owned by BBRI. The average value of

0.4616 and the standard deviation value of 0.40769 indicate that the average data before the

merger on the CR variable can represent all CR data before the merger. With a mean value of

0.4616, it shows that the average company before the merger had a good level of current asset

liquidity.

From the data above, it can be seen that for the EPS variable, the minimum value is -

72.10 which is in BWSI. While the maximum value = 24198.91 owned by BBSI. The average

value of 3202.7341 and the standard deviation value of 8491.46908 indicate that the average

data before the merger on the EPS variable has not been able to represent all EPS data before

the merger. With a mean value of 3202.7341, it shows that the average company before the

merger had a good level of earnings per share.

Table 2

Descriptive Test of Data After Mergers and Acquisitions

Descriptive Statistics

Minimum

Maximum

Mean

Std. Deviation

NPM

-.60

.88

.4136

.45566

ROA

-.01

19.61

2.4789

6.92215

DER

.06

107.17

17.7658

36.51997

ROE

-.12

9.13

1.1704

3.21510

TATO

.04

.22

.1035

.06532

.03

5.84

1.8734

1.94958

EPS

-19.94

6627.63

975.7840

2315.33552

Valid N(listwise)

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From the data above, it can be seen that for the Net Profit Margin variable, the minimum

value is -0.60 which is at PT BDG. While the maximum value = 0.88 owned by PT BBRI

Pension. The average value of 0.4136 and the standard deviation value of 0.45566 indicate that

the average data after the merger on the NPM variable is not able to represent all NPM data

after the merger. With a mean value of 0.4136, it shows that the average net profit margin of

the company after the merger is in good condition.

For the ROA variable, the minimum value is -0.01 which is in BBRI. While the maximum

value = 19.61 owned by BBSI. The average value of 2.4789 and the standard deviation value

of 6.92215 indicate that the average data after the merger on the ROA variable is not able to

represent all ROA data after the merger. With a mean value of 2.4780, it shows that the average

ROA of the company after the merger is in a positive condition.

For the DER variable, the minimum value is 0.06 which is in BBRI PENSION. While

the maximum value = 107.17 owned by PT BDG. The average value of 17.7658 and the

standard deviation value of 36.51997 indicate that the average data after the merger on the DER

variable is not able to represent all DER data after the merger. With a mean value = 17.7658,

it shows that the average company after the merger has a greater level of debt than equity.

From the data above, it can be seen that for the ROE variable, the minimum value is -

0.12 which is in PT BDG. While the maximum value = 9.13 owned by BBSI. The average

value of 1.1704 and the standard deviation value of 3.21510 indicate that the average data after

the merger on the ROE variable is not able to represent all ROE data after the merger. With a

mean value of 1.1704, it shows that the average Return on Equity of the company before the

merger is at a positive point.

From the data above, it can be seen that for the TATO variable, the minimum value is

0.04 which is in BBSI. While the maximum value = 0.22 owned by PT BDG. The average

value of 0.1035 and the standard deviation value of 0.06532 indicate that the average data after

the merger on the TATO variable can represent all TATO data after the merger. A mean value

= 0.1035 indicates that the average company after the merger has a positive asset turnover.

From the data above, it can be seen that for the CR variable, the minimum value is 0.03

which is in BBSI. While the maximum value is 5.84 owned by BBRI. The average value of

1.8734 and the standard deviation value of 1.94958 indicate that the average data after the

merger on the CR variable is not able to represent all CR data after the merger. With a mean

value of 0.1.8734, it shows that the average company after the merger has a good level of

current asset liquidity.

From the data above, it can be seen that for the EPS variable, the minimum value is -

19.94 which is in BWSI. While the maximum value = 6627.63 owned by BBSI. The average

value of 975.784 and the standard deviation value of 2315.5332 indicate that the average data

after the merger on the EPS variable has not been able to represent all EPS data after the merger.

With a mean value of 3202.7341, it shows that the average company after the merger has a

good level of earnings per share.

Normality Test

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A normality test is a statistical test used to test whether the observed data has a normal

distribution or not. A normal distribution is a distribution that looks like a "mountain" or "bell"

centered in the middle, with most of the data concentrated around the midpoint and a small

portion scattered around the upper and lower ends. Statistically, normality testing will use the

Kolmogorov-Smirnov assessment where if the significance value is> 0.05, then the data under

study is normally distributed. The following are the results of the normality test of this study:

Table 3

Testing results

Tests of Normality

Kolmogorov-Smirnov

Shapiro-Wilk

Statistic

Sig.

Statistic

Sig.

NPM

.401

.000

.504

.000

ROA

.510

.000

.418

.000

DER

.413

.000

.515

.000

ROE

.500

.000

.448

.000

TATO

.208

.061

.827

.006

.356

.000

.678

.000

EPS

.439

.000

.400

.000

a. Lilliefors Significance Correction

From this data, it can be seen that the sig value for all variables, the majority has a sig

value <0.05, which means that the majority of data is not normally distributed, so hypothesis

testing cannot use parametric testing, but must use non-parametric testing where in this study,

the non-parametric test that will be used is the Mann Whitney test.

