ABSTRACT
Merger and acquisition as stated
in study must be seen as an available means of saving companies from serious
financial distress or liquidation, in that it provides such business with new
management and better access to financial resources. Merger and acquisition
enable the acquiring company to spread its risk, while still maintaining the
firm's rate of return. We have had problems of collapse in financial
institution in Nigeria and also lack of confidence in the financial institution
by bank depositors. As it is known that capital has became a contemporary
problem which requires proper investigation, so in order to be in a safe
position the government must put in place a proper investigation, of
desirability or otherwise of the minimum requirements in banking viability, as
viability is the major factor been adduced for the large increase in minimum
capital requirement. In the process of merger and acquisition, the shareholders
of the acquired company should be considered and merger should not tend towards
monopoly.
To this end, merger and
acquisition should be embraced and practiced in totality in Nigeria.
TABLE
OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Statement of Problems
1.3 Objective of the Study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Scope and Limitation of Study
1.7 Significance of Study
1.8 Research Methodology
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction
2.1 Reason for Merger and Acquisition
2.2 Types of Merger and Acquisitions
2.3 Factors Influencing the Merger/Acquisition Strategy
2.4 Source of Value in Bank Merger
2.5 Merger and Acquisition Valuation Processes
2.6 Merger and Acquisition Valuation Technique
2.7 Contemporary Issues Relating to Merger and Acquisition in
Nigeria
2.8 Impact of Merger and Acquisition on Bank's Growth
2.9 Some Benefit of Merger and Acquisition
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Population of Study
3.4 Sample Size
3.5 Restatement of Research Hypothesis
3.6 Research Instrument
3.7 Method of Data Collection
3.8 Method of Data Analysis
3.9 Limitation of the Methodology References
CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION OF RESULTS
4.0 Introduction
4.1 Administration of Questionnaire
4.2 Demographic Characteristics of Samples
4.3 Analysis of Individual Statement
4.4 Hypothesis Testing and Interpretation
CHAPTER FIVE
SUMMARY, RECOMMENDATION AND CONCLUSION
5.0 Introduction
5.1 Summary
5.2 Recommendations
5.3 Conclusions
BIBLIOGRAPHY
APPENDIX
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
One of the interesting area
worth of study in finance is Merger and Acquisition. A corporate structural
change. It is an important strategic decision by the management of any
organization merger and acquisition are recognized as one of the ways of
addressing bank dwindling performance.
A merger or acquisition is a
combination of two or more companies in which all but one of the combining
companies leases to exist and the serving company continues to operate in its
original name, usually the acquiring company. Where the acquisition is not with
the consent of the management of the acquires. It is referred to as a take over
which can be protracted and hostile on the other hand an amalgamation or
consolidation involves the combination of all or a portion of the asset and liabilities
of two or more business unit or companies to form of new company, with all the
combining companies dissolves while their operations are taken over by the new
company. In a consolidation, the combining companies are usually of similar size.
Merger and Acquisition started
in Nigeria at the dawn of the twentieth century the acquisition of the asset
and liabilities of the first bank
organization in Nigeria (African Banking Consortion - ABC) in 1984 by the British
Bank of west Africa BBWA now call First Bank Nigeria Plc can be said to be one of the
earliest merger/acquisition exercise in Nigeria.
A kind of "in-house merger'
between prudent finance houses took place in 1990 with little or no publicity. It
was not until 1996 before then country witnessed what can be called full-edge acquisition of one bank by
another one. This was the 100% acquisition
of Magnum Trust Bank Limited by (GTB Plc) Guarantee
Trust Bank. This was followed by other acquisition including those of Equity
Bank Limited (NIMBL) Merchant Bank of Commerce Limited now known as Continental
Trust Bank Plc by Bank Guarantee Limited all in the same year ( 1996).
The above development was a good
omen, as it helps to reduce the number of distressed and failed bank at the
time. It is heart warming to note that the government and monetary authorities
in the country are currently showing goods example in this interesting area of
finance. (Merger and acquisition).
It is of note that merger,
acquisition and takeovers have become major strategic option in the Nigeria
corporate environment in need years as a response to the economic reform
programme empowerment and develop strategy (Needs). Even though in as have been taking place in Nigeria in the
past the spate rose only in 2005.
The immediate trigger was the
directive given by the CBN the banking industry for each bank to increase its
shareholders capital N25 billion by December 31st 2005 considering the huge burden
of raising such funds from the capital market by the existence of some banks.
So may choose the merger and acquisition option. All over the world mergers and
acquisition have continued to commend considerable appeal as a strategic option
for seeking corporate transformation and growth.
According to the financial
terms, in just the first five week of 2005, ego More than 150 of merger and
acquisition deal were announced in the United States the popularity of merger
and acquisition was confirmed by an accentor was 2005 which found that 70
percent of the sampled executive in larger companies worldwide were either
undertaking mergers and acquisition transactions at the time of the surveyor
planned to do so with the year.
