AN ASSESSMENT OF THE IMPACT OF MERGERS AND ACQUISITION IN THE NIGERIAN BANKING INDUSTRY

 

AN ASSESSMENT OF THE IMPACT OF MERGERS AND ACQUISITION IN THE NIGERIAN BANKING INDUSTRY




 

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND

The modern trend all over the world has made mergers and acquisition one of the acceptable strategy for expansion due to the dynamism and complexities within the business environment. This was resulted from the realization that success in business can in most cases be efficiently achieved through free enterprises.  In a country like Nigeria where the economy is in a recessionary and depression state, the most important task of management is to adopt a strategy for survival and growth. Once this is achieved, the need to strengthen its position for growth and expansion ensure one of the strategies for survival and growth in such a depressed economy like Nigeria is merger and acquisition. It is in line with this thinking that this was research was conducted.

 

On a general note, the concept of merger and acquisition is basically at a very young age in Nigerian economy in general and more especially the banking sector. It was on July 6th 2004 that the Central Bank of Nigeria (CBN) announced major policy that bring merger and acquisition issue to forefront of discussion. The CBN decided to increase the minimum net shareholders’ fund (net capital) to N25 billion up from N1 billion (which was just raised to N2 billion in January, 2004) with December 31st 2005 as the deadline of compliance.  However, recent developments in the industry have shown that increasing the capital base is not the only magic wand that will solve the problem of Nigerian banking sector. We have seen so-called big banks almost crashing because of irresponsible and reckless management.

 

1.2       STATEMENT OF RESEARCH PROBLEM

It is argued theoretically that the growth of a firm could be achieved through the application of merger and acquisition strategy. The important questions the researcher is now faced with are:

i)              What are the reasons for success and failure of merger and acquisition?

ii)            What are the causes of merger and acquisition?

iii)          Does the law have anything to do with it?

iv)          What are the problems faced during and after merger and finally, how are the employees affected?

The answer to these questions therefore becomes the main concern of the researcher. This study analyzes the pre and post operation result of the banks that experienced merger and acquisition in Nigeria.

 

1.3       OBJECTIVES OF THE STUDY

The general objectives are to examine mergers and acquisition in the Nigeria banking industry, other objectives of the study include:

i)              To assess the impact of mergers and acquisition in the banking industry whether beneficial or otherwise.

ii)            To know whether mergers and acquisition in the industry will be able to achieve the much needed stability in the banking sectors.

iii)          To offer or give some useful recommendation toward solving the identified problems.

iv)          To examine whether the merger and acquisition contribute to improving the efficiency and effectiveness of the effective banks.

 

1.4       HYPOTHESIS

For the purpose of this study, the following hypothesis was formulated:

HO:      Mergers and acquisition have no impact on the performance of the banking sector.

H1:       Mergers and acquisition have impact on the performance of the       banking sector.

 

1.5       SIGNIFICANCE OF THE STUDY

Under the currently depressed Nigerian economy, survival of organization has become an important consideration. Hence, it is pertinent for corporate entities to always give the national economy and optimum consideration before making important investment proposals. Mergers and acquisition was therefore examined as a means of attaining operational efficiency, corporate growth and the general improvement in the national economy. The study seeks to contribute to the available literature and knowledge on the issues of mergers and acquisition in Nigeria. The study will also serve as a scholarly contribution towards assessing the performance of organization before and after the merger. Hopefully, students’ future researchers in this area will find the outcome very useful.

1.6       SCOPE OF THE STUDY

This study will strictly be on mergers and acquisition in the Nigerian banks and it intended to assess the impact of mergers and acquisition in the banking industry. The study is restricted to the merger and acquisition of United Bank for Africa Plc (UBA) as a case study.

 

1.7       LIMITATION OF THE STUDY

-           A good research work requires a lot of work to be done, but there are some problems that are likely to hinder the research from carrying out proper research.

-           Time factor is one hindrance, as there is limited time available to the researcher.

-           Collection of data from the company is another problem as most organizations see some information as highly confidential which they are not ready to supply.

-           People answering the question may waste your time, some even give you wrong or misleading answers to the questions you ask. However, this research will try to cover as much as possible, the topic at hand and overcome these problems.