Mann Whitney Test

The Mann-Whitney test is a non-parametric test used to determine the difference in

medians of two independent samples (Qolby, 2014). This test is used when the data does not

meet the assumption of normality. This test is an alternative test to the independent t-test in

parametric tests. The following are the results of the Mann-Whitney test in this study:

Table 4

Mann Whitney test results

Test Statistics

NPM

ROA

DER

ROE

TATO

EPS

Mann-Whitney U

11.000

25.500

30.000

31.000

4.000

11.000

31.000

Wilcoxon W

47.000

61.500

66.000

67.000

40.000

47.000

67.000

-2.205

-.683

-.210

-.105

-2.943

-2.205

-.105

Asymp. Sig. (2-tailed)

.027

.495

.834

.916

.003

.027

.916

Exact Sig. [2*(1-tailed

Sig.)]

.028

.505

.878

.959

.002

.028

.959

a. Grouping Variable: Merger

b. Not corrected for ties.

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H1: There is a difference in average Net Profit Margin between before and after the

Merger and Acquisition.

From the Mann-Whitney test results above, it can be seen that the NPM value has an

asymp. Sig (2-tailed) = 0.027 (<0.05) which means the hypothesis is accepted. This means that

there is a difference in the average Net Profit Margin between before and after the Merger and

Acquisition, so the hypothesis stating that there is a difference in the average Net Profit Margin

between before and after the Merger and Acquisition is accepted or H1 is accepted.

H2: There is a difference in average ROA between before and after the Merger and

Acquisition.

From the Mann-Whitney test results above, it can be seen that the ROA value has an

asymp. Sig (2-tailed) = 0.495 (> 0.05) which means the hypothesis is rejected. This means that

there is no difference in the average Net Profit Margin between before and after the Merger

and Acquisition, so the hypothesis stating that there is a difference in the average Net Profit

Margin between before and after the Merger and Acquisition is rejected or H2 is rejected.

H3: There is a difference in the average DER between before and after the Mergers and

Acquisitions

From the Mann-Whitney test results above, it can be seen that the DER value has an

asymp. Sig (2-tailed) = 0.834 (> 0.05) which means the hypothesis is rejected. This means that

there is no difference in the average Debt Equity Ratio between before and after the Merger

and Acquisition, so the hypothesis stating that there is a difference in the average Debt Equity

Ratio between before and after the Merger and Acquisition is rejected or H3 is rejected.

H4: There is a difference in average ROE between before and after Mergers and

Acquisitions.

From the Mann-Whitney test results above, it can be seen that the DER value has an

asymp. Sig (2-tailed) = 0.916 (> 0.05) which means the hypothesis is rejected. This means that

there is no difference in average Return on Equity between before and after the Merger and

Acquisition, so the hypothesis stating that there is a difference in average Return on Equity

between before and after the Merger and Acquisition is rejected or H4 is rejected.

H5: There is a difference in average TATO between before and after the Merger and

Acquisition.

It is evident from the preceding Mann-Whitney test results that the TATO value has an

asymptotic behavior. As indicated by Sig (2-tailed) = 0.003 (<0.05), the hypothesis is accepted.

This indicates that there was a difference in the average total asset turnover between the pre-

merger and the post-acquisition periods, supporting the acceptance of hypothesis H5, which

states that there was a difference in the average total asset turnover between the pre-merger and

the post-acquisition periods.

H6: There is a difference in average CR between before and after Mergers and

Acquisitions.

It is evident from the preceding Mann-Whitney test results that the CR value exhibits an

asymptotic behavior. As indicated by Sig (2-tailed) = 0.028 (<0.05), the hypothesis is accepted.

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This indicates that the average current ratio differed before and after the merger and acquisition,

supporting the acceptance of hypothesis H6, which states that there was a difference in average

current ratio between before and after the merger and acquisition.

H7: There is a difference in average EPS between before and after the Mergers and

Acquisitions.

From the Mann-Whitney test results above, it can be seen that the Earning Per Share

value has an asymp. Sig (2-tailed) = 0.916 (<0.05) which means the hypothesis is rejected. This

means that there is no difference in the average EPS between before and after the Merger and

Acquisition, so the hypothesis stating that there is a difference in the average Earnings per

Share between before and after the Merger and Acquisition is rejected or H7 is rejected.

Discussion

There is no difference in NPM

Net Profit Margin (NPM) is net profit after deducting sales tax which has the function of

knowing the amount of net profit (margin) with the total net income obtained by the entity or

company. The purpose of the company taking steps to merge (mergers and acquisitions) is to

maximize the net income earned by the company.

This goal was not achieved because the company did not do optimally to increase sales

so the resulting profit did not increase. This condition follows agency theory which states that

the making of a policy in an entity or company must have other motives that are also carried

out by managers in the policy-making process, which results directly or indirectly in an

assessment of the performance and quality of the policy to be decided. this also has an impact

on changes in the goals and objectives of implementing the business merger process (mergers

and acquisitions).

