The objectives of this project was predominantly focused on
the investigation of mergers and acquisitions as a tool for a better corporate
performance in United Bank for African PLC (UBA).
In this research work, several literatures related to the
topic of research were reviewed.
The research work was carried out using primary data by the
distribution of questionnaires to respondents.
With the use of data collected, chi-square was used in the
hypothesis testing, null hypothesis (Ho) was accepted in the test I and 2. In
the former: merger and acquisitions are not tools for a better corporate
performance. While in the latter: merger acquisitions will not create a sound
financial stabilities and global competitiveness in the banking industry.
Based on the findings, summary and conclusion was drawn
that merger and acquisition brought a lot of set backs in UBA and in the
banking industry as a whole i.e it did more harm than good. Recommendations and suggestions for further
studies were finally made.
TABLE OF CONTENT
Table of Content v
CHAPTER ONE: INTRODUCTION
of Study 1
of Problem 4
of Study 6
of the Study 6
of the Study 7
of the Study 7
of Terms 8
Background of UBA Group Nigeria Plc 9
CHAPTER TWO: LITERATURE REVIEW
of the Concept of Mergers and Acquisition 14
and Acquisition Process 17
Motivating Bank Executives to Agree
Acquisition and Merger 19
Merger and Acquisition a Survival Strategy in a
Depressed Economy 21
A Brief History of UBA Mergers 24
Theoretical Background 30
General Overview of the Nigerian Banking
Consolidation Programme 32
The Effect of Merger and Acquisition on Contract
Influence of Corporate Atmosphere on Mergers and
Modes of Bank Mergers 47
Source of Value in Bank Merger 49
Pitfalls and Risks in Bank Merger 52
Valuation Bank Merger 53
Efficacy of Merger and Acquisition for Bank
CHAPTER THREE: RESEARCH METHODOLOGY
Sample and Sample Procedure 62
Instrument and Validation 62
Data Collection Procedures 63
Method of Data Analysis 64
Limitation of Study 66
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.0 Introduction 68
of Hypothesis 72
of Results 79
of Scale 80
Resources Issues 81
and Manpower Development 82
of Information and Communication Technology 83
CHAPTER FIVE: SUMMARY, CONCLUSION
5.1 Conclusion 86
5.2 Recommendations 87
for Further Studies 88
OF THE STUDY
banking industry in Nigeria has been undergoing serious structural adjustments
over the past two years arising from the Central Bank of Nigeria requirements
for banks to increase their shareholders fund to a minimum level of N25 billion
(Twenty five billion naira). This triggered off several mergers and
acquisitions that have reduced the number of banks from 89 to 25 as at the
beginning of 2006 which has increased to about 56 as at the end of last quarter
the consolidation exercise started, the banking industry had about 89 active
players whose overall performance led to sagging of customer confidence. There
was lingering distress in the industry, the supervisory structures were in
adequate, they were cases of official recklessness amongst the managers, and
the industry was notorious for ethical abuses, poor corporate governance was
identified as one of the major factors in virtually all known instances of bank
distress in the country.
The Central Bank of Nigeria (CBN), in July 2004 unveiled new
banking guidelines designed to consolidate and restructure the industry through
merger, and acquisitions. The CBN’s action was also designed to make Nigeria
Banks more competitive and to be able to play in the global market. However,
successful operation in the global market requires accountability, transparency
and respect for the rule of law. This is the big challenge that any Nigerian
Organisation that wants to play in the global market will have to face and this
is the basis for any good corporate governance.
The main motivation behind consolidation is to maximize
shareholders value. Value may be maximized though mergers and Acquisitions
(M&As) mainly by increasing the participating firm’s market power in
setting prices or by improving their efficiency and, in some cases, by
increasing their access to the safety net.
Imala (2005) identified eight reasons for M & AS in the
financial services sector. They include:
savings, attribute to economic of scale as well as more efficient allocation of
enhancement, resulting from the impact of consolidation on bank size, scope and
overall market power;
reduction, due to change in organisational focus and efficient organisational
developments, which impose high fixed costs and the need to spread these costs
across a large customer base;
advant of deregulation, which removed many important legal and regulatory
which engender a more globally integrated financial services industry and facilitated
the provides on wholesale financial services and geographically expansion of
Stability, characterized by the smooth functioning of various components of the
financial system, with each component resilient to shock;
pressure on management to improve profit margins and reform on investment made
possible by new and powerful shareholder blocks.
OF THE PROBLEM
Merger and acquisition has been
an interesting topic in the business world, in spite of the numerous advantages
advanced in favour of Merger and acquisition, much viable business. Concern is
skeptical about merging or acquiring other businesses.
problem, which necessitated this study, includes;
Mergers and acquisitions are complex and they
also involve huge capital spending.
The discouragement of Mergers and acquisitions
by individual, shareholders and trade union.
