Business Consolidation and Its Impact on Financial Performance: Evidence from the Ghanaian Banking Industry (Published)
The study provides empirical examination on the impact of business consolidation or mergers and acquisitions (M&A) on the financial performance of banks in Ghana. Both descriptive and correlational research designs were employed for the study. Two banks: Ecobank Ghana Ltd and Access Bank Ghana Ltd were chosen for the study. The annual reports of the banks from pre-merger period (2009 to 2011) and post-merger period (2012 to 2015) were used for the analysis. Two analysis techniques: ratio and regression analysis were used to examine the impact of mergers and acquisitions (M&A) on the profitability of these firms. Net profit margin (NPM) and return on capital employed (ROCE) were used as proxies for financial performance and Ordinary Least Square (OLS) regression model was used to estimate the level of impact of M&A on the performance of the banks. The study revealed that mergers and acquisitions (M&A) resulted to more than 80% growth in income and the net assets immediately after acquisition. The growth in profitability continued in subsequent years, however at a decreasing rates. With regards to net profit margin and return on capital employed (ROCE), the banks observed a marginal decline after three years of acquisition. The study further found empirical evidence to support the view that mergers and acquisitions (M&A) has a positive and significant impact on both NPM and ROCE. Accordingly, it is concluded that mergers and acquisitions (M&A) has a positive and significant impact on financial performance of banks.
Keywords: Acquisition, Agency Theory, Banks’, Consolidation, Mergers, Net Profit Margin, Return on Capital Employed (ROCE), synergy
Impact of Mergers and Acquisitions on the Performance of Deposit Money Banks in Nigeria (Published)
Business combination through mergers and acquisitions has become a global phenomenon to achieve economies of scale and higher productivity. The need for financial institutions to merge becomes even more imperative in the face of the onslaught of greater competition arising from globalization. This study evaluated the impact of mergers and acquisitions which started in 2005 on the performance of deposit money banks in Nigeria using a sample of ten (10) banks. This research made use of secondary data, obtained from the bank’s annual reports and statements of accounts covering a period of 2001-2010, Using nine (9) variables; Return on Assets, Return on Equity, Net Profit Margin, Asset Utilisation, Equity Multiplier, Earnings per share, Debt Equity ratio, Debt Asset ratio & Leverage ratio, the study evaluated the performance of the banks before and after mergers and acquisitions using pair sample t-test. The results showed that there is significant difference in the performances of Deposit Money Banks in the pre and post-merger periods using the ROA, ROE and LR as yards tick but shows no significant impacts in the performances of Deposit Money Bank using other variables as yard stick. The study hereby recommends that the CBN should set and enforce corporate governance standards for commercial banks and also enforce risk based supervision in banks.
Keywords: Acquisition, Mergers, Performance Ratios
EFFECT OF MERGERS AND ACQUISITION ON BANK HEALTH: AN EMPIRICAL INVESTIGATION (Published)
Mergers and Acquisition has been described as a viable too for capital increase in businesses. The Nigerian business environment is not distant from this opinion as several mergers have been successfully conducted to date. Specifically, the banking scene had witnessed many prior to the last recapitalization exercise. This paper investigates the relationship between increasing share capital of banks through merger and acquisition and liquidity and profitability. The study conducts empirical investigation into the merger of Intercontinental Merchant Bank Limited and Equity Bank Limited. The analysis is divided into pre and post merger periods to specifically capture the impacts created by the action. The study observes that liquidity is not significant in the relationship while profitability is very good in explaining the relationship. The paper concludes that profitability of banks is enhanced with capital increase, though not necessarily the liquidity level.
Keywords: Acquisition, Bank Health, Mergers