Effects of Mergers and Acquisitions on the Performance of Banks in Nigeria (Case study of United Bank of Africa)
Africa is the one of the most populous continent in the world with 53 Countries and also the least developed owing to factors such as poverty, high level of illiteracy, lack of infrastructure, economic instability, high level of unemployment, corruption, under developed financial markets etc.
However, it is interesting to note that in the wake of globalisation and integration among world economies and with the Millennium Development Goal to eradicate poverty in the world by 2015, leaders and stakeholders of the different countries in Africa have felt the urgent need to address these issues affecting the growth of the African economies and to give priority to the areas that need the utmost attention. As a result we have witnessed a number of reforms and restructuring going on in a lot of African countries with more countries towing this path as well.
The Financial sector is not left out in these reformation process and some of the reforms we have seen so far in most of the economies include: consolidation of the banking industry, privatisation of government owned companies, reviewing capital market policies and regulations, improving capital market infrastructures etc.
Mergers and acquisitions have emerged as a strategic tool for achieving corporate expansion and growth. Nowadays, companies realize that internal consolidation is not enough to keep them alive in their domestic markets, not to mention the ‘global market', as competition is now ever-growing as an international concept. Gone are the days when competing firms struggled for market share in their domestic markets, now with trade restrictions abolished, there is an internationally diversified market to conquer and M&A serves as a significant corporate expansion tool for protecting existing market share and effectively competing for foreign market share, as it provides corporate expansion and growth on a scale that cannot be achieved by internal growth.
Following the announcement by the former Central bank Governor Professor Charles Soludo on July 6, 2004 on the Nigerian banking sector reform which compelled banks to raise their capital base to 25billion Naira before the 31st December, 2009, necessitated several banks to merge..
1. To investigate the effects of mergers and acquisitions on the performance of the acquiring company.
METHODOLOGY AND DATA ANALYSIS
Measure the effect of the post merger performance quantitatively, and it will be positivist.
Overall three year pre merger and post merger performance of the bank will be analyzed.
For pre merger period, ratios for both the target and the acquirer will be examined to get an indication as to the relative efficiency of the acquirer and the target and the hypothetical combined firm will be created by calculating simple average ratios from the data for the acquirer and target.
The post merger data will be compared with the pre merger data to determine what changes occurred in efficiency, performance and some balance sheet ratios from the pre to post merger period.
Financial ratios and indicators before and after the merger will be analyzed, merger and acquisition effect on shareholders returns will also be evaluated.
O). “Legal Framework for Mergers and Acquisitions.” A Paper Presented at The Retreat on Mergers and Acquisitions in the Nigerian Banking Industry organised by Central Bank of Nigeria and West African Institute for Financial and Economic Management (WAIFEM). Abuja.
IS FAST TRACK ETHICS APPROVAL REQUIRED?
(to be completed by the supervisor)