The observed popularity of
merger & acquisition in
the business world is however not necessarily replicated. In Nigeria the
Central Bank of Nigeria's banking sector consolidation and reform programme
recently reduced the number of commercial Banks in the country from 89-25 and
generated a major fluming of merger and acquisition in an industry, The first
of its types in the nation's corporate history.
Also, the Federal and State
Government's Programmes of privatization of government owned enterprises has in
recent years stimulated substantial acquisition transaction involving private
investors as buyer and government as the sellers of industrial asset the early
1970's was similarly an era of frenetic acquisition resulting from the Nigeria
enterprises promotion Act of 1973 which limited or exclude foreign
participation in certain sectors of the economy and compelled the investors to
sell affected investment to Nigeria outside government inspired policy and
statutory development such as these mergers and acquisitions are yet to be
widely embraced in corporate Nigeria as a routine yet significant options for
strategic re-engineering's and business growth.
However as the economy undergoes
transformation and the private sector becomes the main engine of its growth.
These vibrant routes to business diversification and market consolidation will
acquire steadily soaring significance in the Nigeria business scene.
The essence of thus present
study therefore is to investigate into the impact of merger and acquisition on
investigate into the impact of merger and acquisition on bank growth and
effectiveness in Nigeria.
1.2
STATEMENT OF PROBLEMS
The Nigeria banking system has
undergoes remarkable changes over the year in terms of the number of
institutions, ownership structure as well as
depth and breath of operations. The changes have been influenced largely by
challenges posed by deregulation of financial sector, which involves freeing of
interest, lifting of credit calling and the introduction of open market
operation and licensing of new banks.
Moreover in the face of various
economic reforms economic globalization of operations technological innovation
introduction of universal banking system adoption of international standard
which implies the absence of barrier in offering banking service, which will
enhance competition in the financial service sector (Sam Ayininuola 1999).
Distress and crumbling management
structure In corporate world are not limited to the banking sub-sector alone;
they have also affected the other sector of the economy in fact the entire
Nigeria economy is badly distressed.
A number of corporate
organization that depends on imported goods have not been able to operate
profitability for some years now due the problems created by the fall in the
value of naira. The finance created is about the worst hit sector hence the
debilitating distress.
1.3 OBJECTIVES OF STUDY
The principal objective of this
study is to examine the impact of merger and acquisition on bank growth and
effectiveness in Nigeria.
However in view of the gains of
merger and acquisition, the specific objectives of this study are to:
(i)
To evaluate the
effects of merger and acquisition on bank
growth and
development.
ii) To identify the problems
associated with merger and acquisition and the reasons for their failures.
iii) Review the qualities of
recent mergers and acquisition in the banking industries.
iv) To point out the causes of
banking distress and steps to prevent cases
v) To show case the preference
of merger and acquisition option to liquidation options.
1.4 RESEARCH QUESTIONS
The following research question
can be raised about the study.
i) What are the effects of
merger and acquisition on bank growth and development?
ii) What are the main causes of
the distress on liquidation in banks?
iii) Is merger and acquisition
the best options to distress or liquidation?
iv) What are the problems associated
with merger & acquisition?
v) What should government do to
improve merger and acquisition?
1.5 HYPOTHESIS OF STUDY
The following hypotheses are
formulated and will be tested in this study:
Ho: Merger and acquisition is not
effective in distress resolution in banking industry
Hi: Merger and acquisition is
effectives in distress resolution in banking industry
1.6 SCOPE AND LIMITATION OF STUDY
The scope of this study will
focus on the recent mergers and acquisition that have recently occurred in
Nigeria banking system due to the banking reforms in Nigeria. The study will
focus on union bank which Union Bank, Union Merchant Bank, Universal Trust Bank
and broad bank. The limitations of the study are time financial constraints
suggested with by the researcher.
1.7 SIGNIFICANCE OF THE STUDY
It is important to know that
research works are generally carried out to find solutions to existing and
anticipated problems in a particular environment. The problem of bank distress
and failure has been clamoring for solution. It has been noticed that Nigeria
banks have not kept standard with other banks of the world e.g. The largest
bank in Nigeria has a capital base of about 240m US dollars, which is for the
smallest bank in Malaysia (Business day July 2004). This is the case of
Nigerian Banks with shorter life and mismatching of investment. It is because
of these problems that this study is aimed at appraising the significance of
pulling resources together through "merger and acquisition" as a way
of eliminating bank failure.
This study will also encourage a
number of bank and organizations to consider merger and acquisitions option
instead of following liquidation to swallow them. Consequently the financial
sector regulating authorities will learn a great deal form the conclusion and
recommendation that would be preferred in this study.
1.8 METHODOLOGY OF THE STUDY
This study will rely on both
primary and secondary data's. The primary data will be collected through
questionnaires, while the secondary data will be gathered from, journals,
reports magazines and literature reviews.
In the course of carrying out
this research study the methodology that will be used is the chi-square statistical
analysis, because of this method want to apply I will like to see the use of
primary data i.e. through study, because I feel primary data is most suitable
for this study and it underline merger and acquisitions.
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