The Effect of Mergers and Acquisition on the Growth and Financial Performance of Quoted Companies in Nigeria

Reference code: C086

ABSTRACT

This research project investigated the effect of mergers and acquisition on the growth and the financial performance of quoted companies. In order to achieve the objectives of the study, data was collected from both primary and secondary sources. The primary data sources included the use of questionnaires and oral interviews while secondary data was collected from the annual report and accounts of the organizations concerned. The collected data was analyzed Regression analysis and Pearson correlation. In the course of the research, the following findings were made:  mergers and acquisition was statistically significant in explaining enhanced profitability of quoted companies, we also found that mergers and acquisition was statistically significant in explaining the increased firm value and market share of quoted companies. On the basis of our findings, we concluded that: mergers and acquisition is an important component in business growth and expansion. Given the conclusions, it was recommended that: Companies going into merger deals should try to keep mergers cost low. This is because high costs of mergers can greatly affected post - merger performance which if care is not properly taken, it can be discouraging factor. We also recommend that: The government of Nigeria, at all tiers must put in place machineries to support companies consolidation in Nigeria.   

BACKGROUND TO THE STUDY

......... The rate of corporate failure in Nigeria has been very high and could even get worse if nothing drastic and urgent is done about it. Ewubare (2003); Simulating corporate Growth and Survival through mergers and acquisitions, opined that the reason some of these companies could not survive or let alone not grow could be attributed to a plethora of reasons one of which is un-favourable operating environment. In his words, lithe business mode of Nigeria came under attack when the Babangida administration uncoupled the naira from the prior fixed exchange rate regime and introduced a measure of volatility and uncertainty in the Nigeria Economy". 

This he added" Let the crashing devaluation" of the Naira on a clative basis" Furthermore, Ewubare stated that why companies in Nigeria have a low corporate growth rate is due to the absence of vision & imagination i.e. his view most companies in Nigeria lack the innovation ideas and creative spirit to grow in the midst of an unfavourable environment. British petroleum and Amaco oil during oil companies also dropped significantly, had the foresight to merge for survived. Their mergers created the largest company in the UK in terms of share price return in investment and market share. (New York times, 2000) This single merger success story in the oil industry created a foot print for other oil companies, world over to follow almost immediately. 

Ironically, in spite of this and successful consolidation stories it is discouraging to know that merger failure rate (in terms of increasing share holders value) was put at a 83% and the general failure rate put some between 40 - 80% in a 1999 survey (Porter, and Warsh 2002) suggests that up to 65% of failed mergers and acquisition are due to "people issue" i.e. intercultural difference causing communication breakdowns that results in poor productivity. 

In addition, Leis (2002) opined that sever factors contribute to this dismal statistic. These failures are not usua.lly caused by outside factors like the market competition, high purchase premium or excessive beverage, rather, the failure has three primary causes disparate management styles organization, culture difference and clashes in decision - making processes. According to him, the biggest challenge in handling the human side of the merger equation. People issues ultimately drive performance can censure a majority of operating cost ..........

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TABLE OF CONTENTS

CHAPTER ONE
1.0 Introduction
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Scope of the Study
1.6 Significance of the study
1.7 Limitations of the study
1.8 Historical background of case study

CHAPTER TWO
Literature Review
2.1 Introduction
2.2 Meaning of mergers and acquisition
2.3 Form of mergers
2.4 Reason for merger  &  acquisition
2.5 Legal and regulatory framework for mergers & acquisition
2.6 Practice and procedures of mergers and acquisition
2.7 Merger & acquisition life cycle
2.8 Why mergers and acquisition fail
2.9 Valuation of firms for mergers and Acquisition
2.10 Financing of mergers and acquisition

CHAPTER THREE
Research Methodology
3.0 Introduction
3.1 The merger overview
3.2 Area of study
3.3 Population of the study
3.4 Research design
3.5 Sample and sampling techniques
3.6 Data collection instruments   
3.7 Validity and reliability of the instrument
3.8 Administration of research instrument
3.9 techniques of data analysis

CHAPTER FOUR
Data Presentation and Analysis
4.1 Introduction
4.2 Data Presentation
4.3 Market Share Analysis
4.3.1 Market Share Ranking of Companies
4.4 Findings

CHAPTER FIVE
Summary, Conclusions and Recommendations
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendations
5.5 Recommendation for further studies
Bibliography


Reference code: C086

Reference code: C086

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