This research work titled “The effect of Merger and
Acquisition on an organizational performance shows the achievement of companies
For merger and acquisition to be worth as described, there
should be synergism, the amalgamation between two separate companies to form a
single company is known as merger also acquisition is the purchase of a
controlling interest on company by another company.
A merger can be between two companies with quoted share in stock
exchange. It can also be between companies falling under the same schedule.
The analysis aspect of this project talks about the data
and interpretation and the two essential aspect of research project It also the
imperative interpretation of result. The recommendation of the project
illogically treat the companies domicile in Nigeria that fall under oil
companies in Nigeria. It also raised to ensure a good relationship between two
The objective of the study will provide an insight and
measure the degree at which organization with another organization profitably,
increase in market share, cost saving (efficiency) product diversification.
TABLE OF CONTENTS
Table of contents
1.0 Background to
background of chevron Texaco Nigeria
1.2 Statement of
1.3 Objectives of
1.4 Significance of
1.5 Scope and
limitation of the study
1.8 Sources of data
1.1 1 Data analysis
1.12 Plan of the
1.13 Definition of
2.2 Why many merger
and acquisition don't work
2.3 Valuation of
the two companies before merger
2.4 The proposals
2.5 Reasons for the
2.6 Chevron Texaco
2.7 Chevron Texaco
3.0 The study area
3.1 Research design
3.2 Source of data
3.3 Method of data
3.4 Method of data
3.5 Method of
4.0 Presentation of
4.1 Testing of
4.3 Introduction to
analysis of questionnaire
4.5 Personal data
4.6 The decision rule
proper further stud
1.0 BACKGROUND TO
In all human activities, there are usually successes and
failures. Businesses are therefore no exception. In periods of boom as we experienced
in the mid seventies during the oil boom, many business firms and individuals
strived in an era of abundance and squander mania. In such an era, employment,
production and income are at there peak levels and. government expenditure rise
considerably. During this period also, no one complains and businessmen do not
think of means of survival and sustenance.
On the other hand, when the bay days are over and
down-turns take over the dooms clays arrive and business failure becomes the
other of the day as a result of adverse macro-economic condition. Consequently,
expansion is hindered for even surviving firms. This is the time when company
executives, government and individual remember to think of “MERGERS AND ACQUISITIONS”
as viability, belt tightening and survival.
To avoid increase in liquidation and bankruptcy of
companies, to stem the tide of increasing unemployment that might result from
closure of companies. “MERGER and ACQUISITION is a valuable route to pool
together the strength and synergies in similar organizations to generate
increasing business activities to sustain the future of our companies. “MERGER
AND ACQUISITION” MW from serious financial distress and provide such business
with new management and better access to new financial resources that will save
organization from negative effect of performance.
Every business organization expects to make profit ultimately.
Profitability justification and rational for remaining in business of course
investors, that is, the owner do not only see the profit level as a economic, etc.
The issue of Merger and Acquisiton in present day business
management has been a dream realized, Merger and Acquisition have played an
immense role in the external growth and
internal growth of leading companies worldwide.
In United State of America, merger started between 1890 to
1904 and as continue through to the present day. Presently, about two third [2\3]
of the large public corporation in the United States have merged in their
Merger And Acquisition must be seen as available means of
saving, companies from serious financial distress and provide such business with
new management and better access resources that will save an economy.
1.1 HISTORICAL BACKGROUND OF CHEVRON TEXACO
Texaco is a US based international oil and gas company,
which as integrated operations encompassing upstream and downstream oil,
chemicals and co-generation. The company originated in Texas in early part of
the century and has since grown to become one of the leading multinational oil
companies. Texaco, along with Chevron, owns 50% of caltex, which has extensive
activities in the far East and Africa.
Texaco, through upstream and downstream activities play a
role in the Africa oil industry. Texaco has a strong oil and natural gas
production base in the
United States with an international spread. of producing assets
ill the North Sea, south and Central America, Far East Australia and Africa.
Texaco African production activities are concentrated in Angola and Nigeria,
which together yield more than 20mbd of crude oil. Arigola has been the focus
of' exploration activities through various projects at Rala, Tamboril and
Sulele south. Texaco has maintained its oil production levels in Nigeria and
Angola during 1995. The company holds and operates a 20% working interest in a
consortium that maintained Texaco's share off-shore crude oil production at
9000 barrels a day, despite a 1994 strike by oil workers against the Nigerian
government. It also recently acquired from Statoll and BP a 300/0 equity
interest ill prime deepwater blocks near its current Nigerian operations.
Despite the civil war in Angola, which temporarily shut-in of two fields in the
southern portion of an off-store block, Texaco (200%) increase it share of
production increased slightly to 7000barrels a day at the southern end of the
block. Following the signing of ceasefire agreement late in 1994, Texaco has
been moving a head with plans to expand production off shore Angola and resumed
production from restored on-shore facilities. Refining is an important activity
for Texaco, which have seven refineries ill the US, various refinery assets in
Sought and Central America as refineries in Netherlands, UK and refining in the
fare East. Texaco's marketing activities include an extensive retail network in
the United States as well as strong positions In Europe, South and Central
America and West Africa. I n the Asia pacific region and in South Africa the
company has an extensive marketing presence through caltex.
