An Evaluation of the Impact of Mergers and Acquisitions on Firms’ Earnings
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Abstract
This research work captioned ‘An Evaluation of the Impact of Mergers and Acquisitions on Firms’ Earnings.
A Case Study of Oando Plc’ involves the trend analysis of three year pre- merger and three year post-merger financial statements of a case study with mergers and acquisitions experience chosen from the downstream sector of oil and gas.
The study was embarked on with the following objectives;
- To ascertain whether there is positive change or otherwise on the Earnings Per Share of Oando Plc after the adoption of mergers and acquisitions strategy.
- To measure the changes in the dividend per share of Oando Plc between pre and post merger periods under review.
- To examine the merger effects on the firm’s or company’s profitability.
- To find out general performance of Oando Plc in Nigerian economy in the post-merger periods under review.
- To make necessary recommendations to companies in Nigeria on the need to either adopt or neglect mergers and acquisitions option as corporate survival strategy in a bad economy base on the findings made in the study.
In order to achieve these objectives, the researcher formulated research questions in accordance with the set objectives.
The data used in the study were purely secondary data which were analysed using ratio model and descriptive method of analysis which include percentages and standard deviation.
Introduction
1.1 Background of Study
As a result of changes in information technology, the need to restructure and reposition business organizations and most especially, the increasing rate of global economic crisis currently nicknamed ‘economic meltdown’,
Companies have begun to embrace the corporate strategy of mergers and acquisitions in an increasing rate as one of the most viable survival alternatives.
The aforementioned economic meltdown has almost kept the global business environment in jeopardy to the extent that most companies, banks inclusive, had phased out of the global market due to the inability to meet up with the financial requirement expected of them. It has become the survival of the fittest.
In order to tighten their financial belt as a result of the problem, most companies have undertaken the global phenomenon of mergers and acquisitions.
This business strategy has been in existence for a very long time in most developed countries of the world, where as, in slow developing countries like Nigeria, it is still new.
For instance, USA adopted mergers and acquisitions as far back as 1890s but in Nigeria, the first successful mergers took place in 1983. That is, the merging of AG Leventis and Co Ltd with Leventis stores Ltd.
Subsequently, in recent years, there have been records of successful mergers and acquisitions in Nigeria most especially, in the banking industry as a result of new economic reform undertaken by Central Bank of Nigeria in 2004 which has left the country with few ‘but’ strong banks that can stand the test of time.
References
Akele, S.O. (2004), “The Regulatory Imperative for Mergers and Acquisitions in Nigeria” Vanguard. Dec.6 p. 17.CBN Annual Report and Statement of Accounts for the Year Ended 31st Dec 2005. p. 52
Dimgba, Nnamdi (2009), “Mergers Control by Security and Exchange Commission: A Comparative Analysis of Investment and Securities Acts 1999 and 2007”. The Guardian, Tuesday September 29,2009.p 84.
Emekekwue,P (2002), “Corporate Financial Management” Kinshasa: African Bureau of Educational Sciences.
Giroux, G. (2006), “Earnings Magic and the Unbalance Sheet.The Search for Financial Reality”. Haboken ,New Jersey: John Wiley and Sons Inc.
Henry, David (2002), “Mergers: Why most big deals don’t pay off.”Business week, 14 October .p. 15
