Abstract
Purpose: The purpose of this study was to establish the effect of mergers and acquisitions strategies on financial performance of firms in the financial services sector in Kenya.Methodology: The study adopted a mixed methodology research design. The study population included all the 51 merged financial service institutions in Kenya. Purposive sampling was used. Primary data was obtained from questionnaires and a secondary data collection template was also used. The researcher used quantitative techniques in analyzing the data. Descriptive analysis for the study included the use of means, frequencies and percentages. Inferential statistics such as correlation analysis was also used. Panel data analysis was also applied. Further, a pre and post merger analysis was used.Results: Cost efficiency was found to have a positive and significant effect on financial performance of merged institutions. Diversification had no significant effect on financial performance of merged institutions. Synergy had a significant relationship with financial performance of merged institutions. Board size had a significant relationship with financial performance of merged institution and there was a significant relationship between the moderating effect of economic growth and financial performance of merged institutions.Unique Contribution to Theory, Practice and Policy: The study recommended that policy makers (government) should be able to create or promote the enabling environment for facilitating mergers and acquisitions that concerns infrastructure provision, as a way of achieving cost reduction that could motivate similar mergers in other institutions in Kenya, stakeholders are to identify where their most immense profit pools lie and focus on improving those units responsible for them, the management of the financial services institutions should embrace diversification and financial innovation on product strategies as this will help in generating more income for the banks.
Highlights
1.1 Background of the StudyA merger or an acquisition is a strategy that is carefully planned to achieve a synergistic effect (Akinsulire, 2012)
A test was conducted on the effect of diversification on financial performance
There is no significant relationship between diversification and financial performance of merged institutions
Summary
1.1 Background of the StudyA merger or an acquisition is a strategy that is carefully planned to achieve a synergistic effect (Akinsulire, 2012). The synergistic effect of mergers and acquisitions includes economies of scale through greater output, avoidance of duplication of facilities and staff services and stronger financial base. Some of the reasons for mergers and acquisitions are to: purchase a company having competent management; improve earnings per share, inject fresh ideas for better prospects and enhancement of shareholders’ wealth, gain access to the financial market, eliminate duplicate and competing facilities, secure scarce raw materials, diversify into other products or markets or to complete a product range, greater asset backing; and enhance economy of scale and corporate growth (Akinsulire, 2012: Amedu, 2014). The first real increase in M&A activity in the UK, on the other hand, can be traced back to the 1920’s when the development of mass production techniques created an increase in the vertical integration through scale of production, while the second M &As wave came in the 1960s as a response to the internationalization of the world economy. There was need for M&As to create larger firms that would be capable of being effective in international competition especially from countries like the US and Japan (Sundarsanam, 2003)
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