THE ROLE OF MERGERS AND ACQUISITIONS IN CORPORATE GROWTH AND DEVELOPMENTs
This study’s main objective was to examine how mergers and acquisitions contribute to business development and growth by using Access Bank Plc Abuja as a case study. With the help of a practical sample technique, a survey research design was used for the study, and 36 staff members from Access Bank Plc in Abuja were chosen as participants. Participants were given well-structured questionnaires, 30 of which were returned and validated for the study. Frequencies and tables were used to offer descriptive analysis, which answered the study question.Data were broken down into simple percentages for analysis. According to the study’s findings, Economies of Scale, Synergy, Product and Service Diversification, the Elimination of Competition, and Better Financial Planning are among the reasons why organizations choose merger and acquisition. According to the study’s findings, business organizations can grow effectively and efficiently through mergers and acquisitions. The study therefore suggests that, for the sake of strategic positioning, managers at organizations that have chosen merger and acquisition should identify high-risk sectors of their business and ensure that they receive appropriate attention on a continuing basis. In order to prevent organizational collapse and disintegration, businesses that used merger and acquisition as a growth strategy should integrate their systems.
1.1 Background of the study
Business organizations are created to accomplish a variety of corporate goals, including increased profitability and corporate expansion. One of the main metrics used to assess a company’s performance is growth. Given that businesses work in a dynamic macroeconomic environment, moments of economic instability pose a threat to their growth (Weston and Copeland, 1989). Corporate organizations are currently experiencing a financial crisis as a result of the recent global economic collapse. Merger and acquisition is one method available to corporate organizations during times of economic distress. Since the beginning of commerce, companies have combined in a variety of ways. However, combining two businesses is a challenging procedure because it affects every area of both businesses.
Executives must, for example, come to an agreement on how the merger will be financed and how authority will be distributed. Additionally, businesses must cope with things like layoffs, transfers, job title changes, and shifts in work responsibilities (Weber, 2005). Mergers, acquisitions, and consolidations are the three most common types of corporate combination.
A merger, according to Gaughan (2007), is the joining of two corporations so that only one corporation endures and the combined corporation ceases to exist. In a merger, the acquiring company takes on the obligations and assets of the combined business.Furthermore, the buying company keeps its original identity even though it can become a quite different company as a result of the merger. A company makes an acquisition when it acquires a controlling stake in another company, a legal subsidiary of another company, or some assets of another company, like a manufacturing site. DePamphilis (2003) defined an acquisition as the purchase of an asset, such as a facility, a business unit, or an entire organization.The difference between “merger” and “acquisition” may not appear to be significant at first glance because the end result is frequently the same: two or more businesses with different ownership are now working under one roof, typically to achieve a strategic or financial goal. However, depending on the sort of transaction, the strategic, financial, tax, and even cultural consequences of a sale may be extremely different.
Statement of the problem
The simplest way to define the current economic climate in Nigeria is to say that it is exceedingly unstable, with the issues showing up more in corporate organizations. The extent of the issue is such that national corporate organizations are rapidly losing market share, in addition to dealing with ongoing operating losses and a liquidity crisis that makes it impossible for them to meet demand in the cutthroat market. Low turnover, low profit, low dividend payout, declining growth rate, and high operational costs are other significant issues facing corporate organizations in the nation. Osaze (2004) believes that given the growing interdependence of markets for different goods and services as well as the escalating foreign rivalry, it is apparent that the world in which we live is undergoing profound change at the moment.Because of this, a lot of businesses are growing and extending their geographic reach. It’s interesting to note that Hit Harrison and Ireland (2000) believe that businesses that choose to expand typically work to increase their market share, attract new clientele, generate revenue, give shareholders and other stakeholders a return, etc., while businesses that decide against expanding are unavoidably doomed to failure because they lose clients and market share, devalue shareholders’ and stakeholders’ interests, and so forth. In this regard, Mandi (2003), who made a contribution, stated that over the past three years, growth through acquisition has been a crucial component of the success of many businesses operating in the new economy, and that merger and acquisition activity has been the single most crucial factor in increasing those businesses’ market capitalization.There is a ton of literature and research on mergers and acquisitions, but few, if any, of these studies specifically addressed how these transactions affect business expansion, productivity, and profitability. By addressing the questions of whether merger and acquisition is the appropriate course of action to rescue an organization in a financial crisis and the impact of merger and acquisition on corporate profitability, this study fills this research vacuum.
Objective of the study
The broad objective of this study is to examine the role of mergers and acquisitions in corporate growth and developments. Specifically, the study seek to:
- To examine the reason for opting for merger and acquisition by cooperate organization?
- To examine how Merger and Acquisition affect the growth cooperate organizations
- To ascertain if merger and acquisition serves as a viable option for effective performance in corporate organization.
- To ascertain if consolidation strategy improves productive behavior among employees of the acquired company
1.4 Research Question
- What are the reason for opting for merger and acquisition by cooperate organization?
- How does Merger and Acquisition affect the growth cooperate organizations?
- Does merger and acquisition serves as a viable option for effective performance in corporate organization?
- Does the consolidation strategy improves productive behavior among employees of the acquired company
Significance of the study
The research is significant because it will be helpful to those who monitor the economy and the general public. It will also give some insight into how banks are run throughout the reform era. Additionally, it will demonstrate how responsive merger and acquisition is to the assessment of steady economic growth. It will act as a body of protected knowledge that academics and researchers can consult. Finally, the study will offer sufficient information on the body of existing research on people’s problems during merger processes. The study will also be used as a resource by academics and students who seek to do future research in a relevant sector.