Effect of mergers and acquisitions on performance of firms Essay
Effect of mergers and acquisitions on performance of firms
Background of the Study
As pointed out by Agrawal, Jaffe and Mandelker (1992), decisions on mergers and acquisitions are highly critical in the success of companies, as well as their managers. Numerous corporations always find that one of the best means of getting ahead is expanding the ownership boundaries via the mergers, as well as acquisitions. Mergers and acquisitions result into the creation of synergies, and besides, it enables the merging firms to gain various economies of scale besides expanding their operations and cutting on various costs. Investors might always expect the mergers to provide highly enhanced power for the market. A number of the advocates of the mergers are of the argument that mergers have the capacity to cut on their costs besides boosting the revenues that are gained by firms (Ismail, Abdou and Annis, 2010).
According to Beitel and Schiereck (2001), mergers and acquisitions are corporate finance aspects, management aspects, as well as strategic management aspects that entails selling, buying, dividing, as well as combining diverse firms, as well as similar firms, which have the capacity to help an organization to grow rapidly within its location or sector, or within a newer field or within a newer location, without the creation of a subsidiary, or without the use of a joint venture. Generally, mergers and acquisitions activities may be referred to as a kind of restructuring given that they always result into the reorganization of various entities. They are mainly aimed at the provision of growth, as well as positive value (Tse and Soufani, 2001). As pointed out by Beitel, Schiereck and Wahrengoug (2002), a merger refers to the legal consolidation of two firms into a single entity. On the other hand, acquisition always takes place when a single firm takes over a different firm and entirely establishes and develops itself like the newer owner.
As pointed out by Brailsford, Faff and Oliver (1997), there are numerous good reasons why various firms are nowadays engage in mergers and acquisitions. Through it, firms have the capacity to obtain quality staff, as well as additional knowledge and skills of the sector or industry in which a firm is. A business that has a good management, as well as a good process system will help the other to enhance their own. On the same note, accessing funds, as well as the assets that are valuable for new development is very easy through mergers and acquisitions. Firms always enjoy enhanced production, as well as highly enhanced distribution facilities through mergers and acquisitions (King, Dalton, Daily and Covin, 2004; Tuch and O’Sullivan, 2007). According to Hayward and Hambrick, (1997) there are different other benefits that are generated by mergers and acquisition. For instance, it is recommended when a given firm needs to get into a new market, when a given firm needs to introduce fresh products via research, as well as development, when a firm needs to attain various administrative benefits, when a firm needs to enhance its share of the market, when a firm needs to lower cost its production or operation costs, when a firm needs to enhance its competitiveness and when a firm needs to enhance on their profitability (Huizinga, Nelissen and Vander, 2001).
According to Malhotra and Zhu (2006), an enhanced share of the market is one of the biggest benefits that are gained by various firms from the mergers, as well as acquisitions. When a financially strong firm acquires one that is comparatively distressed, the resultant firm has the capacity to experience a significant increase in the share of the market. The new firm that is formed is always highly cost-efficient. At the same time, it will be highly competitive in comparison to the parent companies that are comparatively weak financially (Johnston and Dinardo, 1997; Rau and Vermaelen, 1998). According to Lepetit, Patry and Rous, (2004), when a given business company wishes to make the presence felt within the new market, firm can get into mergers and acquisition deals. Additionally, when a given business organization needs to gain various administrative benefits, it also has the capacity to engage in mergers and acquisitions.
At the same time, when a given firm wants to introduce newer products into the market, it can also engage in mergers and acquisition deals (Šević, 1999; Vander, 1996; Rappaport and Sirower, 1999; Rhoades, 1993). As pointed out by Mantravadi and Reddy (2008), merger and acquisition has become the most prominent process in the corporate world. The key factor contributing to the explosion of this innovative form of restructuring is the massive number of advantages it offers to the business world. Mergers and acquisitions provide the synergy which provides a surplus power which has the capacity to enhance the performance besides enhancing cost efficiency. Through the mergers and acquisitions, firms will have the capacity to gain tremendous profit through various financial gains, as well as through work performance. Cost efficiency is the other beneficial element of mergers and acquisition. All kinds of mergers always enhance the purchasing power of firms given that there will be more negotiations when the firms have bulky orders (Thalassinos, Kyriazidis, Thalassinos, 2006; Mantravadi and Reddy, 2008; Sinay and Campbell, 2002).
As pointed out by Thalassinos, (2008), with the mergers and acquisitions, it is always very easy for the firms to maintain competitive edges given that there are numerous issues, as well as strategies, which will be comprehended and acquired through the combination of various resources, as well as talents of the merging firms. The merger of two firms and two businesses has the capacity to enhance and also to strengthen the network of the business through enhancing market reach. This provides new opportunities for sales, as well as new areas of exploring business possibility. Generally, there are numerous benefits that are brought about by mergers and acquisitions.
It enhances market power besides limiting the severity of market competition which is always very tough (Thalassinos, 2008; Vander, 1996; Megginson, Morgan and Nail, 2004; Sun and Tang, 2000). Considering the numerous benefits that are generated by mergers and acquisitions, this paper seeks to establish some of the various effects that it has on the performance of various firms. It also seeks to establish some of the challenges that are faced in mergers and acquisitions and therefore strives to establish various ways through which the challenges can effectively be dealt with.