 

1.8       DEFINITION OF TERMS

i)              Merger: This is the joining of two separate companies to form single company while the other company ceases to exist.

ii)            Acquisition: Is the purchase of whole or partial transfer of control of the assets, liabilities, employees, management, technical relationship and expertise of one corporation to another.

iii)          Stability: Is the state of things being uncharged that is not likely to give way or overturn or something that does not change within a range of time.

iv)          Trends: Means the general direction in which something is developing changing or heading towards.

v)            Conglomerate: A firm that deals in many different unrelated products.

vi)          Diversification: This occurs when a company activity seeks to absorb new products and/or new market where it was no previous market presence.

vii)        Ailing: To cause problems for major banks.

viii)      Banking Industry: The companies engaged in the business of offering financial services of keeping money for individuals or companies, exchange currencies, make loans and offer other financial services.

 

CHAPTER TWO

LITERATURE REVIEW

2.1       INTRODUCTION

This chapter reviewed the existing literature in the field of merger and acquisition the conceptual framework of other studies will also be conceptualized. Mergers and acquisition, be it in any sector of an economy, is aimed at strengthen the performance and survival chance of the merging firms. Therefore, mergers and acquisition in the Nigerian banking industry is highly inevitable if the financial sector need to be sanitizing for the purposes of building confidence in the mind of the major player of the sector. Mergers and acquisition being a global phenomena attracted numerous studies and debates nationally or internationally to achieve business objectives.

 

2.2       THE CONCEPTS OF MERGERS AND ACQUISITIONS

The spate of mergers and acquisition activities can be traced back to the period around 1855-1905 in the USA. However, the first merger exercises in Nigeria were witnessed in 1982, with the approval of mergers of United Nigeria Insurance Company Limited and United Nigeria Life Insurance Company Limited. Since 1990s, there have been mergers and acquisition in several sectors of the Nigerian economy some of the major ones are stated below are Investment Banking and Trust Company Limited (IBTC) acted as financial advisers in many of these mergers transactions that is acquisition of 7s of Guarantee Trust Merchants Ltd (now Union Merchant Bank Ltd) by Union Bank of Nigeria Plc in 1995. In 1996, acquisition of 70% of Meridian Equity Bank of Nigeria Ltd (now Equity Bank of Nigeria Ltd) by Nigerian Intercontinental Merchant Bank Ltd (now Intercontinental Bank Plc) and also the acquisition of 100% of Nigeria Arab Bank Plc (now Assurance Bank Plc) by National Insurance Corporation of Nigeria in 1997 etc. (SEC, 2003).

 

Kantudu (2005) viewed merger as a combination of two or more companies in which all but one of the combining companies ceases to exist and the surviving company continues in operation in its original name.  From the legal point of view, Section 590 of the companies and Allied Matters Decree (CAMD) of 1990 stipulate that mergers have been designed as “any amalgamation of the undertaking of any part or whole of the interest of two or more companies or corporate bodies”.  Acquisition on the other hand involves the purchase of controlling interest in a company by another company. It is the process of acquisition (through purchase of stock) or control by a company in another making the other company, the subsidiary of the acquiring company. In a nutshell, acquisition is a form of corporate response for re-organization.  Kantudu (2005) define acquisition as a situation whereby the purchasing company ends up controlling the purchased company.

 

Kurfi (2003) in his words define acquisition as technically an act of acquiring effective control by one company over the assets and management of another company without necessarily combining the companies.  Agbor (2003) define acquisition as “the takeover by one company of sufficient shares in another company to give the acquiring company control over the other company.  Vanhorne (1998) define merger as “a combination of two corporations where only one survives. The merged corporation goes out of existence leaving its assets and liabilities to the acquiring corporation”.  The definition given by different authors with respect to mergers or acquisition have the same meaning but with different wordings. One can therefore conclude that merger is technically a combination or integration of two or more existing companies with the combined companies choosing the name of one of the companies or taking a completely new name. If the name of one of the companies is trained, then the other will go into liquidation. On the other hand, if a new name is taken, the two existing companies will go into liquidation. Acquisition/takeover is a technical way of acquiring and having total control over the assets and liabilities of the acquired company, that is, the acquired company ceases to exist forever and has to go into permanent liquidation, Kurfi (2003).

 

2.3       TYPES OF MERGERS AND ACQUISITION

Merger and acquisition are essentially corporate growth strategies by external means rather than internal development of products, markets, technologies etc. In this view, according to Kurfi (2003), merger is classified into three main types viz:

i)              Horizontal merger

ii)            Vertical merger

iii)          Conglomerate merger

i)              Horizontal merger:  This is a combination of two or more companies in the same stage of production/distribution or area of business. Horizontal merger is also referred to as replicative merger in that companies that are in competition with one another would merge from a single entity to benefit from synergy, economies of scale and exploit more benefits in the market, example, the combining of two or more textile companies or two soft drink companies to gain better share of the market.

ii)            Vertical merger: This is a combination of two or more companies engaged in different stages of production or distribution to complement one another. In this type of merger, the companies involve are not in competition with one another, but have a seller-buyer relationship. Example, the combining of a poultry farm with poultry feed mill, or merging a spinning company and weaving company.

iii)          Conglomerate merger: This is a combination of companies engaged in unrelated lines of business activity. The companies involved are not in competition with one another nor do they have buyer-seller relationship. Example, the merging of textile form, cement company, soft drinks company etc.