The problem of interest that arises within the internal entity or company is that the

implementation of the merger and acquisition itself is not optimal. The above statement is also

to the results of research conducted by (Suprihatin, 2022) which explains that there is no

significant difference in the net profit margin (NPM) indicator before and after the merger and

acquisition process between entities, this happens because the entity (company) is unable to

increase the level of sales so that the impact on profits is not optimal so that the impact of the

increase in NPM value after the merger and acquisition process is not felt.

There is no difference in ROA

ROA provides an overview of how efficient the company is in generating profits from

the assets it owns. The higher the ROA, the more efficient the company is in using its assets.

A high ROA indicates that the company can generate good profits with a relatively small

amount of assets, while a low ROA indicates that the company may need to improve its

efficiency in using assets to generate adequate profits.

The results of the analysis show that mergers and acquisitions have no difference in

company profitability, especially in ROA. These results are consistent with the results of

research by Baburam Adhikari, Marie Kavanagh, and Bonnie Hampson (2023) where ROA is

not different after mergers and acquisitions, this shows that the economic desire to improve

profitability after mergers and acquisitions is not realized. This may be due to non-economic

reasons such as saving other companies from the threat of bankruptcy, which may be more

personal reasons.

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There is no difference in DER

The DER solvency ratio for companies shows how much funds the company provides

compared to the funds provided by creditors through debt. The average value of the DER

analysis results in this study does not show an increasing or decreasing trend after mergers and

acquisitions, so it can be concluded that mergers and acquisitions do not affect how the

company's debt position with equity and assets owned. This result is consistent with the results

of research (Putri & Yasa, 2020) where DER has no difference after mergers and acquisitions.

There is no difference in ROE

Based on the results of the analysis, it is known that the movement in ROE before and

after the merger is relatively the same if converted into a percentage. So the calculations in this

study can be concluded to have no difference in performance between before and after the

merger as measured by return on equity. These results are supported by research (Sari &

Musdholifah, 2020).

There is a difference in TATO

Based on the results of this research analysis, support the existing hypothesis that there

is a difference in total asset turnover between before and after mergers and acquisitions. The

existence of significant differences in financial performance, as measured using total asset

turnover, leads to a significant decrease in the value of the total asset turnover ratio. This is

because the increased asset turnover is not able to generate large profits from the sales process

that exceeds the total debt.

Theoretically, mergers and acquisitions result in the combination of the company's assets,

more effective and efficient management joining the team, and improved asset management

for the business, as demonstrated by a significant change in the total assets turnover variable.

Nonetheless, it can be said that the merger and acquisition process was unsuccessful in

producing the anticipated synergy because the data indicates that the average business saw a

decline in the value of total assets turnover following the merger and acquisition. The findings

of this study are consistent with those of another study (Waskito & Hidayat, 2020), which found

variations in financial success based on total assets turnover before

There is a difference in CR

There is an inequality in the results of the current ratio (CR) between the conditions

before the merger and after the merger and acquisition process, which is because after carrying

out mergers and acquisitions an entity has the potential to fulfill all short-term obligations

which results in the trust of outside parties in supporting the smooth operation of the company's

business. This is supported by agency theory where company management strives to continue

to increase trust in the wider community so that the company's image and good name are high

which results in increased shareholder welfare and entity continuity.

This is by research (Zahra & Syaiful, 2021), which explains the difference in CR before

and after mergers and acquisitions, which can be interpreted as the entity's level of efficiency

in its operations by using its current assets to manage existing current liabilities increasing after

mergers and acquisitions. Companies that carry out the merger and acquisition process result

in an increase in their liquidity level.

There is no difference in EPS

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Earning Per Share (EPS) is used to show the profit earned by investors generated from

each share. High profits and firm value are the goals of mergers and acquisitions undertaken

by companies. Not achieving these goals can be because the company has not been able to

increase the company's profit growth enough. Agency theory supports the above statement

which explains that in the process of making a company or entity policy, there must be other

motives carried out by managers to make a policy so that it directly or indirectly affects the

merger and acquisition policy so that the policy changes in its implementation objectives.

Concurrent testing on all financial ratios used in this study indicates how mergers and

acquisitions affect the financial performance as reported in the financial statements. This study

aims to determine the effect of mergers and acquisitions on the financial performance of the

company before and after mergers and acquisitions, concerning the financial ratios of the

company, which are represented by net profit margin (NPM), return on assets (ROA), debt to

equity ratio (DER), return on equity (ROE), total asset turnover (TATO), current ratio (CR),

and earning per share (EPS). The test results show the influence and absence of significant

effect of the financial ratios components.

CONCLUSION

The impact of mergers and acquisitions on financial performance as shown in the

financial statements is demonstrated by tests done concurrently on all financial ratios utilized

in this research. Concerning the company's financial ratios, which are represented by net profit

margin (NPM), return on assets (ROA), debt to equity ratio (DER), return on equity (ROE),

total asset turnover (TATO), current ratio (CR), and earning per share (EPS), this study seeks

to ascertain the impact of mergers and acquisitions on the financial performance of the

company before and after mergers and acquisitions. The test findings demonstrate the financial

ratios factors' influence and lack of substantial effect.

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