Research Aims and Objectives
This research aims at establishing the effect of mergers and acquisitions on the performance of firms, which specific emphasis on the merger between IBM and Lenovo. The major objective of the study is to explore how the merger and acquisition of IBM and Lenovo affects the financial performance of the firms. Some of the specific research questions include:
1.What are the effects of mergers and acquisition on the financial performance of firms? 2.What are the effects of mergers and acquisition on corporate performance of firms? 3.What are some of the successes of the mergers and acquisitions on firms? 4.What are some of the challenges that are faced during the mergers and acquisitions and how can they be avoided? Research Objectives
The objectives of the research will be to:
1.To establish the effects of mergers and acquisition on the financial performance of firms 2.To determine the effects of mergers and acquisition on corporate performance of firms 3.To determine the challenges that are faced during the mergers and acquisitions and how can they be avoided Rationale of the study
As pointed out by Fuller, Netter and Stegemoller (2002), numerous firms have undergone highly remarkable changes within the last few years when certain things are taken into consideration like the structure of ownership structure, and the depth, as well as the breadth of the operations. The changes that have been faced have been affected hugely by the challenges that are posed by the globalization of the operations, deregulation of financial sector, technological innovations, as well as the adoption of various supervisory, as well as prudential requirements, which are conforming to the international standards (Ghosh, 2001; Linn and Switzer, 2001; Sharma and Ho, 2002; Gugler, Mueller, Yurtoglu and Zulehner, 2003). According to Agrwal and Jafee (2000), there has been a huge body of literature examining the effects of mergers and acquisitions on the performance of firms. There has been considerable evidence indicating that the target shareholders always earn highly significant returns.
There are several other ways through which mergers and acquisition enhances the performance of the firms. For instance, through reduced costs, the overall financial performance of the firms will be improved. A merged firm has the capacity to reduce a number of its various expenses. The budgets for various things such as marketing may be trimmed, whereas the new and the larger firm will enjoy enhanced purchasing power. This has the capacity to lower the raw materials costs as well as other necessities. Generally, a merger always results in layoffs of staffs given that certain positions may become redundant within the new entity. Companies that are merged also have the capacity to share office space thereby eliminating identical manufacturing facilities (Ghosh and Jain, 2000).
Additionally, the financial performance of firms is always enhanced given that there will be enhanced market penetration. Through merging, the new firm company will have the capacity to access more customers. This will play a highly significant role in enhancing the profits that are being made by the firm (Healy, Palepu and Ruback, 1992; Moeller and Schlingemann, 2005; Andre, Kooli and L’Her, 2004; Hviid, and Prendergast, 1993).
As pointed out by Choi and Russell, (2004), through mergers as well as acquisitions, there is diversification. This also plays a major role in enhancing the financial performance given that it will make the firm to offer more goods, as well as services. This will also widen the market share of the firm thereby enhancing the profitability of the firm. The merged firms always have the capacity to provide a wide array of services, as well as products (Heron and Lie, 2002; Rahman and Limmack, 2004; Gallet, 1996; Healy, Palepu and Ruback, 1992; Jarrell and Poulsen, 1989; Jensen, and Ruback, 1983). Feroz, Kim and Raab (2005) posit that Mergers and acquisitions play a major role in enhancing revenues, as well as profitability of firms.
Through it, there is enhanced growth in scale besides. On the same note, it makes the firms to acquire new technology, as well as competence. This also plays a major role in enhancing the overall financial performance of the firm (Linn and McConnell, 1983; Ghosh, 2002; Heron and Lie, 2002). This research is therefore highly significant in that it offers some of the effects of mergers and acquisitions on the performance of firms. It also details some of the challenges that are faced during mergers and acquisitions and some of the ways through which the challenges can effectively be dealt with.
Significance of the study
As pointed out by Mueller (1980), the benefits that are generated through mergers and acquisitions are numerous. This study aims at explore some of the various ways through which mergers and acquisitions can enhance the performance of firms, with specific emphasis on IBM and Lenovo. It seeks to determine how mergers and acquisition influences corporate performance of firms. The various challenges that are faced during the process of mergers and acquisitions are explored by the study. The study is significant in that it details the challenges that can be faced by firms during the process of mergers and acquisition. This will be of significant benefits to the firms that want to merge. When the recommendations that are provided by the study are implemented, firms will have the capacity to deal with the challenges. This has the capacity to make the process of mergers and acquisition to be smooth. Therefore, the study is significant to the firms that seek to merge because it provides information on how they can effectively carry out the process.
Summary of the Chapter
The first chapter has looked at the background of the study. It has explored background information regarding mergers, as well as acquisitions. Additionally, the chapter has looked at the major aims of the study as well as its objectives. The major objectives of the study include exploring the effects of mergers, as well as acquisition on the financial position of firms. Additionally, the study has sought to explore how mergers and acquisition affects corporate performance of firms. It has also looked at the various challenges that may be faced by firms during the mergers, as well as acquisitions and how firms which are merging can deal with the challenges. The chapter has also looked at the rationale of the study, as well as its significance. The study is highly significant in that it details some of the various challenges that are faced during mergers, as well as acquisitions and how the challenges can be mitigated by the firms. It is therefore significant for the firms that seek to merge. Additionally, the paper is highly significant in that it provides information regarding the various benefits that are generated as a result of mergers, and acquisitions.