 

According to Hannatu (2005), acquisition is also divided into three types and may be in the form of:

i)              Horizontal acquisition

ii)            Vertical acquisition

iii)          Conglomerate acquisition

i)              Horizontal acquisition: This is the acquisition of a firm in the same industry as the acquiring firm or company. The companies compete with each other in their products.

ii)            Vertical acquisition: This involves companies at different steps of the production process. The acquisition by an airline company of travel agency would be a vertical acquisition.

i)              Conglomerate acquisition: The acquiring company or firm and the acquired company or firms are not related to each other.

 

2.4       REASONS FOR MERGER AND ACQUISITION

The purpose of merger and acquisition is to locate value. But motives vary and many reasons have been proposed by theorists and financial managers as to the rationale for merger and acquisition. Kantudu (2005), advances reasons for merger and acquisition as follows:

i)              Reduction in operating cost: Companies as a result of the possible elimination of duplicated functions such as management’s administration and accounting functions.

ii)            Economic of scale as a result of the company combination of the operation of two or more companies

 

Atedo (2003) also come up with some reasons for merger and acquisition which are as follows:

i)              Increase in competitiveness and expansion of the company’s product range.

ii)            Creation of a stronger company with increase competitive ability and increased prospects for shareholder’s return.

iii)          Rationalization of operation of related companies in the small industry.

iv)          Enhanced corporate development of the economy resulting from stronger companies and industries

 

2.5       POSITIVE IMPACT OF MERGER AND ACQUISITION

a)            Financial benefit of merger and acquisition

b)            Other positive impact

a)            Financial positive impact of merger and acquisition as stated by Kurfi (2003) are:

i)              Growth opportunity: A company that may be constrained to grow through internal development due to shortage of funds can but grow externally by merging with another company through exchange of shares and thus eliminating the financial constraints.

ii)            Investment opportunity: A company that does not have enough internal opportunity to invest its surplus cash can use it to acquire some other companies. Thus acquisition would provide investment opportunities for shareholders surplus funds which would increase the market value of the shares.

iii)          Borrowing power: A merger of two companies with fluctuating by negative correlated cash flows can bring stability of cash flows of the combined company. Thus, the risk of insolvency can be reduced and the capacity of the combined company to service a large amount of debt could be enhanced due to the financial stability of the company therefore the borrowing capacity of the combine company would be enhanced.

iv)          Cost effectiveness: A combined company is able to realize economies of scale in transaction and floating cost related to an issue of capital. The merged company makes a largest security issues and thereby achieve effectiveness.

b)            Other positive impacts

i)              Provide better platform for more effective banking regulations and policy realization.

ii)            Reversal of  thinned out industry manpower

iii)          Banks involved in merger and acquisition becomes more internationally competitive especially in West Africa.

 

2.5.1    Negative impact of Merger and Acquisition

The following are some of the negative impact of merger and acquisition:

i)              Managerial ability of sufficient caliber to handle the aggregates of men prosperities and transactions is difficult to find.

ii)            Bigness leads to extravagances, some expenditure are not watched carefully.

iii)          Details that are important to small companies are often overlooked in large once such details may be detrimental to any department within the big organization.

 

2.5.2    Difficulties and Success of Merger and Acquisition in Nigeria

Kantudu (2005) gave three important points as difficulties of merger and acquisition in Nigeria which are as follows:

i)              Resistance by Directors, labour union, employees and shareholders of target companies.

ii)            Loss of job arising from elimination of duplicated list.

 

2.5.3    Success Factors in Merger and Acquisition

Some success factors of merger and acquisition are as follows:

i)              The support of the major shareholders of the companies holding more than say 5% of the share is paramount.

ii)            General support of the Nigerian shareholders group in the companies

iii)          Support of the company’s labour force

iv)          Experience and expertise of financial advisers

v)            Correct packaging and presentation of application to SEC and the NSE to avoid unnecessary delays.

