This research work was aimed at determining the implication of
mergers and acquisitions their effects on banks performance as regards to
United Bank for Africa (UBA). In this study, the objectives of the researcher
Find Out the financial implications of mergers and acquisitions in
Nigeria commercial bank sector. Whether mergers and acquisitions can
solve the problem of financial insolvency. If there is any benefit to be
derived from mergers and acquisitions whether survival, growth and benefits (ie
profit maximization) commercial banking sector can only be achieved through
mergers and acquisitions. Can mergers and acquisitions be a tool for performance
evaluation. The researcher was a survey as stated. The instrument used was
questionnaire. The data collected was analyzed and tabulated. The
result revealed that banking sector in Nigeria could perform well,grow and
maximize profit through mergers and acquisitions. Ideological problem may arise
in setting organizational goals as a result of the fusion. There are some
legal aspect attached to them which is based either on their economic effects
or legal states. It also revealed that many shareholders has not
knowledge of the impact of mergers and acquisitions. Above all, the researcher
gave some recommendations, which would benefit the banking and all other
investors if strictly adhered to.
TABLE OF CONTENT
Table of content
1.1Background of the study
1.2Statement of problem
1.3Objectives of the
1.4Significant of the study
1.7Scope of the Study
1.8Limitations of the Study
1.9Definition of Terms
2.0Review of Related Literature
2.1 Regulatory Issues in Mergers and
2.2 Types of Merger
2.3 The Legal Framework of Mergeer
2.4 Reason for Merger and Acquisition
2.5 Mergers and Acquisition and
2.6 Advantages of Merger and Acquisition
2.7 Disadvantages of Mergers and
2.8 Problems of Bank Merger and Acquisition
design and methodology
3.1 An Overview of Research Methodology
3.2 Research Design
3.3 Population of the study and Sample Size
3.4 Sources of Data Collection
3.5 Data Treatment Techniques
3.6 Validity and Reliability of Test
4.0Data Presentation and
4.1 Analysis Presentation
4.2 Test of Hypothesis
5.0Summary of findings, conclusion and
5.1 Summary of
1.1 BACKGROUND OF THE STUDY
The relevance of banks in the economy of any nation cannot be
overemphasized. They are the cornerstones of the economy of a country. The
economies of all market-oriented nations depend on the efficient operation of
complex and delicately balance systems of money and credit. Banks are an
indispensable element in these systems. They provide the bulk of the money
supply as well as the primary means of facilitating the flow of credit."
Consequently, it is submitted that the economic well being of a
nation is a function of advancement and development of her banking industry
According to the value increasing school, mergers occur, broadly,
because mergers generate ‘synergies’ between the acquirer and the target, and
synergies, in turn, increases the value of the firm (Hitt et al., 2001). The
theory of efficiency suggests that mergers will only occur when they are
expected to generate enough realizable synergies to make the deal beneficial to
both parties; it is the symmetric expectations of gains which results in a
‘friendly’ merger being proposed and accepted. If the gain in value to the
target was not positive, it is suggested, the target firm’s owners would not
sell or submit to the acquisition, and if the gains were negative to the
bidders’ owners, the bidder would not complete the deal.
Mergers and acquisitions (M&As) are a global phenomenon, with
an estimated 4,000 deals taking place every year. However, they are not a
recent development; four periods of high merger activity, also known as merger
waves, occurred in the United States in 1897-1904, 1916-29, 1965-69, 1984-89
and 1993-2000 (ILO, 2001; Jimmy, 2008; Mangold and Lippok, 2008) while M&As
staged in Nigeria in 2004/2005 with effect from January 1, 2006 under
governorship of Professor Charles Chukwuma Soludo at the Central Bank of
Nigeria (CBN). On one month assumption of office/duties, Charles Soludo worked
out details of an agenda for repositioning the CBN and the financial system for
the 21st century with an outcome
of pruning the Nigerian eighty nine (89) Banks to twenty five (25) on or before
December 31, 2005.
Therefore, the terms mergers, acquisitions and consolidation may
often be confused, look similar and mostly used interchangeably. However, the
three have different meanings.
A merger refers
to the combination of two or more organisations into one larger organisation.
Such actions are commonly voluntary and often result in a new organizational
name (often combining the names of the original organizations).
An acquisition, on
the other hand, is the purchase of one organization by another. Such actions
can be hostile or friendly and the acquirer maintains control over the acquired
Nigeria banking reform is a product of the global efforts at
revamping the world economy. First it was a millennium development goals
(MDG), nest it was new partnership for Africa Development (NEPAD) Strategy
before the National Economic Empowerment and Development Strategy
(NEEDS). All these have been thing in common: The Economic Development of
Nigeria for a long time in the history of policy reforms in Nigeria, developing
the banking sector was given priority attention. Various directive were
given to the banking sector with the aim of developing other sectors, this
propelling the entire economy.