2.0. Literature Review
As Agrawal, Jaffe and Mandelker (1992) posits, mergers and acquisitions refer to the global business terms that are applied in attaining business growth, as well as survival. Merger involves the coming together of about two or more companies in order to be a single big company whereas acquisitions entails the takeovers, as well as pursuing of same motives. Mergers, as well as acquisitions are always aimed at attaining cost efficiency via economies of scale, as well as diversify together with the expansion of the range of various business activities in order to make sure that there is enhanced performance of the firm. Many studies have empirically assessed whether mergers, as well as acquisition provides various benefits to companies. As Cabanda and Pajara-Pascual (2007) posits, a number of studies have always strived to assess whether there is a relationship between mergers, as well as acquisition and the profitability of firms.
A number of the studies have always pointed out that the mergers, as well as acquisitions have positive effects on the efficiency of the firms. Generally, a number of the studies have offered mixed evidence. At the same time, a number of them have failed to illustrate a very clear link between the performance of firms and mergers, as well as acquisitions. However, generally, there are numerous benefits that are generated by firms from mergers as well as acquisitions (Agrawal and Jaffe, 2000; Choi and Harmatuck, 2006). As pointed out by Andre, Kooli and L’Her (2004), mergers & Acquisitions has always been stated to be an activity of corporate restructuring and it has significantly exhibited huge growth over the past years considering the numerous benefits that it generates to firms. Additionally, mergers and acquisitions has become a highly significant corporate strategy within the economic and financial environment globally. Firms have always been exposed to domestic, as well as international competition.
Through mergers, as well as acquisitions, firms always have the capacity to enhance their levels of competition. On the same note, the economy of various nations has undergone huge transformations. This has made a number of firms to start restructuring operations around the major business activities via mergers and acquisitions. Mergers and acquisitions is a tool that is applied by firms in the expansion of their operations. Mergers and acquisition is always aimed at increasing the long term profitability of firms. Despite the fact that mergers and acquisition is a highly significant component of corporate strategy, research on mergers and acquisition has not provided highly conclusive evidence on if they have the capacity to enhance efficiency or whether they have the capacity to destroy wealth. Hence issues related to mergers and acquisitions have significantly drawn considerable interest from academicians, as well as practitioners globally (Andrade, Mitchell and Erik, 2001; Berger and Humphrey, 1992; Cabanda and Pajara-Pascual, 2007).
According to Kling (2006), enhanced Value Generation is one of the leading causes of mergers, as well as acquisition deals. It always results into enhanced value generation for firms. Generally, the shareholder value of various firms after the mergers and acquisitions are always greater in comparison to the parent companies’ shareholder values. Mergers and acquisitions always succeed in the generation of cost efficiency through economies of scale (Diaz, Olalla and Azofra, 2004; Kumar, 2009). As pointed out by Yeh and Hoshino, (2002), merger and Acquisition have the capacity to make firms to enjoy tax gains. It also has the capacity to result into the enhancement of revenue given that the firms will have the capacity to gain a very big share of the market. Firms always go for the Mergers, as well as Acquisition the joint firms will have the capacity to generate additional value in comparison to being separate. When a firm buys another, they always have the expectation that the shareholder value that is newly generated will be very high in comparison to the value of the two firms combined (Dunis and Klein, 2005; Lau, Proimos and Wright, 2008; Yook, 2004).
According to Liu and Zou (2008), mergers and acquisitions have the capacity to make the firms that are weathering in the tough times to be revived. When a firm that is suffering from numerous problems within the do not have the capacity to overcome some of its difficulties, mergers and acquisition deals are always recommended for the firm. When a firm has a robust market presence and buys out a weak company, then a highly competitive, as well as cost efficient firm will be generated. The other major reason why various firms always engage in mergers and acquisition deals is to gain cost efficiency. When two firms come together through the mergers and acquisition, the joint firm will significantly benefit through cost efficiency. Merger and acquisition has the capacity to generate economies of scale. This in effect results into the generation of cost efficiency. The two companies will form one that will be very big. Additionally, the production will be done on large scale. When the output production becomes bigger, production cost per unit of output will be reduced (Seth, 1990; Majumdar, Moussawi and Yaylacicegi, 2007; Yuce and Ng., 2005).
The merger of Lenovo and IBM occurred in April 2004 when Lenovo which is a Chinese based company bought IBM PC division. In the merger, Lenovo took over IBM’s desktop & notebook business and other related businesses worldwide, including distribution and marketing channels, and all its customers. Because of the acquisition, a strong and complex venture was created; therefore, Lenovo became the third largest PC maker and distributer in the whole world. 2.2. The effects of mergers and acquisitions on the Performance of firms As pointed out by Ghosh (2002), the financial performance of various firms is always enhanced after the mergers as well as acquisitions. There are numerous ways through which the performance of the firms is enhanced through the mergers, as well as acquisitions. For instance, mergers as well as acquisitions always enhance the productivity of the employees. This plays a major role in enhancing the overall performance of the organizations. Additionally, after mergers, as well as acquisitions, the net asset growth of firms is always enhanced. This also has a role to play in making sure that the performance of the firm is enhanced.
