Comparative Merger Acquisition. case of merger and acquisition, a reasonable time should be allowed for compliance and implementation should be closely monitored.
Data and Methods
The study adopted the quantitative research technique based on ex-post factor design. Measures of corporate performance analyzed in the study are Gross earning, current ratio, return on capital employed and dividends per share. Current ratio shows the ratio of current asset to current liabilities.while return on capital employed shows company profitability and efficiency.
Secondary data on the variables (return on assets, bank asset ratio, and capital adequacy ratio for the period 1996-2014 were sourced from the annual reports of the Nigeria Deposit Insurance Corporation (NDIC). The independent sample t-test was used to determine the extent to which the performances of these indicators differ between the pre-and post-consolidation periods. The independent sample test technique of data analysis was adopted because it is a robust
Method of comparative analysis.
The result presented in the above table shows a decrease in the mean performance of return on capital employed from the pre-merger and acquisition value of 3.94 to 2.08 in the post-merger and acquisition period ( Submit Jurnal Internasional , 2011).
This is an indicator of negative performance. To determine whether or not this difference is
Significant, the result of the independent sample test.
The independent sample test result does not show evidence of significant difference between pre-and post-merger and acquisition means of return on assets. This result suggests that consolidation through mergers and acquisitions did not lead to significant reduction in the corporate performance of the Nigerian banking sector.
The statistics presented in table 3 shows that the mean of current ratio increased from a pre-merger value of 33.5578 to 45.9111 in the post-merger and acquisition period this result indicates an increase in the size of the banking sector relative to the entire economy, an indication of positive performance.
Table 3b shows that consummation of merger and acquisition agreements in the banking sector led to significant deterioration in current ratio. The result suggests that inefficiency attended the implementation of the exercise and clearly explains the inability of the massive capital inflow into the banking sector, as a result of the upward capital review , to guarantee some measure of stability in the sector.
For gross earning, table 3a shows a decline from the pre-merger and acquisition mean of 36.6667 to 17.4489 in the post-merger and acquisition period. This result is rather worrisome. It suggests that rather than enhance capital adequacy mergers and acquisitions that characterized the 2004/2005 programme led to a decline in capital adequacy ratio.
Table 3b shows that consummation of merger and acquisition agreements in the banking sector led to significant deterioration in earning per share. The result suggests that inefficiency attended the implementation of the exercise and clearly explains the inability of the massive capital inflow into the banking sector, as a result of the upward capital review, to guarantee some measure of stability in the sector ( Submit Jurnal , 2011).
Summary of Findings, Conclusion and Recommendations
Evidence emanating from the study shows that (i) there is no significant difference in the profit performance of the banking sector (as measured by return on capital employed) between the pre-and post-merger and acquisition periods (ii) there is evidence of significant increase in the pre- and post-merger and acquisition means of current ratio (iii) there is a significant reduction in earning per shares between the periods. Following from the above findings, the study concludes that mergers and acquisitions have significant impact on the corporate performance of the Nigerian banking sector. We therefore recommend that due diligence should adopted in the identification and selection of compatible partners in order to achieve synergy. In the case of policy-induced merger and acquisition, a reasonable time should be allowed for compliance and implementation should be closely monitored.
However, for this target to be met by the existing banks then, merger and acquisition was one of the required means used. Consequently, these led to the reduction of Nigeria’s banks from 89 to 25 in 2005, 23 in 2006, 22 in 2007, 19 in 2009 and 21 till 2017, with the approval and addition of Suntrust and Jaiz banks respectively. Furthermore, early 2019, the number of the banks further dropped to 20 with the most recent acquisition of Skye Bank Plc by Polaris Bank Plc and Diamond Bank Plc by Access Bank Plc (fsmatovu, 2019) respectively. However, the new banks were designed to allow for a fresh start and rejigging of the banks business models and reconstruction of its credit portfolios (Okga, 2017).
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