West Africa, Texaco markets more than 20mbd through
networks In Nigeria, Ivory Coast, Cameroon and Togo. In October 2000 chevron
and Texaco agreed to merge their operations to become Chevron Texaco.
Prior to when Chevron and Texaco merge, Texaco Nigeria plc
is a company that was established in 1969 in Nigeria and is involved in oil
exploration and distribution and it is also listed in Nigeria stock exchange
and Texaco incorporation was Incorporated in 1926 as Texas corporation. It is
headquartered in White Plains, New York. It has its Nigeria office located at 8
McCarthy Street Lagos. It is also of the world's largest integrated oil
companies operating iii more than 150 countries worldwide.
In over forty years of operating in Nigeria Chevron Nigeria
limited (CNL) has established its self as a leader in oil and gas exploration
and production In 1963, the company discovers Nigerians Successful off-shore fieldworker
-located in the Western Niger-delta. It again blast the trail in gas
utilization when in 1997 it commissions the Escravos Gas protect- Nigeria's
first major gas utilization scheme. Chevron Nigeria limited is the operator of
the NNPC/Chevron joint venture in which The NNPC holds 60% with Chevron retaining
the balance of 40%. Chevron Corporation headquartered in Sa-n Francisco
California. Its Nigerian office is located at Chevron drive Lekki-Peninsula
Lagos. It is operating a nearly a 100 countries worldwide
1.2 STATEMENT OF
The adoptions of merger and acquisition in tackling the
organizational problems have become a debatable issue in modern time. Many
organization are not willing to adopt Merger and Acquisition as a solution to
the dwindling organizational performance due to some the following reasons;
Initial hostility and
bad blood due to the modalities of merger
Position of new
Inability to accept
changes by the existing work force and staff union
representation and lack of deliberate acculturative and staff orientation
These among many problems are what this research intends to
1.3 OBJECTIVES OF
The objective of the study will provide an insight and
measure the degree at which organizations has achieved the key rationale of it MERGER
with another organization profitably, increase in market share, cost saving
(efficiency) product diversification.
To discuss in details the preamble, process and format that
Merger and Acquisition takes, and to explain various definitions of Merger And
Acquisition, its forms and when they take place.
To discuss in details preliminary statement, processes and
format that Merger and Acquisition takes and also to know how, if they are able
to effect organizational performance and if their effect is beneficial.
To discuss why Merger and Acquisition don't work, problems
and why Merger and Acquisition is embarked upon despite all problems inherent
and it prerequisites.
1.4 SIGNIFICANCE OF
As a result of economic recession in Nigeria that led to
the closure of many companies makes it important for the benefit of Merger and
Acquisition to be examined from a national perspective rather from individual
Furthermore, in view of the fact that most of the firms
with derived finance and management attributes need for Merger And. Acquisition
are foreign owned. Care has to taken so that the games of the indigenization
exercise are not lost.
It can be recalled that the deregulation of the economy by
the present government has been making production activities very difficult for
the oil sector in terns of the price input both foreign and domestic, hence
adversely affected the prices of the Merging companies.
Finally, in the light this, it has become imperative to
find out the extent of the effect which Merger and Acquisition has on the
performance of Chevron and Texaco. And the economic viability of Merger and
Acquisition as growth or survival options for business concern in Nigeria.
1.5 SCOPE AND
LIMITATION OF THE STUDY
The scope of the study will look at the composition and
structure of Merger and Acquisition with particular reference to Chevron Texaco
Company in Nigeria, it will be limited to a few years back and this is done so
as to guide against over flogging of the subject concern.
As for the limitation of the study, the problem of
financial constraint on the part of the researcher limits the souring of
materials. There is also the uncooperative attitude of some of the library attendants
and lack of adequate and appropriate texts. Also harassment and uncooperative
nature of the workers of the companies use as case study. Despite these
constraints, the study will stand the test of time in its constraints and
determined consultation with the appropriate texts, journals, magazines etc.
They are the ideas and opinion of some authors and experts
on the subject matter under consideration. It also intends to review the effect
of Merger and Acquisition on an organizational performance. It intends to
review and evaluate performance of the two companies before and after Merge.
Furthermore it also intends to review various forms of Amalgamation of
companies, and also to review some of the reasons why Merger and Acquisition
don't work or simply wobble along.
In this study, we shall employ both quantitative techniques
and descriptive method of analysis. The use of correlation analysis will be
employed. The secondary data will be collected from the annual report and
statement of accounts of the merged companies. Other source of data includes
newspapers, journals, textbooks and magazines etc.
Primary and secondary method of data collection is to be
employed in this research. The interview method of gathering data will be
extensively employed for the purpose of this research work. This is because the
Merger and Acquisition between the two companies had already taken place. The
secondary information will be extracted from publications, journals and
documents etc, which will help in the completion of this research work.