2.5.4    Other important issues in Merger and Acquisition

The Relevant Statutes/Regulations

The statute which provides the legal framework within which mergers and acquisitions can be carried out in Nigeria is the Investment and Securities Act (ISA), 1999. Without going into too much detail, the ISA (among other things) repealed the provision of the Securities and Exchange Commission (SEC) Decree 1988 and also repealed part xvii of the Companies and Allied Matters Act (CAMA) 1990 (dealing in company’s securities) which contained detailed provision relating to the public offer and sale of securities, unit trust and mergers and takeovers. Equivalent and in some cases more detailed provision relating to these and other matters can now be found in ISA and in the rules and regulations issued by the Securities and Exchange Commission (SEC), pursuant to section 258 and 262 of the ISA.

 

2.5.5    Steps necessary in Mergers and Acquisition

The basic steps that a company must take in ensuring that the merger is legally consummated are as follows:

i)              Decision to combine by the companies involved

ii)            Fact finding assembles necessary data and product sales etc by companies involved

iii)          Initiation identity, prospects through the board and management

iv)          Confirmation consent of Board of Directors and shareholders

v)            Negotiation between the key officers of the companies

 

Apart from the above, the legal and procedural requirements are as follows:

i)              Preparation of scheme of arrangement, and this contains the agreed terms and conditions of the merger and acquisition

ii)            Court ordered meeting in line with CAMD, the Federal High Court summons separate meeting of the shareholders of both companies to consider and approve the scheme of arrangement.

iii)          Report to court the outcome of the meeting

iv)          Obtain final sanction from the court to proceed with the merger and acquisition

v)            Filing of the court order with the Registrar of companies

vi)          Seal deals and implement terms share exchange or cash exchange

 

 

2.5.6    Specific Requirement for Merger and Acquisition – the Banking Sector

A cursory look at the Bank and Other Financial Institutions Act (BOFIA) reveals that the Act is silent on the issue of merger and acquisition. The Act does however restrict the acquisition of share by banks and given how closely banks are regulated. It is safe to assume that any merger or acquisition will require the prior approval of the CBN (Kantudu, 2005).

 

2.5.7    Consideration in Merger and Acquisition

Where a merger and acquisition transaction results in the transfer of assets, liabilities and undertaking of one company to another, the acquiring company provides a consideration to the shareholders of the company that will lose its identity. In Nigeria, this usually involves the issuance of securities in the surviving company bit many also be monetary. The numbers of securities or the values of the monetary consideration is based on the merger valuation. Shareholder who is elected to receive monetary consideration in lieu of securities in the surviving company are usually required to give notice to that effect in the manner prescribed in the scheme document.

 

2.5.8    Remarkable Changes in the Nigerian Banking System

The ability of the banking industry to play its role has been periodically punctuated by its vulnerability to systemic distress and macroeconomic volatility, making policy fine tuning inevitable. Historically, the Nigerian banking industry had evolved in four stages. The first stage can be best described as the unguided laissez faire phase (1950 – 1959), during which several poorly capitalized and unsupervised indigenous banks failed in their infancy. The second stage was the control regime (1960 – 1985), during which the Central Bank of Nigeria ensured that only fit and proper persons were granted banking license, subject to the prescribed minimum paid up capital. The third stage was the post-structural adjustment programme (SAP) or the Control regime (1986 – 2004), during which the neo-liberal philosophy of free entry was occur-stretched and baking licenses were dispensed by the political authorities on the basis of patronage. The emerging fourth stage is the era of consolidation (2004 to a foreseeable future) with major emphasis on re-capitalization and proactive regulation based on risk based or risk focused supervision framework (U. Kama, 2006).

 

 

2.5.9    Recent Global experiences in Mergers and Acquisition

The financial services industry is restructuring and consolidating at an unprecedented pace around globe, particularly in the United States, Western Europe, Africa and Asia. Specifically, in the period 1997 – 1998, 203 banks merger and acquisitions took place in Europe area. In 1998, a merger in France resulted in a new bank with a capital base of US $688 billion, while the merger of two banks in Germany in the same year created the second largest bank in Germany with a capital base of US $541 billion. In Japan, a spectacular merger has produced the new Tokyo-Mitsubishi Bank with over 700 billion in asset.  In many emerging market, including Argentina, Brazil and Korea, consolidation has also become prominent as banks strive to become more competitive and resilient to shocks as well as reposition their operation to cope with the challenges of the increasingly globalised banking systems. Each continent expects Africa (with possible exception of South Africa) has had a fair share of merging banking.