The efficiency of firms is always enhanced through mergers, as well as acquisitions. This also has a role to play in enhancing the overall performance of firms (Bruner, 2002; Linn and Switzer, 2001; Choi and Harmatuck, 2006; Groff, Lien, and Su, 2007). According to Brealey and Myers (2003), the underperforming businesses also have the opportunity to enhance their performance through mergers, as well as acquisitions. Additionally, through mergers and acquisition, firms will have the capacity to access a broader base of customers. Additionally, it has the capacity to increase the market share of the firms that are engaging in the mergers and acquisitions. Through mergers and acquisition, there is diversification of services, products, as well as long-term prospects of a given firm. A target business might have the capacity to provide a fir with services or products which can be sold by a given firm through their own distribution channels. Mergers and acquisitions also play a major role in the reduction of various costs, as well as overheads because marketing budgets are shared by the firm.
On the same note, there is enhanced purchasing power, as well as very low. Competition is also reduced through mergers and acquisitions (Brigham, 1986). According to King, Dalton, Daily and Covin (2004), the benefits of Mergers and Acquisitions are numerous. Mergers and Acquisitions have the capacity to produce cost efficiency via economies of scale. It also has the capacity to enhance revenues via given that the firms will have the capacity to gain a big share of the market. It also has the capacity to generate greater tax gains. According to Cybo-Ottone and Murgia (2000), the major benefits that are obtained by various firms from the mergers and acquisitions are enhanced generation of value, enhanced cost efficiency, as well as enhanced share of the market.
As pointed out by Diaz, Olalla and Azofra, (2004). The numerous benefits that are generated by the mergers, as well as the acquisitions have become the basis for their adoption by various firms wish to enjoy their various benefits. The benefits have also made various firms to get into the deals of mergers and acquisitions. Mergers and Acquisitions have the capacity to generate tax gains besides increasing revenue. At the same time, it has the capacity to reduce various capital costs (Cybo-Ottone and Murgia, 2000). 2.2. Success of the merger- The ability to integrate or displace a culture As pointed out by Altunbas and Ibanez (2004), in order to achieve a successful merger for both organizations, the merger must fall into the three types of mergers depending on the necessary cultural change and the degree of integration. The three types of merger are; redesign merger, extensive mergers, and collaborative mergers.
Lenovo started reorganizing and reforming the company system in 2009, this follows losing business and after confessing underestimating the two parties cultural differences. Both Lenovo and IBM have been working their way out of cultural compatibility since the reformation. Currently, IBM and Lenovo can be said to be on the right way. Lenovo had made great steps towards becoming an employee-focused organization than before. There has been change in the communication between employees as confessed by the vice president of cultural integration and diversity, and vice president of human resource (Amedu, 2004). Both of the vice presidents informed Worthington post on the communication style that the company has adopted to be employee friendly. Gina Qiaosaid who is the vice president for Human resource said that she has adopted being aggressive and more direct as the Americans. Yolanda who is the vice president in charge of vice president of cultural integration and diversity have been encouraging Chinese to actively participate in the meetings; she realized that Chinese were not used to expressing their opinions because they were shy and feeling uncomfortable.
It is in practice that the Americans tend to talk more as compared to the Chinese who do more listening, this annoys the Chinese. However, they have both adopt to leave with the varying cultures. It was clear that these changes cannot happen in a twinkle of an eye but will take some time. The company was also aware that the innovation of this mutual learning had to take place within the different levels of the company. To promote the cultural adoption in the top leadership, the company established leaders group to help in identifying cultural differences and frankly talk about the same. Finally, it was agreed among the executive members that their meetings will be held on different locations with the aim of increasing their exposure on each other’s culture (Beitel, Schiereck &Wahrenbur, 2003). 2.2.1. The critical successful factors that are the focus of the successful M&A activities
18.104.22.168. Properly constructed corporate plan
Lenovo experienced a tough period after the acquisition, marred with grave financial problems and dropping stock prices. In the wake of all these problems, the management embarked on designing of corporate plan. The plan had two steps to lead Lenovo towards a success. The implementation of this plan saw Lenovo achieving high profits in 2010.
22.214.171.124. Synergistic Effect
According to Bello (2004), a successful merger and acquisition is weather the acquiring company and the merging company is able to complement each other’s advantage and make a big thing out of the two. The merging of IBM and Lenovo has shown more fruits in many aspects. There great synergistic effects include the synergy of distribution channel, the synergy of business, the synergy of cost saving, and the synergy of brand management.
126.96.36.199. Resolving human resource issues
Initially, there were incredible differences between IBM’s and Lenovo’s human resource strategies. One of the visible major problems was the big gaps between the two companies; the wages of IBM was great as compared to Lenovo. In order to match the differences, Lenovo gave a transformation period of three years as a transitional period with which to make the pay uniform. This turned out with the best results since it reduced the discontent of existing Lenovo employees as the same time retaining the previous employees of IBM. Another success in the human resource was the ability of the management to make American and Chinese employs to cope with each other bearing in mind they had different cultures. As pointed out by Carbral, Dierick &Vesala (2002), human resource issues forms one of the major issues in mergers and acquisitions.
