Post Merger

In today's health care industry, the establishment of alliances, partnerships, and mergers has changed the corporate structure for most hospitals, clinics, managed care organizations and insurance companies. Mergers arises out of mutual needs and the willingness between organizations to share risks and cost, knowledge and capabilities, and involve interdependence to reach a common objective. While mergers and other forms of collective action have long been common among health care organizations that share the same values, the main motive for mergers is not relatively new. Some have argue that there are too many nonprofit organizations that are organizationally weak, ineffective, and with little capacity to provide professional services. The purpose of this paper is to provide a thorough analysis of post-merger performance of acquiring organizations and will reflect the economic and regulatory implications that lead to the causes of merger among health care organizations. The factors that determine the key to this financial process will also be discussed in this paper.

Key Words: merger and acquisition, consolidation, cost, skepticism, economic of scale, hospitals, health care industry, financial planning.

Merger are one of the most researched areas in finance, yet some basic issues still remain unresolved. While most empirical research on mergers focuses on daily stock returns surrounding announcement dates, a few studies also look, at the long-term performance of acquiring firms after mergers. Despite extensive research, the motivation behind mergers has been largely illusive. Study finds that mergers create shareholder value over short-term windows, despite the fact that the gain predominately accrues to shareholders of target firms. There has also been ample evidence that acquires have significant negative returns over long-term windows that overwhelm their positive short-term returns,