Determinants of Perfomance of Mergers and Acquisitions in the Financial Sector in Kenya

Abstract

Mergers and acquisitions are common growth strategies for modern business. The purpose of this study was to critically examine the determinants of performance of mergers and acquisitions in the financial sector in Kenya, particularly banks and insurance companies. The following objectives were used in the study: to determine the relationship between culture integration and performance of mergers and acquisitions, to examine the relationship between market coverage and performance of mergers and acquisitions, to evaluate the relationship between skill competence and performance of mergers and acquisitions, to identify the relationship between value creation and performance of mergers and acquisitions. The study used both descriptive and cross-sectional designs, and a mixed methodology. Data collection instruments were questionnaire for obtaining the primary data and published data for secondary data. The study used behavioural, economic, resource-based and synergistic theories. These banks and insurance companies were included if they had undergone mergers and acquisitions from 2000 to 2014. A total of 93 returned questionnaires were used and the hypothesized relationships were tested using multiple regression analysis. Data analysis was conducted with the aim of describing and summarizing data, identifying relationships between variables, comparing variables, identifying the difference between variables and predicting outcomes of the research, coding, and developing themes. The study found out that culture integration, skill competence, market coverage and value creation contribute significantly to performance of mergers and acquisitions. The contributions for each variable indicated that value creation was the greatest predictor, skill competence followed and culture integration contributed less to the model. The study offered practical insights to policy makers, academicians, scholars and researchers in strengthening organizational identification of the determinants of performance of mergers and acquisitions by considering the crucial role of culture integration, skill competence, market coverage and value creation on the performance. The study suggested that there was a direct correlation indicating that; culture integration, skill competence, market coverage and value creation indicated a positively correlated. Regression showed that there was a relationship between culture integration, skill competence, market coverage and value creation and performance of mergers and acquisitions in the financial sector in Kenya. The findings reveal that further research will bring value creation to perspective, developing a strategic framework to enhance performance within the environment and the comparisons of major findings of mergers and acquisitions to understand synergistic theory. On the basis of these findings, it is recommended that value creation and skill competence bring a greater impact, and, therefore organization may do well to invest more in value creation and skill competence for performance. Market coverage was found to add value to the model and new mergers and acquisitions need to look at this with a critical mind.