188.8.131.52. Ability to blend two different brands
According to Carleth, Hartmann & Spagnolo (2002), co-branding is one of the strategies used in development of new products. However, combining of two brands has sometimes resulted into an outcome which was not intended. It is through development of new products that most companies seek growth. In order to explore the international marked and increase its global revenue, Lenovo had planned to exploit IBM brand which is well known worldwide. Initially, Lenovo signed an agreement allowing it to use IBM’s trademark for five years, this allows the whole world to recognize Lenovo. The company has since then continued to build its reputation in the international market. This is evidence in 2011 when Lenovo became the third largest computer suppliers worldwide, overtaking Acer.
2.3. Challenges in Merger and Acquisition
As pointed out by David & Yener (2004), despite Mergers and Acquisitions being considered as primary driver of growth for consumer goods, there are several challenges associated with it. The challenges can be categorized into three namely cultural, compliance related, and technical. Cultural Challenges including bringing together of different cultures together. In the Case of Lenovo and IBM, Chinese and American cultures which are different. Merger and acquisition has always come with an element of hostility, more so to the individuals at the target company, in most cases they believe they are being taken over. Contrary, employees of the acquiring organization may feel like they are not fitting in the new firm. These two forces results in reluctance to coming up with efforts to build bridges in the new firm.
In most cases both team are unwilling to relearn, realign, retool how to do their job. According to Kathy (2005), compliance related challenges arise from the corresponding networking of their compliance with relevant applications. In most instances, the companies shall have achieved different levels of compliance; hence the merged company will definitely need a new strategy in bringing the straggler up to par. In some instances, merger and acquisition forces the company to implement new regulation, this requires additional resources, planning, understanding and execution. According to Olagunju & Obademi, (2012), technical challenges involve the technical infrastructures. The exercise of merger begins with planning on how to transfer technologies, human resource, systems and processes; which are very important for the operation of the new company. Companies that have gone through merger and acquisition process admit that is a rational behavior of interest to both the company and the shareholders.
The financial crisis which has persisted since 2009 has been a challenge for various companies. These companies have always looked into merging with stronger and larger players so as to survive in the competitive world. In the recent past, a storm of mergers have been witnessed as companies try to reach new strategic objectives and compete within the changing market. Institutional changes which are caused by merger affect work assignment, organizational climate and group dynamics. These changes eventually affect employ motivation. The performance of a company is influenced by employees’ psychological response and the correlation is clear when a drastic change occurs in the organization like changing a manager. The result might be negative behavior i.e. acts of sabotage, absence. Additionally it can also lead to positive behavior like loyalty and more commitment (Osho, 2004). Merger process can be divided into four stages with each stage having different effect to the employees of the target organization. The stages include; Pre merger, Initial planning and formal combination, Operational combination, and standardization. It is established that it is during the operational combination stage where employee motivation occur significantly.
This is because it is the where the actual integration of functions and daily operations occur. It is during this stage that, work assignment, reporting responsibilities, and process budgets are redistributed and employees are challenged to learn new ways of doing things; adopting new corporate culture and managing new performance requirements. The changes which arise from Merger and Acquisition create issues for both the employee and the organization. Research has determined that there are three important sources which occur during operation combination stage (Osho, 2004). These significant derive from role conflict, social identity, and acculturation, all of which affects employee motivation. 2.3.1. How Merger and Acquisition can be made to be Successful As pointed out by Pilloff & Santsmero (1997), there are numerous challenges that face mergers, as well as acquisitions. They range from challenges to do with human resources, information technology issues, as well as cultural issues. There are various cultural issues that have to be looked into. These will play a major role in ensuring that the process is effectively handled in order to make sure that the benefits are generated.
To make a merger and acquisition a success, companies which has restructure or have merged need to consider several mitigation factors including; First, they need to adequately inform customers from both sided on how the merger will affect them. Informed customers will always make informed decision. Secondly, the new company need to create a plan which outlines the immediate activities which are going to be undertaken in the short run, the plan should clearly communicate the new entity (Rhoades, 1993). Thirdly, there is need to thoroughly communicate to all employees and informing them on how they are likely to be affected by the merger.
Additionally, change management process should be implemented gradually. Forth, the processes of the new company should be streamlined as soon as possible. This will help in boosting employ morale and making things to become clear. Finally, the management should be able to integrate systems and effectively implement new procedures and policies which are based on best practices. One of the key to successful merger and acquisition is the ability of the company to efficiently and effectively integrate the two companies into one unit which is then capable of carrying out the vision of the management. It is important that integration of processes, people, policies, products, technology, customers, and solutions are geared towards achieving this vision (Sobowale, 2004; Straub, 2007; Vander, 2002).
2.4. Summary of the Chapter
This chapter looks at the theoretical literature of regarding mergers and acquisitions. It has mainly looked at the theoretical and the empirical literature. It has provided some of the various ways through which mergers and acquisition contributes to the performance of firms. It has also provided the various challenges that are faced by mergers and acquisitions as well as the various ways through which the challenges can be mitigated. The various success factors of mergers and acquisition has also been provided.
