Mergers and Acquisition Strategy and Performance of Selected Deposit Money Banks in Nigeria

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue V, May 2020 | ISSN 2321–2705

Mergers and Acquisition Strategy and Performance of Selected Deposit Money Banks in Nigeria

Etim Osim Etim¹, Nsima Johnson Umoffong^2
1BSc, MBA, MSc, PhD, CFAN, FCA, Department of Accounting, Faculty of Business Administration, University Of Uyo, Uyo, Akwa Ibom State, Nigeria
²BSc, MBA, PhD, Department of Accounting, Faculty of Business Administration, University Of Uyo, Uyo, Akwa Ibom State, Nigeria

Abstract: – The study examined the effect of merger and acquisition strategy on performance of selected Deposit Money Banks (DMBs) in Nigeria. Purposive sampling technique was adopted as sampling procedure for selecting three Deposit Money Banks (UBA, Access Bank and FCMB) that successfully implemented Merger and Acquisition Strategy in the Financial Services Sector of the Nigeria economy. Secondary Data Spanning a period of 20 years (1996-2015) were collected from the published annual financials of the banks. Descriptive statistics involving the test of differences in two means (pre and post mergers periods) and multivariate Analysis of variance (MANOVA) were employed in analysis of the data. Results shows that merger and acquisition strategy impacted positively on performance of the selected Deposit money Banks in Nigeria with improved performance in gross earnings (pre total value 6.05, post total value , 405.29); profit after tax (PAT) values (Pre-total values 2.1 post total values 65.91). Earnings Per Share (E.P.S) values (pre-total values 23.03, Post-total values, 141.12). More so the calculated ANOVA values (F-statistic) for test of hypothesis were 32.83, 17.31 and 29.14 as against 3.60 critical value meaning post-merger performance were better than the pre-merger period. It was concluded that merger and acquisition strategy is good for Nigerian Banks. It is recommended that Banks with poor corporate governance issues and weak Capital structure should embrace mergers and acquisition and that the CBN should strengthen it monitoring and oversight functions to enhance operational efficiency of Deposit money Banks in Nigeria.

Key words: Merger and acquisition, Performance, Corporate governance and capital structure.

I. INTRODUCTION

Banks and other financial institutions occupy pivotal position in any economy. They serve as the linkage between the surplus and deficit economic units in channeling funds needed for economic growth and development. The robustness and viability of this sector is necessary for a vibrant economy as the state of any economy is often a reflection of the state of its financial system. The correlation cut across the globe, for developed and developing economies (Olowe, 2011). Following the global financial crisis and the economic meltdown that blew across countries the world over, many businesses including banks in Nigeria were affected and shaken to their foundations thus impacting their operations negatively. There was liquidity shock, high non-performing facilities, banks insolvency and failures.

Read More