 

In Africa where many banks are small in size in terms of their market capitalization, mergers and acquisitions in terms of volume and value have been relatively low. The five largest banks in Africa – Standard Bank Group, Amalgamated Bank of South Africa (ABAS) Ltd, Nedco Ltd, First National Bank Ltd and Investment Groups Ltd are based in South Africa and are all the result of Mergers and consolidations. Standard Bank Groups are the largest banking group in South Africa and Africa as a whole and were the result of the consolidation of several financial institutions over a period of ten years. As at end of December 2008, its shareholder’s funds total R28,667 million or $4.6 billion. Similarly, the amalgamated banks of South Africa Limited are the second largest in the country and Africa as a whole with a shareholder’s fund base of R19,350 million or $3.1 billion. The bank was the result of the merger of over fifteen commercial banks, whole banks, finance houses, insurance companies and advisory services across South Africa, Namibia, Tanzania, Mozambique and Zimbabwe. As a result, the bank has been able to create a powerful financial base that enables it to provide services to selected markets in the United Kingdom and United States of America.

 

In Nigeria, before the recently reforms, the minimum capitalization for existing banks stood at $7.53 million, while new bank were required to take a minimum capitalization of $15.06 billion, as against $526.4 million minimum capitalization in Malaysia. The largest bank in Nigeria before the consolidation exercise had a capitalization of 240 million, while the total capitalization of then 89 banks stood at $3.0billion (U. Kama, 2006).  According to Mustapha 2006, the only mode of consolidation allowed are merger and outright acquisitions/takeovers. A mere group arrangement is not acceptable for the purpose of meeting the 25 billion naira. Therefore, all banks that has banks as subsidiaries or have common ownership were encouragement to merger and acquisitions.  In general note, the Nigerian Banking will (through merger and acquisition) yield veritable goldmine of superior returns such as an unmatched array of financial solutions provided through a sophisticated and wide branch network throughout Nigerian Banking sector with clearly defined growth strategy and exercise that offers full spectrum of financial products and services. It will also engender economies of scale, saves cost, synergies and shareholders returns on a level yet unparalleled by any other financial institutions in Africa.

 

2.6       HISTORICAL BACKGROUND OF UBA PLC

Today’s United Bank for Africa Plc is the product of the merger between former UBA and STB Plc which was placed 3rd and 5th largest banks respectively by the CBN as at early 2004 and also the 5% acquisition of Continental Trust Bank by STB in 2003. The history of UBA Plc dates back to 1946 for former UBA and STB and CTB both in 1990.   Today’s UBA emerged of a time of industry consolidation induced by regulation on the 6th of July, 2004 by Professor Charles Soludo, former Governor of the Central Bank of Nigeria. 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 Nigeria Consumer Finance Market, leading a private/public sector partnership supporting the acceleration of Nigeria’s economic development and growing the institution from a banking to a one-stop financial services institution.

 

Today, the consolidated UBA is the largest financial services institution in West Africa with a balance sheet size in excess of N600 billion operating in Nigeria and Ghana. UBA has 428 retail distribution centers across Nigeria, its main operation base, and 5 branches in Ghana. Outside Africa, it also has presence in New York and Cayman Island. UBA is presently operating more than 5 million customer accounts.

 

 


CHAPTER THREE

RESEARCH METHODOLOGY

3.1       INTRODUCTION

This chapter gives an insight to the methods used in the collection and interpretation of data used, it also includes the methods of the analysis used.

 

3.2       POPULATION OF THE STUDY

The population of this study is the 25 banks that are now in existence after the merger and acquisition exercise in the Nigerian Banking Industry.

 

3.3       SAMPLE SIZE

The sample size of this research study was limited to thirty (30) officers such sixteen (16) of the officers selected were from the senior and junior staff cadre, while the remaining fourteen (14) were from the customers. Hence, the sixteen (16) staff chosen have adequate information needed to reach conclusion generalisable to the whole “Assessment of the Impact of Mergers and Acquisition in the Nigerian Banking Industry”.

 

3.4       SAMPLING TECHNIQUE

Judgmental sampling technique is a method of sampling whereby a researcher selects a sample of an appropriate size on the basis of his judgment of his desirable. The researcher used judgment sampling technique in selecting management staff and account of United Bank of Africa Plc (UBA).

 

3.4.1    Primary Data

The primary data consist of first hand information collected from the respondents. For the purpose of this research, personal interview method will be used to extract information from the respondents. It will also be used to supplement and measure the effectiveness and reliability of the data collected from their records and other secondary data sources. Also, questionnaires will be used on the staff of UBA Plc and its customers.

 

3.4.2    Secondary Data

These are information already available and originally collected previously for some other purpose but becomes useful in the process of research such as textbooks, organization records, publications and journals, certain documents of UBA Plc such as annual report, business directory, journal and publications of their progress and development will also be used.

