Business Impact Assessment



Business Impact Assessment

Introduction

In recent years, the most pertinent issues within the banking sector have been to improve profit growth, enhance customers' satisfaction and business portfolio. In order to meet these new banking trends, various strategies must be put in place to restructure, consolidate and reorganize business activities within the sector. The emergence of Mergers and Acquisition has been a major strategy in growing customer base; improve employee performance, creating improved products and services. Mergers and Acquisition has its origin spanning as far back as the 1980s within the US banking sector which enhanced the growth of the sector during the period. This brought about various restructuring in a bid to strengthen the financial market.

For financial institutions to gain competitive advantage over rivals in the face of the current global financial crisis, they must engage in various strategies to enhance their internal strengths by taking up opportunities that seek to neutralize various threats and avoid weaknesses. It is also vital that organizations engage employees and customer in the decision making process involved in M&A to ensure that the intended strategy is effectively adopted and the performance level of its employees is not affected as a result of the process, because the motivational level of employees is a determinant factor to the growth process in an organization. For the purpose of this research, the topic provides a brief insight into the origin of M&A, its impact on financial institutions in Nigeria. Therefore, all the issues and aspects related to the Mergers and Acquisitions will be discussed in detail.

Background of the Mergers and Acquisition

The term Mergers and Acquisitions is (commonly known as M&A) although often classed together have different meanings. A merger is generally defined as when two or more companies go into partnership to create a completely new business unit. However not all organizations who merger create a new entity as some of them continue operating as a partnership by working “under the roof” of any of the merged organizations. The Nigerian companies and Allied Matters Act 1990 section 590, defines merger as 'any amalgamation of the undertaking or part undertakings of one or more corporate bodies' (Elumilade, 2010).

A merger can also be defined as a combination of two or more corporations in which only one corporation survives. The acquired company undertakes the assets and liabilities of the merged firm. An acquisition is slightly different from a merger. Unlike mergers, an acquisition is one firm buying another. This does not involve an exchange of stock or a consolidation to form one business unit. Over the years, there have been several researches on the effects of merger and acquisitions in the banking industry to ascertain the level of improvement in performance and increased market power by the consolidated banks. However, mergers and acquisitions in the banking industry have been analyzed by various researchers from different perspectives. M&A can aid bank performance by the influence of market power in setting prices. Increased market share as a result of ...