Agrwal, A. and J. Jafee, 2000. “The Post-Merger Performance Puzzle. In Cooper, C. and
Geregory, A., eds. Advances in Mergers and Acquisitions, CT: JAI press, Stamford. Andre, P., M. Kooli and J. L’Her, 2004. “The Long-Run Performance of Mergers and Acquisitions: Evidence from the Canadian Stock Market”, Financial Management 33 (4), pp. 27-43. Agrawal, A., F. Jaffe and G. N. Mandelker, 1992, “The post-merger performance of acquiring
firms: a re-examination of an anomaly”, Journal of Finance 47, no. 4, 1605–21. Altunbas, Y. Ibanez D.M. (2004) Mergers and Acquisitions and Bank Performances in Europe.
The role of strategic similarities. ECB Working Paper in 398 Frankfurt. Amedu, S. (2004): “Corporate Takeover, Acquisition and Merger”. The Nigerian Stockbroker, the Official J. Chartered Ins. Stockbrokers, January-March. Agrawal A, Jaffe J F and Mandelker G N (1992), “The Post-Merger Performance of Acquiring Firms: A Reexamination of an Anomaly”, Journal of Finance, Vol. 47, No. 4, pp. 1605-1621. Agrawal A and Jaffe J F (2000), “The Post-Merger Performance Puzzle”, Advances in Mergers
and Acquisitions, Vol. 1, pp. 7-41.
Andrade G, Mitchell M and Erik Stafford E (2001), “New Evidence and Perspectives on
Mergers”, Journal of Economic Perspectives, Vol. 15, No. 2, pp. 103-120. Bruner R F (2002), “Does M&A Pay? A Survey of Evidence for the Decision-Maker”, Journal of
Applied Finance, Vol. 12, No. 1, pp. 48-68.
Beitel, P. Schiereck D, Wahrenbur, M. (2003): “Explaining the M & A Success in European Bank Mergers and Acquisitions”. Center for Financial studies Working Paper Series, Johann Wolfgang Geoth University Bello, M. S (2004): “Mergers and Acquisitions as a Strategy for Business Growth in Nigeria”. Nig. J. Acct. Res., 1 (1).
Beitel, P. and D. Schiereck, 2001, “Value creation at the ongoing consolidation of the European
banking market”, Working paper 05/01, December 5-7, 2001. Beitel, P., D. Schiereck and Wahrengoug, 2002, “Explaining the M&A success in European bank
mergers and acquisitions”, Institute for Mergers and Acquisitions (IMA). Brailsford, T., R. Faff and B. Oliver, 1997, “Research design issues in the estimation of beta”
(McGraw-Hill, series in advanced finance).
Brealey, R. A. and S. C. Myers, 2003, “Principles of Corporate Finance” (New York, McGraw-
Brigham, F. E. 1986, “Fundamentals of Financial Management” (Chicago, The Dryden Press).
7) Capron, L., 1999, “The long-term performance of horizontal acquisition”, Strategic Management Journal 20, no.11, 987–1018.
Berger, A. and D. Humphrey, 1992. “Mergers in Banking and the Use of Cost Efficiency as a
Defense”, Antitrust Bulletin 37, pp. 541-600.
Cabanda, E. and M. Pajara-Pascual, 2007. “Merger in the Philippines: Evidence in the Corporate
Performance of William, Gothong, and Aboitiz (WG&A) Shipping Companies”, Journal of Business Case Studies 3(4), pp. 87-100.
Choi, J. and D. Harmatuck, 2006. “Post- Operating Performance of Construction Mergers and Acquisitions of the United States of America”, Canadian Journal of Civil Engineering 33 (3), pp. 266-278. Choi, J. and J. Russell, 2004. “Economic Gains around Mergers and Acquisitions in the Construction Industry of the United States of America”, Canadian Journal of Civil Engineering 31 (3), pp. 513- 525. Cybo-Ottone, A. and M. Murgia, 2000, “Mergers and shareholder wealth in European banking”,
Journal of Banking and Finance 24, 831 – 859.
Carbral, I, Dierick F, Vesala. J. (2002): “Banking Integration in the Euro Area”, Eur. Central
Bank Occasional Pap. 1 (6).
Carleth, E., Hartmann P & Spagnolo G. (2002): Banking Mergers, Competition and Financial Stability. Committee of the Global Financial System Conference 2, Part 2. Diaz, B. D., M.G. Olalla and S.S. Azofra, 2004, “Bank acquisitions and performance: evidence from a panel of European credit entities”, Journal of Economics and Business 56, no. 5, 377-404. Dunis C. and T. Klein, 2005, “Analysing mergers and acquisitions in European financial services: An application of real options”, The European Journal of Finance 11, no. 4, 339-355. David, M. I. & Yener, A. (2004): “Merger and Acquisitions and Banks Performance in Europe”: The Role of Strategic Similarities, Eur. Central Bank Work. Pap. Ser., (398), October. Fuller K, Netter J and Stegemoller M (2002), “What Do Returns to Acquiring Firms Tell Us? Evidence from Firms that Make Many Acquisitions”, Journal of Finance, Vol. 57, No. 4, pp.1763-1793. Feroz, E. H., S. Kim and R. Raab, 2005. “Performance Measurement in Corporate Governance:
Do Mergers Improve Managerial Performance in the Post Merger Period?”, Review of Accounting and Finance 4, pp. 86-101.
