MERGERS AND CORPORATE PERFORMANCE: A CASE STUDY OF UNITED BANK FOR AFRICA
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MERGERS AND CORPORATE PERFORMANCE: A CASE STUDY OF UNITED BANK FOR AFRICA
CHAPTER ONE
INTRODUCTION
Mergers and other firms of corporate central have emerged as a major forces in the modern financial and economic environment.
The general set of explanation or instructions of corporate synergy signifies that the value of firms may result in more efficient and effective management, exploitation of market power, improved production techniques and overall corporate performance. (G. Inthumati, 2011).
Mergers is statutorily defined as any amalgamation of undertakings of two or more companies or corporate bodies (section 509 of CAMA 1990).
The financial reporting standard (FRS) defines mergers as a business combination that results in the creation of a new reporting entity formed by the combining parties in which the shareholders of the combined business come together in a partnership for mutual sharing of risk and benefits of the combined entity and in which no party to the combination in substance obtains control over any other is seen to be dominant.
Merger is the combination of two or more companies, generally by offering the stockholders me company securities in the acquiring company for the surrender of their stock (Investopetia).
Merger also the combination of two or more companies into one with only retaining it identity. Typically the larger of the two companies is the company whose identity is maintained. If often involves an exchange of stock, called pooling interest, which avoids taxes. The purchase (accounting) method where good will is recorded can also be used. (John w. Hansen 2007).
In Nigeria and other emerging economics, mergers has been embraced as a panacea to the seemingly mutiny global economic recession.
According to Akamokhor (1989:2) gives the current economic crisis facing Algeria there is no doubt that the mergers will continue to be major avenue open to firms in the country trying to resolve the problem of youth and insolvency.
To this end there is a need for corporate management to be concern about the subject matter (mergers) either as a possible target for acquisition or seeking to require another firm.
One of the significant objectives of any economy is achieving high rate of economic growth. In achieving this, corporate entities keep on improving its policies and explore various available options both at micro and macro levels, and business combination is an external approach to this objective.
1.1 STATEMENT OF RESEARCH PROBLEM
In the recent past in Nigeria business environment mergers and other forms of business combination have become an imperative option for most business entities.
The question therefore is, to mergers and others forms of business combination health and ultimately improves the general performance of the business.
This study seeks to specially compare the pre and post mergers performance of merging companies (United Bank for Africa and Standard Trust Bank between year 2001 – 2005 and 2007 – 2010).
1.2 STATEMENT OF RESEARCH QUESTIONS
This research seeks to provide answer to the following questions;
1) Are there any financial, benefits of mergers?
2) What are the non financial benefits of mergers?
3) Does mergers give rise to improve working conditions and motivate for employees?
1.3 OBJECTIVES OF THE STUDY
The study aims at finding out if there are different in the overall corporate performance of companies after mergers has taken place.
Other objectives of the study includes:
1) To ascertain the effect of mergers on employees.
2) To critically analyse the non-financial of mergers (if any)
3) To find out the success factors for mergers (if any)
1.4 SCOPE OF STUDY
This study seeks to examine the effects (if any) of mergers in corporate performance. The examination will be carried out in the banking sector (Standard Trust Bank and United Bank for Africa 2002 – 2010).
The examination will be carried out by analyzing the financial statements of the banks before mergers are the mergers. The analysis will be done using the various accounting ratios (probability ratio, liquidity ratio, asset management ratio etc) and also the use of questionnaire.
1.5 RESEARCH LIMITATION
Some possible limitation to this work indicate
1. Small nature of simple size
2. The study is limited to the banking sector
3. The subjective nature of financial statements
1.6 STATEMENTS OF RESEARCH HYPOTHESIS
Hypothesis by Longman Dictionary is an idea that is suggested as an explanation for something, but that has not yet been proceed to be true.
