practice of mergers and acquisitions has attained considerable significance in
the contemporary corporate scenario which is broadly used for reorganizing the
business entities. Merger and Acquisition
has been recognized as the most important factor in corporate finance for
companies as well as the economy. The M&A have not been the booming
scenario in the Kenya as compared to other African countries. Earlier research
has shown no advancement or improvement in the country performance and
profitability. And it has a direct impact on the crucial financial component in
the country i.e. banks.
research was done to analyze whether the merger had any effect on the banks’
performance .The research aims to determine the effect of the mergers and
acquisitions on the shareholders’ value and to examine the implication of
mergers and acquisitions on profitability. The variable used in the study was
dependent, independent and moderating variable.
The dependent variable was ROE, independent were EPS and ROI and moderating
variable was set rules and regulations.
study used descriptive survey design. The population of this study was comprised of all the
14 banks that had merged or acquired in Kenya since year 2000 to the time of
study. Data was collected by use of questionnaires with both open and closed
ended questions. The collected data was analyzed using SPSS where the
co-efficient of correlation obtained was used to determine the nature of the
relationship between the independent and dependent variables. The analyzed data was presented by use of percentages,
frequency tables, graphs and pie charts.
findings of this study revealed that majority of the banks i.e. 42% merged or
acquired other banks between 4 and 7 years ago. The recent mergers i.e. those
that are below 4 years since they merged accounted for only 20% of all the
mergers and acquisitions in the banking sector. The banks that merged or acquired for the purpose of
enlarging their market share and raise their profitability accounted for about
76% of all the mergers and acquisitions in the banking industry in Kenya. The study further established that the
mergers and acquisitions among the banks in Kenya raised the shareholder’s
value through raising the demand, price and earnings per share. However, the
mergers and acquisitions did not have a significant effect on the amount of
dividends declared to the shareholders and the frequency of issuing dividends.
main reason why organizations and mostly within the Kenyan banking industry
merge and/or acquire others, is to enlarge their market share and increase
their profitability. This is achieved through two or more banks coming
together, combining their resources together with one schedule to raise their
profitability. Such resources as skills, management systems, equipment,
processes and procedures are strengthened through the mergers and acquisitions
with an aim of raising their productivity.