Gallet, C. A., 1996. “Mergers and Market Power in the U.S. Steel Industry”, Applied
Economics Letters 3, pp. 221-223.
Ghosh, A., 2002. “Does Operating Performance Really Improve Following Corporate
Acquisition?”, Journal of Corporate Finance 7, pp. 151-178. Groff, E., D. Lien, and J. Su, 2007. “Measuring Efficiency Gains from Hospital Mergers”,
Research in Healthcare Financial Management, pp. 1-10.
Gugler, K., D. Mueller, B. Yurtoglu and C. Zulehner, 2003. “The Effects of Merger: an International Comparison”, International Journal of Industrial Organization 21, pp. 625-653. Ghosh A (2001), “Does Operating Performance Really Improve Following Corporate
Acquisitions?”, Journal of Corporate Finance, Vol. 7, pp. 151-178. Ghosh A and Jain P J (2000), Financial Leverage Changes Associated with Corporate Mergers”,
Journal of Corporate Finance, Vol. 6, pp. 377-402.
Healy, P., K. Palepu and R. Ruback, 1992. “Does Corporate Performance Improve
Success?”, Journal of Financial Economics 31, pp. 135-175. Heron, R. and E. Lie, 2002. “Operating Performance and the Method of Payment in
Takeovers”, Journal of Financial and Quantitative Analysis, March, pp. 137-156. Hviid, M. and C. Prendergast, 1993. “Merger Failure and Merger Profitability”, Journal of
Industrial Economics 41(4), pp. 371-386.
Hayward, M. L. and D. C. Hambrick, 1997, “Explaining the premiums paid for large acquisitions: evidence of CEO hubris”, Administrative Science Quarterly 42, no. 1, 103–7. Healy P M, Palepu K G and Ruback R S (1992), “Does Corporate Performance Improve After
Mergers?”, Journal of Financial Economics, Vol. 31, pp. 135-175. Heron R and Lie E (2002), “Operating Performance and the Method of Payment in Takeovers”,
Journal of Financial and Quantitative Analysis, Vol. 37, No. 1, pp. 137-155. Huizinga, H. P., J. H. M. Nelissen and R. Vander Vennet, 2001, “Efficiency Effects of Bank Mergers and Acquisitions in Europe”, Discussion Paper 088/03, Tinbergen Institute, Amsterdam. Ismail, T. H., A. A. Abdou and R. M. Annis, 2010. “Exploring Improvements of Post-Merger Corporate Performance- the Case of Egypt”, the Icfai University Journal of Business Strategy. Jarrell, G. and A. Poulsen, 1989. “The Returns to Acquiring Firms in Tender Offers: Evidence
from Three Decades”, Financial Management 12, pp. 12-19.
Jensen, M. and R. Ruback, 1983. “The Market for Corporate Control: the Scientific Evidence”,
Journal of Financial Economics 11 (1-4), pp. 5-50.
Johnston, J. and J. Dinardo, 1997, “Econometric Methods” (McGraw Hill, New York). King, D., D. Dalton, C. Daily and J. Covin, 2004. “Meta-Analysis of Post-Acquisition Performance: Identifications of Unidentified Moderators”, Strategic Management Journal, February, pp. 187-201. Kling, G., 2006. “The Long-Term Impact of Mergers and the Emergence of a Merger Wave in
Pre-World-War I Germany”, Explorations in Economic History 43 (4),
pp.667-688. Kumar, R., 2009. “Post-Merger Corporate Performance: an Indian Perspective”, Management
Research News 32 (2), pp. 145-157.
Kathy, L. (2005): Mergers and Acquisitions. Another Tool for Traders. Investopedia. Lau, B., A. Proimos and S. Wright, 2008. “Accounting Measures of Operating Performance
Outcomes for Australian Mergers”, Journal of Applied Accounting 9 (3), pp. 168-180. Liu, X. and H. Zou, 2008. “The Impact of Greenfield FDI and Mergers and Acquisitions on Innovation in Chinese High-Tech Industries”, Journal of World Business 43, pp. 352–364. Lepetit, L., S. Patry and P. Rous, 2004, “Diversification versus specialization: an event study of M&As in the European banking industry”, Applied Financial Economics 14, no. 9, 663-669. Linn S C and McConnell J J (1983), “An Empirical Investigation of the Impact of `Antitakeover’ Amendments on Common Stock Prices”, Journal of Financial Economics, Vol. 11, pp. 361-399. Linn S C and Switzer J A (2001), “Are Cash Acquisitions Associated with Better Post- acquisition Operating Performance than Stock Acquisitions?”, Journal of Banking and Finance, Vol. 25, pp. 1113-1138. Moeller S B and Schlingemann F P (2005), “Global Diversification and Bidder Gains: A
Comparison Between Cross-Border and Domestic Acquisitions”, Journal of Banking and Finance, Vol. 29, pp. 533-564.
Majumdar, S., R. Moussawi and U. Yaylacicegi, 2007. “Quest for Efficiency: Assessing the Impact of Mergers on Performance in the U.S. Telecommunications Industry”, Working Paper Series, available at: www.ssrn.com. Malhotra, S. and P. Zhu, 2006. “Shareholder Benefits and Firm Performance: an Empirical Analysis of International Acquisitions by Firms from a Developing Economy”, Working Paper Series, available at: www.ssrn.com (accessed March 15, 2008). Mantravadi, P. and A. Reddy, 2008. “Relative Size in Mergers and Operating Performance: Indian Experience”, Working Paper Series.
