Effect of Pre-Merger and Acquisition Capability Strategies on Value-Based Financial Performance of Banks in Ghana

Abstract

Purpose – The purpose of this paper is to examine the effect of pre-merger and acquisition capability strategies on value-based corporate financial performance of banks in Ghana. Design/Methodology/Approach: A cross-sectional survey was employed comprising four (4) acquirer banks listed on Ghana Stock Exchange (hereafter GSE) and four hundred and eighty-two (482) respondents purposively selected for this study. Data were analyzed using descriptive statistics, principal component analysis (PCA) and regression analyses. All the analyses were performed using SPSS v21. Findings: The findings reinforce the important position pre-merger and acquisition capability strategies on value-based corporate financial performance of acquirer banks. Amongst the pre-M&A success capability strategies that maximise shareholder value are: strategic intent; clear criteria; choice and evaluation of strategic partner and size mismatch; financial, legal and operational due diligence; integrative approach that strengthens the core business, expands the core business and unlocks new business areas; and effective communication before acquisition). Research Limitations/Implications: The study employed only a single research methodological approach, therefore future research could be undertaken using a mixed approach and triangulate to compare findings. Furthermore, the findings from the present study are cross-sectional, considering the limitations there in, a longitudinal approach should be explored. Practical Implications: Emphasis should be place on pre-merger and acquisition capability strategies that maximise shareholder value. This will help practitioners make legitimate decisions and conclusions that can foster business growth. Originality/Value: the effect of pre-merger and acquisition capability strategies on value-based financial performance was tested; previous studies have tended to test the direct effects.