Effect of Merger and acquisition not always
Why Mergers and acquisition not always
1.2 RESEARCH HYPOTHESIS
is conjectural statement, which a researcher draws up to assist in achieving
the aims and objectives of the researcher efforts.
hypotheses so formulated are put forward for testing and it supported by the
facts and figures obtained from the study. The hypothesis can be identified as
the Null Hypothesis and Alternative hypothesis.
Ho: There are
no differences between two variables being compared.
Hi: There are
differences between the two variables compared.
and acquisitions will not create a sound financial stability and global
competitiveness in the banking industry.
and acquisitions will create a sound financial stability and global
competitiveness in the banking industry.
and acquisitions are not better tools for corporate performance.
and acquisitions are better tools for corporate performance. In all, the
acceptance of the null hypothesis automatically means the rejection of the
alternative hypothesis and vice-versa.
OBJECTIVE OF THE STUDY
main goal of this study is to disabuse the minds of top executives, investors
and major decision makers in the organisation from pre-conceived ideas and
in-genuine fear regarding merger and acquisition. Another area of focus of this
study is on the following aspects:
As a means of business survival
To realize the benefit of Mergers and
acquisition in Nigeria’s
To consider the option of Merger as a saving
rather than folding up.
Proffer practicable solution as to the problem
areas of merger and acquisition and recommending it as a viable option amongst
other option in the business environment.
SIGNIFICANCE OF THE STUDY
research project will be significant to the following:
Students preparing for various professional
examination and those of higher institution of leavening.
To the financial analyst
To the government
It will act as a guide for firms seeking for
mergers and acquisition
It will act as a tool for assessing the growth
in performance of merged banks.
1.5 SCOPE OF THE STUDY
scope of this research work includes textbooks, seminar papers, journals and
other expert’s literature on Merger and acquisition and financial management.
This project will form a very logical conclusion on Mergers and acquisitions. A
tool for better corporate performance using UBA group as a case study.
1.6 LIMITATION OF THE STUDY
researcher met with some difficulty such as academic demand, transportation
problem and financial constraint serve as limitations to the study. But all
these will not significantly affect the result of this study.
1.7 DEFINITIONS OF TERMS
Merger: This is simply exchange of voting
share by the shareholders of the companies in order to achieve uniting of
interest (i.e synergy objectives).
Amalgamation: This is the formation of an
entirely new company to acquire the net assets of two or more separate
companies that been wind up for that purpose.
Acquisition: A company acquires all the
assets and liabilities of another company in other to become a new owner.
Take over: This is a situation where the
majority of equity shares of a problematic company is taken over by another
Consolidation: Is to make ones position
of power stronger and more likely to continue or maintain the same level of
achievement, profit and success.
Profitability: Is the state of producing
a profit the degree to which a business or activities are profitable.
Corporate: Forms a single group or
belonging to or connected with a business.
Share/Stock: Is a unit of ownership in a
BACKGROUND OF UBA GROUP NIG. PLC
Bank for Africa Plc (UBA) is the product of the Merger of Nigeria’s third (3rd)
and fifth (5th) Largest banks namely the old UBA and erstwhile
Standard Trust Bank Plc (STB) respectively, and a subsequent acquisition of the
erstwhile Continental Trust Bank Limited (CTB). The Union
emerged as the first corporate combination in the industry of Nigeria
The history of the founding of the old UBA dated
back in the year 1946 and the erstwhile STB and CTB both in
1990. Although today’s UBA emerged at a time of history consolidation induced by
regulation the consolidated UBA was borne out of a desire to lead the domestic
sector to a new era of global relevance by championing the creation of the
Nigerian Consumer finance market leading a private/public sector partnership at
supporting the acceleration of Nigeria’s economic development, and growing the
institution from a banking to a one-stop financial foot prints as the face of
banking in the continent.
UBA just recently acquired liberty Bank,
the presence of Mr. Tony Elumelu an Economist and a financial guru as the Group
Managing Director is a big plus to the growth and progress of the new UBA.
1.9 STUDY OUTLINES
study shall be divided, into five chapters.
Chapter one consists of the introduction
of subject matter i.e mergers and acquisition of tool for corporate performance
(using UBA Group of Nigeria Ltd as case study).
Chapter two is essentially on literature
review of the subject matter.
Chapter three focuses on Research
Methodology and design. In this chapter, primary data collection method was
used by distribution of questionnaires to targeted audience through structural
and unstructured interviews.
Chapter four deals with data
presentation and analysis. It consists of data obtained in the questionnaires
shared to all level of staff in UBA group. Two hypothesis where tested with the
use of chi-square and each was tested at 95%.
While chapter five should consist the
summary of major findings of the study. It is a brief collection of all
relevant facts that underline the project. In this chapter, conclusion is made
base on imperical findings as well as recommendations and suggestions.