According to berger et al, (1998), the restructuring effect is a
dynamic effect of the (M&A) due to a change in focus in which the
institution changes its size, financial condition or competitive position from
their perform values, after consummating M & M. In a simple example as
stated, the merger of the N600 million banks and the N400 million bank might
eventually result in a merged bank of only N810million rather then the
N1billion bank. This could occur, for example, if the purpose in the
mergers was to reduce excess banking capacity in the local market. This
reduction in bank size from the N1billion perform bank to the N810 million
actual bank would likely increase its proportion of assets devoted to small
business. Lending since smaller institutions tend to have higher
proportion of these loans.
Merger and acquisition or any other form of consolidation may
influence bank interest rates, competition and transmission mechanism of
monetary policy in so far as the increase in size and the opportunity for
reorganization involved may either provide gains in efficiency that bear an
marginal costs or give rise to increase in market power, or both together.
Umoren (2007), posits that merger and acquisition is simply
another way of saying survival of the fittest that is to say bigger survival of
the fittest that is to say a bigger, more efficient, better capitalized more
skilled industry. It is primarily driven by business continues and or market
forces and regulatory interventions. This issues therefore, which this
study intend to address are whether mergers and acquisition will bring about
efficient reliable and sound capital base for the bank that fully embraced
mergers and to what extent can bank merger boost the confidence of the
customers, the investors, the shareholders and ability to finance the real
sector of the Economy.
Since merger and acquisition cannot be over emphasized, this
prompted the researchers’ interest to asses the perceived consequences of
mergers and acquisitions on the banking in Nigeria.
1.2 STATEMENT OF THE PROBLEMS
Over the years, the most disturbing problems that facing the bank
mergers and acquisition in Nigeria includes the following;
1.There is problem of merger in the productivity
of Nigerian Banks.
2.There is problem of merger in reinstate public
confidence on Nigeria banks.
3.Problem of bank merger in succeeding in curbing
bank failure in Nigeria.
4.There is problem of merger and acquisition in
improving the services rendered by Nigerian banks.
5.There is problem of merger and acquisition in
facilitate economic growth and stability in Nigeria.
6.There is problem of merger and acquisition in
other sectors of Nigeria economy.
1.3 OBJECTIVES OF THE STUDY
The main objectives that made the researcher go to this topic are
i.To find out the effect merger will have on the
productivity of Nigeria banks.
ii.To find if merger will reinstate public
confidence on Nigeria Banks.
iii.To find if bank merger succeeded in curbing bank
failure in Nigeria.
iv.To find if merger and acquisition will improve
the services rendered by Nigerian banks.
v.To find out if merger and acquisition will
facilitate economic growth and stability in Nigeria.
vi.To find if bank merger and acquisition will
affect other sectors of the Nigerians economy.
1.4 SIGNIFICANCE OF THE STUDY
This study will be immense benefit to bank directors, prospective
investor, employees, financial analyst, financial consultants and the public in
The study wills also
facilitates the understanding of participant banks that intends to merger. It
will also lead to growth, expansion, as well as improvement of the service
rendered by Nigeria banks. The study will also leads improved technical
know how in the banking industry.
This study will in addition
service as a guide and a reference material to other students conducting
similar research work on the same or related topic.
1.5 RESEARCH QUESTIONS
The following are considered relevant as research questions in the
course of this study;
i.Does merger affect the productivity of Nigeria
ii.Does merger reinstate public confidence on
iii.Has bank merger succeeded in curbing bank
failure in Nigeria?
iv.Does merger and acquisition improve the services
rendered by Nigeria banks?
v.Does merger and acquisition facilitate economic
growth and stability in Nigeria?
vi.Does bank merger and acquisition affect other
sectors of the Nigeria Economy?
1.6 RESEARCH HYPOTHESIS
In the course of this study, the following research hypothesis was
Bank merger do not affect the productivity of the banking sectors.
Bank merger affects the productivity of the banking sectors.
Bank merger has not reinstated public confidence on Nigeria banks.
Bank merger has reinstated confidence on Nigeria banks.
Merger and acquisition have not improved the service rendered by Nigeria banks.
Merger and acquisition have improved service rendered by Nigeria banks.
1.7 SCOPE OF THE STUDY
The research work would direct itself on merger and acquisition
and their effects on bank performance with respect to limited bank for Africa
It would highlight on the
need for investing public to understand the financial implication (involvement)
in mergers and acquisitions before embarking on it. The researcher would
consider mergers and acquisition as a key factor to overcome economic
recession as considered to key person, who would furnish detected information
about banks that are involved in merger and acquisition.
TERMS AND CONDITIONS APPLY
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