ACQUISTION OF ENGRO FOODS BY FRIESLAND CAMPINA (2016

Abstract

A company’s ability to make a profit determines whether it can obtain bank financing, draw in investors to finance its operations, and expand. The factors that affect profitability are discussed in this study. Although, Return on Assets and Return Equity are commonly used to measure profitability of any firm but this study, also incorporated Return on sales to measure the performance. Return on sales is also one ofthe key factors to asses company’s performance after the merger that how much a company gets return from sales cumulatively. The purpose ofthis study is to analyze Engro Foods and Friesland Campina financial performance after the acquisition of Engro foods by Friesland Campina. Moreover, using ratios and graphical representations, this study investigated the determinants of Sales for both the companies after the acquisition from 2017-to current year. The results show that mostly during the studied period, Engro’s ratios are inversely moving as compared to the industry specially in down times. Also, ratios highlight that current ratio and firm size are significant drivers of food sector listed firms in Pakistan. Thus, managers could further improve their firms’ profitability by focusing on these two financial ratios i.e., return on assets and return on equity. Profitability and liquidity ratios analysis showed a declining trend causing negative impact on the performance ofthe company.