The correlation co-efficient analysis is the analytical
technique to be employed in testing the hypothesis. This technique help in
measuring the strength of a linear relation between two or more variables that
is, the unit change in a variable associated with the change in another
1.8 SOURCES OF DATA
The data to be used for this research work comes from two
PRIMARY SOURCES OF DATA: The primary source of data consists of interview and questionnaire.
SECONDARY SOURCES OF DATA: The secondary sources of data on the other hand will
consist of publications, journals, annual reports, text books, news papers and
information from websites.
1. Does Merger and acquisition have positive impact on an
2 Does Merger and Acquisition have negative impact on an
3 Is it
necessary for an organization to merge?
4 How important
is merger and Acquisition
5 Is Merger and Acquisition the best solution to organizational
6 Why does Merger and Acquisition don't work in. some
This is the aspect that deals with testing of the
hypothesis, chamber's dictionary define a hypothesis testing as a tentative
assumption for evaluation, basis of discussion for measuring of academic
performance hypothesis testing could also be likened to a premise ready for an
examination, the correlation analysis will be used for hypothesis in this
research study. The form of application will be fully discussed in the fourth
chapter. The research question asked is:
1. Merger and Acquisition does not have any impact or changes in
an organizational performance = H0.
2. The impact of Merger and Acquisition will have a positive
effect in an organizational performance = HA
1.11 DATA ANALYSIS
The following quantitative and qualitative method of data
analysis shall be employed in this research work; Correlation analysis, Chi
Square (X2), Jury of expert opinion method.
1.12 PLAN OF THE
The complete plan of the study is organize as follows:
Chapter One embodies
the introduction, Historical background of Chevron Texaco Nigeria, objectives,
of the study, Research methodology, Hypothesis Testing, Scope and Limitations
of the study, Definition of terms.
Chapter two contains
the literature review, under which the researcher will review theories and
previous studies (various views) on the impact of Merger and Acquisition on an
organizational economic development, types of merger. Why Merger and
Acquisition don't work or simply wobble along. Considering internal perspective
to mention but few.
Chapter three will
provides the subjection theoretical position of the impact of Merger and
Chapter four is mainly
on the presentation and analysis of data collected.
Chapter five provides
the summary, conclusion and recommendation of the study.
1.13 DEFINITION OF
MERGER: Merger is the
combination of two or more companies in which only one firm survives as a legal
absorption is a combination of two or more companies into an existing
companies. All companies except one loose their identity in a merger through
consolidation is a combination of two or more companies into a new company. In
this form of merger, all companies are legally dissolved and a new entity is
acquisition may be defined as an act of acquiring effective control by one
company over asset and. management of another company without any combination
of companies. Thus, in an acquisition two or more companies may remain
independent, separate legal entity, but there may be change in control of
TAKEOVER: A takeover
may also be defined as obtaining of control over management of the company by another.
An acquisition or take over does not necessarily entail full legal control. A
company can have effective control over another company by holding minority
HOLDING COMPANY: A
company can obtain the statue of a holding company by acquiring shares of other
companies. A holding company is a company that holds more than half of the
nominal value of the equity capital of another company called a subsidiary
company, or controls the composition of its Board of Directors.
realized in a Merger where the performance of the confined firm exceeds that of
its previously separated parts.
ECONOMIES OF SCALE: The
benefit of size in which the average unit cost falls as volume increases.
TENDER OFFER: An offer
to buy current shareholders stock at a specified price, often with the
objective of gaining control of the company. The offer is often made by another
company and usually for more than the present market price.
WHITE KNIGHT: A
Friendly acquirer, at the invitation of target company, purchase shares from
the hostile bidder(s) or launches a friendly counter bid in other to frustrate
the initial unfriendly bidder(s).
STRATEGIC ALLIANCE: An
agreement between two or more independent firms to cooperate in other to
achieve some specific commercial objective.
This study was primarily aimed at measuring the effect of
Merger and Acquisition on organizational performance taking Chevron and Texaco
"merger" as a case study.
Merger and Acquisition was the main driven by the pressure
to growing companies, a way of ensuring their stay, the competitive strategy pressured
by enterprise to deliver sustainable superior performance over rivals, and
pressure from shareholders, for a return that justifies the return ratios of
equity investment and how growth helps in coping with the need to deliver
James C Van Horne and John
M. Wachwocz, Jr. Fundamentals of Financial Management
Keenam.M and White L. (1988):
Mergers and Acquisition Lexington Books Toronto.
Pandey I.M. (2000): Financial
Management Vikas Publishing House PVT Limited.
Pandey I.M. (1993): Financial
Management Vikas Publishing House PVT Limited.
Business Newspaper I.C.A.N
(1993): Monday 9th February 2004 page 20. The Nigerian Accountant,
Official Journal of the institute of chartered Accountant of Nigeria, October/
December 1993 volume xxvi No 4 page 43.
Giwa F.F. (1987): Issues in
Merger and Acquisition, Vanguard Newspaper Page 25.
World Socialist Analysis website