THE IMPACT OF MERGER AND ACQUISITION ON SHAREHOLDERS WEALTH IN NIGERIA

PROJECT INFORMATION

Format: Ms Word /  Chapters: 1-5 /  Pages: 103 /  Attributes: Data Analysis

ABSTRACT

The study access the impact of merger and acquisition on shareholders wealth in Nigeria. The need to carryout the research is permeated by under capitalization, decline in profitability and poor investment potentials. The research objectives is to merger the impact of merger and acquisitions on profitability of commercial banks in Nigeria, to access  whether consumer M/A helps to improve consumer deposit DMBs and to measure the impact of M/A on shareholders wealth. The research adopted an expost factor research design which borders on annual reports and account of UBA BANK, ZENITH BANK, ECO BANK, GTB BANK and FIRST BANK PLC from 1999-2012. Research segmented the 14 years into two period which are pre M/A[1999-2005] and post M/A[2006-2012]. Frequency distribution table and descriptive statistics was use for data presentations and analysis while paired sample t-test was used to test the three research hypothesis. It was discovered that M/A does not impact on profitability of commercial bank and that customer confidence is restored through M/A. It was thereafter recommended that management of the selected banks should work in order to control the cost of their operations which affects the dividend paid to the owners

CHAPTER ONE 1.0 INTRODUCTION 1.1 BACKGROUND/OVERVIEW OF THE STUDY In recent times business synergy have been identified as a key factors of corporate profitability, survival and competences. To this end, Mantravadi and Reddy[2008] noted that corporate institutions worldwide have been aggressively trying to build new competencies and capabilities to remain competitive and to grow profitability. Business organization are established to achieve certain corporate objectives including corporate growth and increase in profitability. Growth is a major yardstick by which the success of a business organization operate in dynamic macroeconomic environment such growth is threatened in periods of volatile economic instabilities[Weston and Copeland, 1989]. The resultant effect of recent world economic meltdown is a financial crisis among corporate organization. One strategy open to corporate during the period of economic crisis is merger and acquisition. Companies have been combining in various configuration since the early days of business, little wander, Ismail et al[2011] see M/A as the best way to go ahead and expand corporate boundaries. Olaguna and obademi[2012] noted that different organization adopt different strategies such as internal reorganization, external reconstruction and so on, they consider appropriate to overcome these pressure and meet stakeholder expectations. When the measure fails to produce the desired result, the affected organization may go into business combination either in the form of merger and acquisition as a way out of unfavourable situation. To this end, Naba and chen[2014] see M/A as  one of the features of globalization and may be driving forces of non competitive banks. Oloyede and sulaiman[2012][ posted that merger and acquisition is perceived by many firms in Nigeria to be a long term business strategy to improve avenue to achieve synergy, large economic of scale expand business operation and reduce cost. However, the success of M/A largely depends on the extent of management efficiency and discipline. Merger and acquisition is simply another way of saying survival of the fittest that is to say a bigger, more efficiency better capitalization, more skilled industry. It is primarly driven by the business motivates and market forces and regulatory interventions[olaguague/obademi2012].                  In view of the foregoing, it is pertiment that the study be conducted to assess the relevance of M/A on not only cooperate performances to cases of undercapitalization, low profitability and increase in corporate failure which itself is the rational behind the adoption of merger and acquisition business strategy. 1.2 STATEMENT OF THE PROBLEM Imeokpaia[2014] observed that Nigeria corporate institutions, particularly the banking system today is fragile and marginal. The system faces enormous challenges which if not address urgently, could snowball into a crisis in the near future to, onalapo, and Ajala[2013] described the recent outbreak of bank mergers and ac questions in Nigeria is attracting much attention, partly because of heightened is what motivates firms to merger and low merger and acquisition affects performances or efficiency. However this paper investigates effects of merger and acquisition on the performance of bank and explores the sources of any merger induced changes in performance. It is motivated by the relatives dearth of empirical evidence on the impact of merger and acquisition involving Nigeria banks. The need to embark on research work is a direct reflection of challenges which trail corporate entities in Nigeria. These includes; 1] Under capitalization 2] Decline in profitability 3] Poor investment potentials, viz-a-via decease in shareholders wealth. 4] Loss of public confidence amongst others.                 In line with above submission, Muhammed[2005] most Nigeria banks were becoming personalized in ownership and management structure which made the banks incapable to finance large scale and long terms project due to limited liquidity at their disposal. The sectors was characterized with import financing rather than encouraging domestic growth in the economy there was loss of public confidence due to fear of liquidation, customs disatification on banking services as well as some obnoxious, unprofessional and other sharp of industry . All these caused great distortion in the financial system resulting to financing inefficiency which made investors not to get constant in high dividend as a result of inefficiency in terms of gross earnings, profit after tax and net assets. When the period of economic boom in Nigeria was over, economic downturn and business failures emerged as a result of adverse macro economic conditions. Consequently, business expansion became hindered and operating earnings shrank. Consequent upon the challenges many firms resorted to adoption of various survival strategies such as divestiture of seemingly non profitable lines of business, internal and external capital reorganization, recapitalization, merger and acquisition and so on. Olabode and makinde[2003] assert that business combination which is commonly used as one of the last survival options has an edge over the other in terms of optimization resources[udeh and igwe2013].

1.3 OBLECTIVES OF THE STUDY