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AN ANALYSIS OF BUSINESS MERGER AND ACQUISION AND THEIR IMPACT ON BUSINESS PROFITABILITY (A CASE STUDY OF ACCESS BANK PLC)

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    ABSTRACT

    The study was designed to examine the effect of merger and acquisitions in the banking industry in Nigeria the need to carry out this study arose from the challenges faced by Nigerian banks despite the reduction of banks from 89-25 at the end of 31st December 2005. These current challenges faced by banks in the country have made researchers to question the efficacy of the consolidation of bank in Nigeria; the exploration research method was used for this study. Data was collected from textbooks, journals, conference paper and the internet. The finding reveal that the consolidation (mergers and acquisition) activities in Nigeria did not meet the desired objectives of liquidity, capital adequacy and corporate governance which have resulted to more troubled banks after the consolidation on the basis of these, the study recommend among others the leadership should have the skill and require experience necessary to perform the role effectively and should have a sound understanding of the nature of the company business and it risk for smooth and efficient post merge operation and also that corruption, fraud and insider abuses must be minimized in the banking industry for the country to derive the benefit of merger and acquisitions of bank.

    TABLE OF CONTENTS

    TITLE PAGE

    CERTIFICATION

    DEDICATION

    ACKNOWLEDGEMENT

    ABSTRACT

     

    CHAPTER ONE

    1.0       INTRODUCTION

    1.1       BACKGROUND OF THE STUDY

    1.2       STATEMENT OF THE PROBLEM

    1.3       OBJECTIVE OF THE STUDY

    1.4       RESEARCH QUESTIONS

    1.5       SIGNIFICANCE OF THE STUDY

    1.6       HYPOTHESIS OF THE STUDY

    1.7       SCOPE AND LIMITATION OF THE STUDY

    1.8       HISTORICAL BACKGROUND

    1.9       DEFINITION OF TERMS USED

     

    CHAPTER TWO

    LITERATURE REVIEW

    2.0       INTRODUCTION

    2.1       RATIONALES FOR TYPES OF MERGER AND ACQUISITION

    2.2       MOTIVE BEHIND MERGER AND ACQUISITION

    2.3     CONDITIONS FOR BUSINESS COMBINATION (MERGER)

    2.4     GUIDELINE AND INCENTIVES ON CONSOLIDATION IN NIGERIA BANKING INDUSTRIES

    2.5     EFFICIENCY OF MERGER AND ACQUISITION IN AN ORGANIZATION PRODUCTIVITY

    2.6     THE PLACE OF EMPLOYEE IN A SUCCESS MERGER AND ACQUISITION

    2.7     CURRENT LEGAL POSITION (MERGER)

    2.8     MERGER AND ACQUISITION ON THE UPSURGE

    2.9     HISTORICAL BACKGROUND OF THE CASE STUDY

     

    CHAPTER THREE

    3.0       RESEARCH METHODOLOGY

    3.1       TYPES AND METHODS OF DATA COLLECTION

    3.2       THE STUDY POPULATION

    3.3       RESEARCH DESIGN

    3.4       DETERMINATION OF SAMPLE SIZE

    3.5       METHOD OF PROCESSING DATA

    3.6       RESEARCH INSTRUMENT SPECIFICATION

     

    CHAPTER FOUR                          

    4.0       DATA ANALYSIS AND PRESENTATION OF RESULT

    4.1       INTRODUCTION

    4.2       ANALYSIS OF RESPONSE

    4.3       PRESENTATION OF DATA

    4.4       HYPOTHESIS TESTING

    CHAPTER FIVE

    5.0       SUMMARY, CONCLUSION AND RECOMMENDATION

    5.1       SUMMARY

    5.2       CONCLUSION

    5.3       RECOMMENDATION

    REFERENCES

    QUESTIONNAIRE

     

    CHAPTER ONE

    INTRODUCTION

    1.1       BACKGROUND OF STUDY

    The word merger and Acquisition have been in the forefront in the economic environment in recent years. Today, Organization in the economies is from time to time with a vast array of Challenges from the operating environment.

    Corporate in efficiency and in efficiency have been rampaging the corporate world. It is not uncommon to see various organizations being plagued with series level of unprofitability. This run through the Whole gamete of economy, both profit and nonprofit making companies operate in a dynamic environment created and influenced by a variety of forces.