According to Osula (1995:46) “Hypothesis can be defined as a ten future generalization where tenability is to be tested on the basis of compatibility of the implications with empirical evidence and with previous knowledge.
The hypothesis tested in this study are;
1) Null hypothesis
Ho: There is a positive different between pre mergers financial performance and post mergers financial performance.
2) Null Hypothesis
Ho: There are non-financial benefits after mergers
Alterative hypothesis
Hi: There are financial after mergers.
3) Null Hypothesis
Ho: There is no different between the pre and post mergers employees welfare.
1.7 RESEARCH METHODOLOGY
The study faustes on mergers in Nigeria with a case study of United Bank for Africa (UBA) and Standard Trust Bank (STB) 2002 – 2010.
The research analysis will be carried out using accounting ratios on the financial statement of the banks before and after the mergers and also with the use of questionnaires.
DEFINITION OF SOME COMMON TERMS
1. Mergers: It is the combination of two or more companies in which all but one of the combining companies legally cease to exist and the serving company continues in operation.
2. Corporate performance: This is the measurement of the extent to which the objectives of the firm is being meet.
3. Amalgamation: This involves this formation of a new business which then acquires the assets (and possibly the liabilities) of the two or more company or existing business.
4. Absorption: This applies when a relatively large dominant business acquires the assets (and possible liabilities) one or more existing companies or business which are then wound up.
5. Growth: This refers to the firms ability to sustain if availability, dynamism, and value enhancing capability.
6. Synergy: This involves a situation where the combined firms ins more called than the sum of individual combining firms i.e 2+2 =5.
REFERENCES
G. Inthumathi (2011) euro Journals.
Akamokhor G.A. (1989) “Mergers and Acquisition: The
Nigerian experience.
Osula S.C. (1993) Introduction to Research Methodology 2nd
Edition.
Company and Allied Matters Act 1990.
Financial Reporting Standard (FRS).
Longman contemporary English
John W. Hanseh (2007) Dictionary of Accounting.
Investopediaies (2014) A division of IAC
MERGERS AND CORPORATE PERFORMANCE: A CASE STUDY OF UNITED BANK FOR AFRICA
CHAPTER ONE
INTRODUCTION
Mergers and other firms of corporate central have emerged as a major forces in the modern financial and economic environment.
The general set of explanation or instructions of corporate synergy signifies that the value of firms may result in more efficient and effective management, exploitation of market power, improved production techniques and overall corporate performance. (G. Inthumati, 2011).
Mergers is statutorily defined as any amalgamation of undertakings of two or more companies or corporate bodies (section 509 of CAMA 1990).
The financial reporting standard (FRS) defines mergers as a business combination that results in the creation of a new reporting entity formed by the combining parties in which the shareholders of the combined business come together in a partnership for mutual sharing of risk and benefits of the combined entity and in which no party to the combination in substance obtains control over any other is seen to be dominant.
Merger is the combination of two or more companies, generally by offering the stockholders me company securities in the acquiring company for the surrender of their stock (Investopetia).
Merger also the combination of two or more companies into one with only retaining it identity. Typically the larger of the two companies is the company whose identity is maintained. If often involves an exchange of stock, called pooling interest, which avoids taxes. The purchase (accounting) method where good will is recorded can also be used. (John w. Hansen 2007).
In Nigeria and other emerging economics, mergers has been embraced as a panacea to the seemingly mutiny global economic recession.
According to Akamokhor (1989:2) gives the current economic crisis facing Algeria there is no doubt that the mergers will continue to be major avenue open to firms in the country trying to resolve the problem of youth and insolvency.
To this end there is a need for corporate management to be concern about the subject matter (mergers) either as a possible target for acquisition or seeking to require another firm.
One of the significant objectives of any economy is achieving high rate of economic growth. In achieving this, corporate entities keep on improving its policies and explore various available options both at micro and macro levels, and business combination is an external approach to this objective.
