Reference code: c002
ABSTRACT
The research work attempts to assess the financial consequences of merger and acquisition of commercial banks in Nigeria. The research analysis used published audited accounts of ten (10) out of twenty-four (24) banks that emerged from the consolidation exercise and data from the Central Bank of Nigeria (CBN). The research denotes year 2003 to 2005 as the pre-consolidation and 2006 to 2008 as post-consolidation periods for our analysis. Data used for the work were collected from both primary and secondary sources. The relevant data collected were analyzed and tested using simple percentages, tables, bar-charts. Subsequently, the three hypotheses formulated in this research work were tested using regression analysis and correlation co-efficient (r^2). The result of the analysis revealed that there is significant relationship between pre and post merger and acquisition capital base of commercial banks and level of profitability, there is significant difference between pre and post-merger and acquisition earnings per shares, merger and acquisition have also increased the capitalization of commercial banks, post-consolidation also witness changes in company’s share ownership, increase in the cost of services and changes in bank lending rates. Based on these findings, it can be concluded that the merger and acquisition exercise has improved the overall performances of banks significantly and also has contributed immensely to the growth of the real sector for sustainable development. Finally, the study recommends that in order to safeguard against possible abuse of the concept of mergers and acquisitions; the Central Bank of Nigeria (CBN) and other regulatory authorities should check all manner of abuse that may arise which may not be in the interest of shareholders and the general public; to generate more profit, the bank need a good regulatory environment that will enable them to expand their scope of businesses but strictly within the financial service industry; the government should provide necessary infrastructure in order to reduce the cost of doing business scientifically to allow banks to make profit; the Central Bank of Nigeria (CBN) being banks’ supervisory agent should intensify its efforts towards effective monitoring and ensure that the gain from the merger and acquisition is sustained.
INTRODUCTION
The decade 1995 and 2005 were particularly traumatic for the Nigerian banking industry; with the magnitude of distress reaching an unprecedented level, thereby making it an issue of concern not only to the regulatory institutions but also to the policy analysts and the general public. Thus the need for a drastic overhaul of the industry was quite apparent.
In furtherance of this general overhauling of the financial system, the Central Bank of Nigeria introduced major reform programmes that changed the banking landscape of the country in 2004. The main thrust of the 13-point reform agenda was the prescription of minimum shareholders' funds of 25 billion for Nigerian Deposit money bank not later than December 31, 2005. In view of the low financial base of these banks, they were encouraged to merge. Out of the 89 banks that were in operation before the reform, more than 80 percent (75) of them merged into 25 banks while 14 that could not finalized their consolidation before the expiration of deadline were liquidated.
For instance between 1993 and 1996, about 1500 mergers were recorded in the USA (Pilloff 1996), similar experience was observed in the Europe and Asian continents (Schenk 2000).
To a large extent, this consolidation is based on a belief that gains accrue through expenses reduction, increased market power, reduced earnings volatility, and scale and scope economies. However, the characteristics of the kind of reforms induced mergers and acquisition of the banking industry creates doubts about its potentials of realizing efficiency gains. A deeper look at the 25 banks that emerged after the consolidation shows that most banks that were regarded as distressed and unsound regrouped under new names or fused into existing perceived strong banks not necessarily to correct the inefficiency in their operating system but just to meet the mandatory requirement to remain afloat and to continue business as usual.
Mergers and acquisition or any other form of consolidation may influence bank interest rates, competition and transmission mechanism of monetary policy in so far as the increase in size and the opportunity for reorganization involved may either provide gains in efficiency that bear on marginal costs or give rise to increase in market power, or both together. Gains in efficiency would be obtained in moving on to greater scale of activity (if there are economies of scale).
Since the essence of any reforms is to bring greater efficiency not only in the operation but also their contributory role to the overall economy, then it is important to also raise the issues whether the recent mergers and acquisitions have really impacted positively on both credit allocation and saving mobilization through reduced cost of borrowing and increased returns on savings.
Whether or not bank mergers actually achieve these expected performance gains is still remain critically an empirical question. If consolidation does, in fact, lead to gains, then shareholder wealth can be increased. On the other hand, if consolidating entities do not lead to the promised positive effects, then mergers may lead to a less profitable and valuable banking industry.
Mergers and Acquisitions are commonplace in developing countries of the world but are just becoming prominent in Nigeria especially in the banking industry.
Umoren (2007) says that merger and acquisition is simply another way of saying survival of the fittest that is to say a bigger, more efficient, better-capitalized, more skilled industry. Is part of the natural evolution of industries? It is primary driven by Business motives and/or market forces and Regulatory interventions. The issues therefore, which this study intend to address are whether merger and acquisition will bring about efficient reliable and sound capital base for the bank that fully embraced mergers and to what extend can bank merge boost the confidence of the customers , the investors , the shareholders and ability to finance the real time sector. ...............
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TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Research question
1.5 Research hypotheses
1.6 Significance of the study
1.7 Scope and limitation of the study
1.8 Definition of terms
1.9 Organization of the study
Reference
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction
2.2 History of Banks Recapitalization in Nigeria
2.3 Banks Consolidation through Merger and Acquisition
2.4 Approval under Merger and Acquisition
2.5 Procedures for Obtaining Approval for Mergers and Acquisitions
2.6 The Role of SEC, CBN, NSE, and CAC as Regulatory Authorities in Mergers and Acquisitions
2.6.1 Securities and Exchange Commission (SEC)
2.6.2 Central Bank of Nigeria (CBN) Approval
2.6.3 Nigeria Stock Exchange (NSE) Approval
2.6.4 Corporate Affairs Commission (CAC) Approval
2.7 A Review of Bank Concentration Theories
Pro-Concentration Theories
2.9 Evolution of the Nigerian Banking Industry
2.10 Regulation of Nigerian Banking Industry
2.11 Concept of Merger and Acquisition
2.12 Types of Mergers and Acquisitions
2.13 Stages of Merger and Acquisition
2.14 Factors Influencing M&A Outcomes: Eight Schools of Thought
2.15 Motives behind Merger and Acquisition
2.16 Challenges of Bank Consolidation
2.17 Prospect of Banks after Consolidation
Reference
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction
3.2 Research Population
3.3 Sample Size Determination
3.4 Research Design
3.5 Sources of Data
3.5.1 Primary Sources of Data
3.5.2 Secondary Sources of Data
3.6 Data Collection Method
3.7 Design and Administration of Questionnaires
3.8 Operational Measures of the Variables
3.9 Data Analysis Techniques
3.9.1 The Percentage Analysis
3.9.2 Regression Analysis
3.9.3 Karl Pearson Product- Moment Correlation Co-Efficient
3.9.4 The T-Test
3.10 Validity and Reliability of the Research Instrument
3.11 The Pilot Study
3.12 Method of Organizing Data
Reference
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction
4.2 Analysis and Interpretation of Data
4.2.1 Responses to Question in Section A
4.2.2 Responses from Section B
4.3 Test of Hypothesis
4.3.2 Test of Hypothesis 2
4.3.3 Test of Hypothesis 3
4.3.4 Summary of Test of Hypothesis
4.4 Discussion of Findings
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.0 Introduction
5.1 Summary of Findings
5.2 Conclusions
5.3 Recommendations
Bibliography
Appendix 1
Questionnaire
Appendix 2
Reference code: c002
Reference code: c002
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103 Pages
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