    These changes in a dynamic environment create uncertainty and risk; also create opportunities for management to exploit the situation of profit objectives and productivity.

    A major fact about a business operating environment is that it is dynamic and not static environment, if it works to survive it is no gain saying that most companies are caught napping with the various changing trends that are avoiding in the business environment . Even various policies promulgated by the necessary authorities to ground tools and pull out business.

    The various view about changes in business environment there are over ready corporate organization that are on look out for changes in the operating environment. They capitalized on opportunities that these effort to bring about corporate productivity.

    An Organization performance in the environment is a matter of degree of alignment between the organization environmental opportunities objectives, policies and strategies. A careful analysis of the corporate atmosphere in Nigeria has ascertained most of the industries and companies that are operating at less than full efficiency and hence are unable to maximize the value of the wealth of a group of large investors or shareholder.

    Therefore, it is against this backdrop that affected organization are now developing survival instincts and strategy one of the ground strategies being sought after by corporate management in recent time is merger and Acquisition. A typical example is the reforming in the banking industries, before the policies of 14=25 billion minimum capital balance, hardly can the industry boast of four banks coming together to finance a 1o billion worth of projects. Even the real sects felt a great blow because if the inability to gain access of loan facilities in the banking industry.

    In the quest for survival a subsequent efficient competitive edge in the market, merger and acquisition is being considered as a group strategy tools for corporate productivity. Merger in corporative by the transfer of all property to a single corporation. Every organization desire to grow in order to achieve this, a group strategy should be adopted for the profitability and productivity. When an organization has clarified as purpose and objectivities, it knows where it wants to go; the position is how to get there? It then develops strategy on how to reach the goals.

    Consumers as well as industries markets have come to expect periodic is changes and improvement in the products which are offered, then for this to be realized, Companies seek merger and Acquisition to satisfy the market which will eventually result to increase market share when two or more companies come together pull their resources together, a new strong and healthy organization with better service will be birthed.

    Merger and acquisition enhanced corporate productivity through provision of access to new markets for the acquiring firm but also result in the acquiring of high market share. This will result to high patronage of a firm product and increase the firm’s stock value.

    Conclusively, the synergistic effect of merger and acquisition can never be emphasized on organization profitability. It ensures that all are desk in the organization to provide extra mutual beneficent and reinforcing advantages that will prosper the organization more rapidly towards the achievement of it goals. To improve the stability of firms earnings, sale and productivity merger and acquisition should be considered as group strategic option for cooperate profitability

    1.2       STATEMENT OF THE RESEARCH PROBLEM

    In recent time merger and acquisition have been a typical issue among the captains of the economy what constitutes the focus of the research is the various environment forces that have crippled the effectiveness and productivity of the economy and the seemingly group strategy way out. Every company has had it rough in the economy because of their in abilities to perform to the full capacity of their production system.

    The unproductiveness of these various corporate organizations has dealt a great blow on the economy at large. The market could not have their needs talk less of saturating the market with the required production and services.

    The multiplier effect of these short coming leads to inflation in the economy where more cash is chasing few goods and services. The unproductively is also witness in the main stay of the economy, banking industry. The banking industry has been characterized with poor financial capacity. The economy is not private investment because of the inability to allow more funds into their economy, even the real sectors economy was affected because of their inability to gain access to loan facilities in banking industry. There are cases of banks distressed as a result of this poor financial liability of the banks, it is against this backdrop  that the management of the apex bank in the country, Central bank of Nigeria proposed consolidation in the banking industry to share up the capital base of the various banks in the industry for profitability . The imperfect of merger and acquisition to ensure corporate profitability remains the focus of the study. In view of these problems, research questions are asked; which are to be later resolved.

     

     

    • PURPOSE OF THE STUDY

    For any of a large number of reasons, merger and acquisition cannot take a back seat in this view of economic resolution that is sweeping across the financial sector and seal section of the economy

    • To examine the impact of merger and acquisition on organizational profitability.
    • To establish the effect of merger and acquisition on individual employee performance.
    • To examine the impact of merger and acquisition on economic development.