Megginson, W., A. Morgan and L. Nail, 2004. “The Determinate of Positive Long-Term Performance in Strategic Merger: Corporate Focus and Cash”, Journal of Banking and Finance, March, pp. 523-552. Mueller, D.C. 1980. The
Determinants and Effects of Mergers: an International Comparison.
Oelgeschlager, Gunn & Hain, Cambridge, MA.
Olagunju, A. Obademi, O. (2012) An Analysis of the Impact of Mergers and Acuisitions on Commercial Banks Performances in Nigeria. Pakistan Journal of Social Sciences. 9: 139-146. Osho, M. (2004): Consolidation through Merger and Acquisitions: The African Experience. Conference Proceedings on Consolidation of Nigeria’s Banking Industry, Central Bank of Nigeria, Abuja. Pilloff S.J. Santsmero A.M. (1997) The Value Effects of Bank Mergers and Acuiqisition. Work
Paper., Financial Institution Centre, University of Pennyslvania, pp. 97-107. Rhoades, S.A. (1993): “The Efficiency Effects of Bank Mergers”: An Overview of Case Studies of Nine Mergers. J. Banking Finan, 22: 273 – 291.
Rahman A R and Limmack R J (2004), “Corporate Acquisitions and the Operating Performance of Malaysian Companies”, Journal of Business, Finance and Accounting, Vol. 31, Nos. 3/4, pp. 359-400. Ramaswany, K. and J. Waegelein, 2003. “Firm Financial Performance Following Mergers”,
Review of Quantitative Finance and Accounting 20, pp. 115-126. Rappaport, A. and M. Sirower, 1999. “Stock or Cash? the Trade-Offs for Buyers and Sellers in
Mergers and Acquisitions”, Harvard Business Review 77 (6), pp. 147-158. Rau, P. and T. Vermaelen, 1998. “Glamour Value and the Post Acquisition Performance of
Acquiring Firms”, Journal of Financial Economics 49, pp. 223-253. Rhoades, S., 1993. “Efficiency Effects of Horizontal (in-Market) Bank Mergers”, Journal of
Banking and Finance 17, pp. 411-422.
Sinay, T. and C. Campbell, 2002. “Strategies for More Efficient Performance through Hospital
Merger”, Health Care Management Review 27, pp. 137-156.
Sun, H. and A. Tang, 2000. “The Sources of Railroad Merger and Gains:
Evidence from Stock
Price Reaction and Operating Performance”, Transportation Journal 39 (4), pp. 14-27. Sharma D S and Ho J (2002), “The Impact of Acquisitions on Operating Performance: Some Australian Evidence”, Journal of Business, Finance and Accounting, Vol. 29, No. 1, pp. 155-200. Sobowale, D. (2004): “Soludo’s Revolution and N25 billion Capital Base Policy, The Grave Danger Ahead”: Mergers, Acquisitions and Recapitalization Options, How Feasible. Weekend Vanguard, July. Seth, A. 1990), “Value creation in acquisitions: a reexamination of performance issues” Strategic
Management Journal 11, no. 2, 99–115.
Šević, Ž., 1999, “Restructuring banks in central and eastern European countries as a part of macroeconomic changes towards market-oriented economy”, BCPPRS and Čigoja Štampa, Belgrade. Straub, T. (2007): Reasons for Frequent Failure in Mergers and Acquisitions. A Comparative
Analysis. Deutscher University Verlag, Wresbaden.
Thalassinos E., Kyriazidis Th., Thalassinos J., 2006, “The Greek Capital Market: Caught in Between Corporate Governance and Market Inefficiency”, European Research Studies Journal, Vol. IX, issue 1-2, pp. 3-24. Thalassinos, E., 2008, “Trends and Developments in the European Financial Sector”, European
Financial and Accounting Journal, vol. 3, no. 3, pp. 51-68. Tse, T. and K. Soufani, 2001. “Wealth Effect of Takeovers in Merger Activity Eras: Empirical
Evidence from the UK”, International Journal of Economics of Business 8, pp. 365-377. Tuch, C. and N. O’Sullivan, 2007. “The Impact of Acquisitions on Firm Performance: A Review of the Evidence”, International Journal of Management Reviews 9 (2), pp. 141-170. Vander, V.R (2002) Cross-Border Mergers in European Banking and Bank Efficiency. Working
Paper Ghent University 152.
Vander V. R., (1996). “The effect of mergers and acquisitions on the efficiency and profitability of EC credit institutions”, Journal of Banking
and Finance 20, no. 9, 1531-1558. Yeh, T. and. Y. Hoshino, 2002. “Productivity and Operating Performance of Japanese Merging Firms: Keiretsu-Related and Independent Mergers”, Japan and the World Economy 14, pp. 347-366. Yook, K.C. 2004. “The Measurement of Post-Acquisition Performance Using EVA”, Quarterly
Journal of Business & Economics, Summer, pp. 67- 84.
Yuce, A. and A. Ng., 2005. “Effects of Private and Public Canadian Mergers”, Journal of
Administrative Sciences, June, pp. 111-124.