1.1 STATEMENT OF RESEARCH PROBLEM
In the recent past in Nigeria business environment mergers and other forms of business combination have become an imperative option for most business entities.
The question therefore is, to mergers and others forms of business combination health and ultimately improves the general performance of the business.
This study seeks to specially compare the pre and post mergers performance of merging companies (United Bank for Africa and Standard Trust Bank between year 2001 – 2005 and 2007 – 2010).
1.2 STATEMENT OF RESEARCH QUESTIONS
This research seeks to provide answer to the following questions;
1) Are there any financial, benefits of mergers?
2) What are the non financial benefits of mergers?
3) Does mergers give rise to improve working conditions and motivate for employees?
1.3 OBJECTIVES OF THE STUDY
The study aims at finding out if there are different in the overall corporate performance of companies after mergers has taken place.
Other objectives of the study includes:
1) To ascertain the effect of mergers on employees.
2) To critically analyse the non-financial of mergers (if any)
3) To find out the success factors for mergers (if any)
1.4 SCOPE OF STUDY
This study seeks to examine the effects (if any) of mergers in corporate performance. The examination will be carried out in the banking sector (Standard Trust Bank and United Bank for Africa 2002 – 2010).
The examination will be carried out by analyzing the financial statements of the banks before mergers are the mergers. The analysis will be done using the various accounting ratios (probability ratio, liquidity ratio, asset management ratio etc) and also the use of questionnaire.
1.5 RESEARCH LIMITATION
Some possible limitation to this work indicate
1. Small nature of simple size
2. The study is limited to the banking sector
3. The subjective nature of financial statements
1.6 STATEMENTS OF RESEARCH HYPOTHESIS
Hypothesis by Longman Dictionary is an idea that is suggested as an explanation for something, but that has not yet been proceed to be true.
According to Osula (1995:46) “Hypothesis can be defined as a ten future generalization where tenability is to be tested on the basis of compatibility of the implications with empirical evidence and with previous knowledge.
The hypothesis tested in this study are;
1) Null hypothesis
Ho: There is a positive different between pre mergers financial performance and post mergers financial performance.
2) Null Hypothesis
Ho: There are non-financial benefits after mergers
Alterative hypothesis
Hi: There are financial after mergers.
3) Null Hypothesis
Ho: There is no different between the pre and post mergers employees welfare.
1.7 RESEARCH METHODOLOGY
The study faustes on mergers in Nigeria with a case study of United Bank for Africa (UBA) and Standard Trust Bank (STB) 2002 – 2010.
The research analysis will be carried out using accounting ratios on the financial statement of the banks before and after the mergers and also with the use of questionnaires.
DEFINITION OF SOME COMMON TERMS
1. Mergers: It is the combination of two or more companies in which all but one of the combining companies legally cease to exist and the serving company continues in operation.
2. Corporate performance: This is the measurement of the extent to which the objectives of the firm is being meet.
3. Amalgamation: This involves this formation of a new business which then acquires the assets (and possibly the liabilities) of the two or more company or existing business.
4. Absorption: This applies when a relatively large dominant business acquires the assets (and possible liabilities) one or more existing companies or business which are then wound up.
5. Growth: This refers to the firms ability to sustain if availability, dynamism, and value enhancing capability.
6. Synergy: This involves a situation where the combined firms ins more called than the sum of individual combining firms i.e 2+2 =5.
REFERENCES
G. Inthumathi (2011) euro Journals.
Akamokhor G.A. (1989) “Mergers and Acquisition: The
Nigerian experience.
Osula S.C. (1993) Introduction to Research Methodology 2nd
Edition.
Company and Allied Matters Act 1990.
Financial Reporting Standard (FRS).
Longman contemporary English
John W. Hanseh (2007) Dictionary of Accounting.
Investopediaies (2014) A division of IAC
MERGERS AND CORPORATE PERFORMANCE: A CASE STUDY OF UNITED BANK FOR AFRICA
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