    1.4          RESERCH QUESTIONS

    • Does merger and acquisition has impact on organizational profitability?
    • Does merger and acquisition has impact on employee performance?
    • Is there any significant relationship between merger and acquisition and economic development?
    • STATEMENT OF RESEARCH HYPOTHESIS

    The purpose of this research is to establish the fact that merger and acquisition stands as a strategic management option to bringing about profitability and achievement of organizational goals.

    Therefore, both null hypothesis (Ho) and alternatives hypothesis (Ha) will be used to test the impact of merger and acquisition or organization profitability.

    The research formulated the following.

    • Ho: Merger and Acquisition does not have any impact on organizational profitability.
    • Hi: Merger and Acquisition have any impact on organizational profitability.
    • Ho: Merger and Acquisition does not have any significant impact on the economy.
    • Hi: Merger and Acquisition have significant impact on the economy.

    1.6       SIGNIFICANCE OF THE STORY

    Strategy constitutes the vehicular procedures through which an organization attains its goals in the over dynamic business environment. Profitability and growth are among the key objectives of business concerns. Then one would righty believe that a progressive organization must develop strategic towards their achievement.

    Merger and acquisition will steam line the enlarged organization, which will run on less administrative and overhead cost than for separate organizations. It will help in recognizing the needs for strategic opinion for corporate productivity.

    The Study will help managers using merger and acquisition to create an atmosphere that will enhance effective and efficient achievement of cooperate productivity. It will expose the benefits and growing realization that merger and acquisition can bring to effectiveness and efficient of an organization.

    The study will offer policy recommendation to managers in improving the level of corporate productivity and profitability in the Banking Industries.

     

    1.7       SCOPE OF STUDY

    There are other ground strategic option the rough which an organization can be production but this research work is limited to “Merger and Acquisition on Organization profitability “ Merger and Acquisition on organization profitability” The areas that will be carried in the course of carrying out this research work will include the responsibility of realizing how effective and efficient an organization can be if a strategic “Corporate marriage” is arranged with another offering the same service.

    Also, the process that will be involved in the scheme of merger will be understudying to enhance scheme of merger will be understudying to enhance a successful merger and acquisition.

    The process of management and cultural due diligence that need to be attended to in course of merger and acquisition will be understudying in the course of the research of the work. In the same vein, the after math positive effect of the same merger and acquisition will also be adequate examined in all fields of human endeavors, Problems and constraints.

    1.8       LIMITATION TO STUDY

    This study focuses on the effects of merger and acquisition on the growth of an organization. It also emphasized on what must be done to curb the negative factors that surrounds or hinder its implementation.

    1.9       DEFINITION OF TERMS

    Merger: Is a situation where two or more separate entities agree to less their individual legal entity to come under one umbrella entity by pooling their management material and labor resources together.

    Economy: Is a system which tries to balance the available resources of a country through the means of factor of production.

    Operation: The action of functioning or being effect is an area of concerned with responsibility.

    Impact: The measure of the significant or strong influence and intangible effect of one act.

    Acquisition: Is the situation where companies agree to pool their interest by an exchange of shares, so that the existing shareholder comes together under one entity.

    Business: Comprise of the sum total of all activities involved in the creation and distribution of goods and services in order to earn profit,

    Profitability: The efficiency of a company or industry to make a profit or helpful result in the situation in which the company is producing or making profit.

    Growth: The creation and the implementation of policies that influence the types, the amount, the timing and economy development.

    1.10     ORGANIZATION OF STUDY

    This is divided into five chapters.

    Chapter one: is the general introduction that contains the background, study, purpose of study, statement of research problem, research questions, research hypothesis, and significance of study and scope of study.

    Chapter two: is the literature review. It contains the concept of merger and acquisition. The types of mergers, i.e Horizontal merger, and vertical merger conglomerate merger.

    Motives behind merger and acquisition. Guidelines to merger and acquisition, efficiency of merger and acquisition in organization profitability, the place of employees in a successful merger and acquisition management and cultural due-diligence, post merger operation.

    Chapter three: contains the research design, description of the study population. Sampling of plan Description of Data collection instrument and the Administration of data instruments.

    Chapter four: is the presentation data analysis which includes presentation of data according to research questions.

    The last Chapter, which is chapter five is the summary, conclusion and recommendation.

     

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