 

3.4.3    Questionnaire Method

Well constructed questions will be used to investigate from the staff about comparison between how the bank were then and how it is now. Customers to the bank will also be issued with questionnaires.

 

3.4.4    Personal Interview Method

Personal interview will be carried out on the accounts and managers of UBA Plc. This is used to gather valid and reliable information through the responses of the interviewee to a planned sequence of questions. The interview covers issues relating to what he/she thinks personally about the merger of the two banks and to suggest areas that needs improvement.

 

3.5       METHOD OF DATA ANALYSIS AND PRESENTATION

The method of data analysis employed in this research involved arranging the data into tabular formats, essentially for ease of understanding and comprehensiveness of all the underlying relationship between the operational variables. The data obtained in respect of each of these questions asked were collected according to these options provided.

 

 

 

 


CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.0       This chapter is concerned with the presentation and analysis of all the information/data collected. Responses from the questionnaires are analyzed accordingly.

 

4.1       DATA PRESENTATION AND ANALYSIS

4.1.1    Position/Rank of the workers in the organization

Table 1:

RANKS

NO. OF RESPONDENTS

PERCENTAGE

Accountants

7

44%

Auditors

2

13%

Management Staff

7

43%

Total

16

100

Source: Field Survey, 2010

All the above motivated staff, have their role to play in the organization to ensure efficient and effective decision in relation to merger. The implication with regards to merger is that, for the auditor’s work, the audit work will increase as a result of the merger, so there has to be a joint audit because different accounting forms have to come and combine resources together to audit the accountants of the said merged banks. On the part of Accountants, the accounting work is likely to increase as a result of the merger, there has to be a paper book records of accounting so as to come up with a good financial statement as a result of the merger. Lastly, because of the increase in the number of management staff as result of the merger, most staff have to be selected so as to minimize running cost.

 

4.1.2:   How long have you work in the organization?

Table 2:

PERIOD

NO. OF RESPONDENTS

PERCENTAGE

1 – 3years

5

31%

4 – 10years

6

38%

11 year – above

5

31%

Total

16

100

Source: Field Survey, 2010

Here, the implication under these category is that, not all the management staff witness merger, as such they cannot give reliable information on the effectiveness of merger and acquisition, while some of the management staff witnesses merger and can give detailed information on the effectiveness of the banks before and after the merger.

 

4.1.3    What responsibility did you offer in the organization?

Table 3:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Accountants

7

44%

Auditors

2

38%

Management Staff

7

43%

Total

16

100

Source: Field Survey, 2010

Implications of accountants here is two (2) different bank accounts has to be properly maintained as a result of the merger, the expenses will increase, and customers will also increase so as the accountant work has to be effective and efficient.

On the part of auditors, with regard to merger, the auditors should exercise some reasonable care, skill and caution, while discharging their work, they should approach their work with integrity without any suspicion or dishonesty.

 

4.1.4    Did you witness the merger between former UBA Plc and STB Plc?

Table 4:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Yes

11

69%

No

5

31%

Total

16

100

Source: Field Survey, 2010

On this part, the table above implication shows that some of the management staff does not witness merger, as such they cannot give any information on the assessment of impact of merger and acquisition in the banking industry.

 

 

 

4.1.5    Are you affected by this merger and acquisition?

Table 5:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Yes

9

56%

No

7

44%

Total

16

100

Source: Field Survey, 2010

From the table above, the implication is, some of the staff were affected as a result of the merger, because some staff lost their job, some were transferred, some were promoted and at the same time demoted, their work has increased, there is a lot of tension and stress, while some are not affected, the issue of merger and acquisition has brought them success, as such they can render good services.

 

4.1.6    How have the inflows of customers have been, after the merger?

Table 6:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Decreasing

-

-

Unchanged

-

-

Increasing

16

100%

Total

16

100

Source: Field Survey, 2010

100% of the respondents argued that the inflows of customers have increased after the merger, this is said to be so, but in real life situation, most customers when seeing their banks are merging usually close their account so as to avoid the problem of bank distress.

 

 

 

 

 

 

 

 

 

4.1.7    Which of the following do you consider UBA’s major problem?

Table 7:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Higher management

2

12.5%

Employees

2

12.5%

The Organization

4

25%

Product/Services

-

-

Competitors

8

50%

Total

16

100

Source: Field Survey, 2010

 

Higher management: The implication on their part is that, they cannot come out with new customer services to compete with others, this is because as result of their inability to give good management decisions.

