Thepractice of mergers and acquisitions has attained considerable significance inthe contemporary corporate scenario which is broadly used for reorganizing thebusiness entities. Merger and Acquisitionhas been recognized as the most important factor in corporate finance forcompanies as well as the economy.
The M&A have not been the boomingscenario in the Kenya as compared to other African countries. Earlier researchhas shown no advancement or improvement in the country performance andprofitability. And it has a direct impact on the crucial financial component inthe country i.e. banks.Thisresearch was done to analyze whether the merger had any effect on the banks’performance .
The research aims to determine the effect of the mergers andacquisitions on the shareholders’ value and to examine the implication ofmergers and acquisitions on profitability. The variable used in the study wasdependent, independent and moderating variable. The dependent variable was ROE, independent were EPS and ROI and moderatingvariable was set rules and regulations.Thestudy used descriptive survey design. The population of this study was comprised of all the14 banks that had merged or acquired in Kenya since year 2000 to the time ofstudy.
Data was collected by use of questionnaires with both open and closedended questions. The collected data was analyzed using SPSS where theco-efficient of correlation obtained was used to determine the nature of therelationship between the independent and dependent variables. The analyzed data was presented by use of percentages,frequency tables, graphs and pie charts.
Thefindings of this study revealed that majority of the banks i.e. 42% merged oracquired other banks between 4 and 7 years ago. The recent mergers i.
e. thosethat are below 4 years since they merged accounted for only 20% of all themergers and acquisitions in the banking sector. The banks that merged or acquired for the purpose ofenlarging their market share and raise their profitability accounted for about76% of all the mergers and acquisitions in the banking industry in Kenya. The study further established that themergers and acquisitions among the banks in Kenya raised the shareholder’svalue through raising the demand, price and earnings per share. However, themergers and acquisitions did not have a significant effect on the amount ofdividends declared to the shareholders and the frequency of issuing dividends.Conclusion Themain reason why organizations and mostly within the Kenyan banking industrymerge and/or acquire others, is to enlarge their market share and increasetheir profitability. This is achieved through two or more banks comingtogether, combining their resources together with one schedule to raise theirprofitability. Such resources as skills, management systems, equipment,processes and procedures are strengthened through the mergers and acquisitionswith an aim of raising their productivity.