 

Secondly employees, most of the employees are not adequately well remunerated and motivated as such they cannot render good services.

 

Thirdly competitors, most staff argued that UBA cannot compete with other banks because of so many factors, but customer service and that should be a better way to compete with others.

 

Lastly the organization, the organization has to come up with good investment decision to achieve its objective in a desirable way.

 

 

 

 

 

 

 

 

 

 

4.1.8    How can these problems be eradicated or minimized?

Table 8:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Efficient service

8

50%

Neighborhood banking

2

12.5%

Better remuneration

6

37.5%

Total

16

100

Source: Field Survey, 2010

From the table above, the implication is that before these problems can be eradicated or minimized, several control measures has to be taken into cognizance such as efficient service, good remuneration, more branches, corporate social responsibilities and so on.

 

The following questionnaires were administered to the customers of UBA Plc

4.1.9    Table 9, 10 and 11, there is no implication on this part, because the data obtained from them can enable the researcher to come up with reasonable conclusion.

 

4.1.12  what are the major problems of UBA Plc?

Table 12:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Competition

-

-

Employees

-

-

Service/Products

-

-

Delay

4

29%

Congestion

10

71%

Over-documentation

-

-

Total

14

100

Source: Field Survey, 2010

Most customers see delay and congestion as the major problems of the bank. The table above implications shows that, the bank is likely to lose customers not to make huge profit as result of the congestion put stress on their staff, as they will work even during their ideal time and lastly they cannot meet their financial obligations when they fall due.

 

4.1.13  how can these problems be eradicated or minimized?

Table 13:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Efficient service

9

64%

Neighborhood banking

5

36%

Total

14

100

Source: Field Survey, 2010

The implications of the table above shows that their network has to be improved and effective to facilitate easy banking, enough branches has to be opened, the use of Automated Teller Machines (ATM) has to be effective to avoid problem of delay.

 

4.1.14  is there any suitable solutions that you think necessarily to be taken to avoid the problem of insolvency?

Table 14:

RESPONSES

NO. OF RESPONDENTS

PERCENTAGE

Proper management

11

79%

Loans given

3

21%

Total

14

100

Source: Field Survey, 2010

The implication of the table above is that, 79% of the respondents urged that better management in the bank will contribute, while 21% of the respondents believed that when given out loans, it has to be proper and collaterals must be valued accordingly.

 

4.2       TEST OF HYPOTHESIS

HO: Mergers and Acquisition have no impact on the performance of the banking sector.  From our analysis it was not discovered that the merger had no impact on the bank under study.  Therefore this hypothesis does not hold.

 

H1: Mergers and Acquisition have an impact on the performance of the banking sector.  This hypothesis can be tested with table 4.1.6 which shows that the merger has had positive impact on UBA.  All the respondents agreed that the customers of the bank has increased drastically.  The alternative hypothesis therefore, holds.

 

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1       INTRODUCTION

Contained in this chapter is a digest of the research result, conclusion was then drawn from the summary with a view to making recommendation.

 

5.2       SUMMARY

The present economic environment in Nigeria more than ever before, calls for the effective and efficient utilization of both human and material resources to achieve the desired goals of an enterprise. To this end, various strategies are being employed to meet these challenges of which mergers and acquisition is one of them. This study was therefore conducted to assess the impact of mergers and acquisition in the Nigerian banking industry.  Attempt was made to highlight the significance of mergers and acquisition to the utilization, stakeholders and the economy as a whole. The concepts of mergers and acquisition, its purpose, benefits, types, the regulatory and professional pronouncement have been discussed.  From the analysis of related literature, analysis and interpretation of data, the researcher conclude that mergers and acquisition are really catalyst for enhanced control, rapid growth and survival of both strong and ailing firms in Nigeria. The researcher also wishes to submit that financial institutions adopt fast to mergers and acquisitions than non-financial institutions.

 

5.3       CONCLUSION (FINDINGS)

Based on my own findings, I hereby conclude that mergers and acquisition became the only option available to banks who could not meet the minimum capital base of N25 billion imposed by the Central Bank of Nigeria. Mergers and acquisition has its share of problems but if systematically and carefully done, like the case of UBA Plc, the advantage usually outweighs the disadvantage.

 

The role of the Securities and Exchange Commission (SEC) and other regulatory bodies should not be such that will frustrate or discharge firms from participating in mergers and acquisition exercise, that in the parties should of be free to negotiate the terms and condition including the price and timing of the proposed mergers and acquisition.   It is further concluded that the Nigerian Enterprises Promotion Decree should be amended to facilitate mergers and acquisition activities in the country by providing avenue for attracting new foreign investment.

 

The type of bank services/products provided by a bank has a serious impact on attraction of customers to that organization. For example, customers are now attracted to patronize ‘cash fast’ and the ATM, more than the old product/service that the bank had. Due to the recapitalization of the banking sector, customers feel very safe depositing their valuables with the bank unlike what was obtainable before that. Prior to the recapitalization, about 15 banks have been liquidated by the CBN and a dozen declared distressed, the whole customers in the banking industry became very cautious as to where they make their deposit. This was therefore corrected by the recapitalization police. UBA Plc can be said to be among the leaders in the banking sector housing a total deposit base of about N570 billion, a profit before tax of about N15 billion and a retail branch of 428 nationwide. Having one of the highest capital at its disposal, the prospects of UBA Plc are numerous due to the response capitalization exercise.

 

5.4       RECOMMENDATION

Based on the findings of this study and the conclusions drawn from them, the researcher will like to make the following recommendations. It is hoped that these recommendations will be useful to bankers in helping them to improve in their means of satisfying customers, the problems encountered during and after merger and the types. Also, students and all other parties might also find this study beneficial.

1)            Competition is high in the banking industry, therefore any bank that does not plan on how to satisfy customers and maintain them will soon be forced out of business by others, like the likes of UBA Plc.

2)            Long turnaround times is nothing but a trap that can render a strong organization weak and even death, due to obsolescence which will make it unattractive due to change in customer taste. An organization should therefore reduce as much as possible, its turn-around maintenance to re-create energy and attractiveness.

3)            The banking industry should try to increase their branch network, because there are places and towns that have no single branch of their organization in which people are willing to save.

4)            Customer ignorance on some issues, policy, and knowledge, bank activities is very low. An atmosphere should be created where a staff can be employed to take care of customer who wants to know about a particular operation or any person that is confused. The organization should also provide documents on weekly or monthly basis to any customer entering the organization at a particular day to inform them of recent happenings.

 

 

 

 

 


BIBLIOGRAPHY

Agbor, D. (2003), Understanding the Legal and Regulatory Framework for executing Mergers and Acquisition in Nigeria. Proceedings of a Seminar on Mergers and Acquisition organized by SEC.

 

Kantudu & Hannatu (2005, Mergers and Acquisition as tool for Achieving Corporate Growth and Control: A Theoretical Approval Bayero International Journal of Accounting Research, Vol. No. 2.

 

Kurfi, A. K. (2003), Principles of Financial Management. Benchmark Ltd, Kano.

 

Peter, N. A. (2003) Merger and Acquisition: The Nigerian Banking Industry to meet the Development Challenges of the 21st Century. Being an Address delivered to the special meeting of the Bankers Committee held on July 6, 2004 at the CBN Headquarters, Abuja.

 

Vanhorne, J. C. (1988), Financial Management and Policy Practice. Hall International Inc. Eaglewood, N. J. USA, 9th edition.

 

 

 

 

 

 

 

 

 

 


QUESTIONNAIRE

Dear Sir/Madam,

I am a research student from Kano State Polytechnic, School of Management Studies, Department of Accountancy. This questionnaire has questions concerning the topic “An Assessment of the Impact of Mergers and Acquisition in the Nigerian Banking Industry, A Case Study of United Bank for Africa Plc (UBA)”. Please tick or answer the questions to the best of your knowledge and sincerely. Be assured that all information given will be treated with the strictest confidence.

 

Thanks.

 

EMPLOYERS

1)            What is your position/rank in the organizations? ……………………….

 

2)            How long have you worked with this organization? ……………………

 

3)            What responsibility do you offer in the organization? ………………….

 

4)            Is the organization’s activities suitable for you?

Yes                     No                    No idea

 

5)            If yes, how did you contribute to the success and progress of the organization?…………………………………………………………….

…………………………………………………………………………...

 

6)            Did you witness the merger between former Standard Trust Plc (STB) and United Bank for Africa Plc (UBA)?      Yes             No

 

 

7)            Are you affected by this merger and acquisition?    Yes                  No

 

8)            How have the inflows of customers here been after the merger?

a) Decreasing                 (b) Unchanged                        (c) Increasing

 

9)            Which of the following do you consider UBA’s major problem?

a)      Higher management

b)      Employees

c)      The organization

d)     Product/Service

e)      Competitors

 

10)        How can these problems be eradicated or minimized?

…………………………………………………………………….........

…………………………………………………………………….........

…………………………………………………………………….........

…………………………………………………………………….........

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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