KAZEEM OLUWASESAN SALAWU

AN EVALUATION OF THE EFFECT OF MERGER AND

ACQUISITION ON THE PERFORMANCE OF NIGERIA
BANKING SECTOR
(Case: United Bank of Africa, PLC)

Academic Thesis
Fall 2013
Business School
International Business Administration

TABLE OF CONTENTS
TABLE OF CONTENTS ...................................................................... 2
Thesis abstract4
Abbreviations ...................................................................................... 5
1 INTRODUCTION ............................................................................ 8
1.1 Background of the Study ............................................................................. 8
1.2 Statement of the Problem ......................................................................... 10
1.3 Research Objective ................................................................................... 11
1.4 Significance of the Study ........................................................................... 12
1.5 Structure of the Thesis .............................................................................. 12

2 REVIEW OF RELATED LITERATURE ......................................... 14

2.1 Introduction ............................................................................................... 14
2.2 Theoretical Framework for Merger and Acquisition ................................... 16
2.3 Types of Merger ........................................................................................ 17
2.4 Reasons and Problem for Merger and Acquisition .................................... 19

3 IMPACTS OF MERGER AND ACQUISITION TO NIGERIA

ECONOMY........................................................................................ 23
3.1 Legal Requirement for Merger and Acquisition in Nigeria ......................... 23
3.2 Procedures for Merger in Nigeria .............................................................. 24
3.3 Reason for Regulating Merger and Acquisition Transaction ..................... 25

4 RESEARCH METHODOLOGY ..................................................... 27

4.1 Introduction ............................................................................................... 27
4.2 Research Design....................................................................................... 27
4.3 Sources and Method of Data Collection .................................................... 28
4.4 Study Population ....................................................................................... 28
4.5 Research Instrument ................................................................................. 28
4.6 Limitation of the Research work ................................................................ 29

5 PRESENTATION AND DATA ANALYSIS ..................................... 30

5.1 Introduction ............................................................................................... 30

3
5.2 Data Analysis Procedure ........................................................................... 30

6 SUMMARYS, CONCLUSIONS AND RECOMMENDATIONS ....... 51

6.1 Summary of Findings ................................................................................ 51
6.2 Conclusions .............................................................................................. 52
6.3 Recommendation ...................................................................................... 52

BIBLIOGRAPHY................................................................................ 54
APPENDICES ................................................................................... 56

4
SEINJOKI UNIVERSITY OF APPLIED SCIENCES

THESIS ABSTRACT
Faculty: Business School
Degree programme: International Business
Specialisation: International Business
Author/s: Kazeem Oluwasesan Salawu
Title of thesis: An Evaluation of the Effect of Merger and Acquisition on the Performance of Nigeria Banking Sector.
Supervisor(s): Miia Koksi
Year:
2013
Number of pages:
Number of appendices:
_________________________________________________________________

This study was designed to study the effect of Merger and Acquisition in the Banking Industry in Nigeria with special reference to United Bank of Africa, Plc.
The research work tried to reveal whether the introduction of merger and acquisition can improve the banking industry profitability and provide an engine for economic growth and sustainable development.
The thesis will review the background of the Nigerian Banking sector since inception as well as, examine the efficacy of merger and acquisition of banks in Nigeria.
Moreover, questionnaire and personal observation would be adopted as part of
methodology necessary to retrieved required data from United Bank Of Africa, Plc.
Necessary literatures were also reviewed to complement the thesis while the main
body would focus on the effect of merger and acquisition to United Bank Of Africa,
Plc. Recommendation and conclusion are the last write-up of the whole study; it
would be recommended that the government and regulatory authorities devise
method of monitoring the activities of merging banks and stands as checks and
balances to non-compliance of their laid down regulations.

Keywords: Merger, Acquisition, Bank, Economy

Abbreviations
SAP

Structural Adjustment Program

CBN

Central Bank of Nigeria

N.D.I.C

Nigeria Deposit Insurance Corporation

GNP

Gross National Profit

UBA

United Bank for Africa

CAC

Corporate Affairs Commission

CAMA

Companies & Allied Matter Act

SEC

Securities and Exchange Commission

CEO

Chief Executive Officer

TABLES AND FIGURES

FIGURE 1. Reason for Merger and Acquisition and Problems in Achieving
success. ................................................................................................................ 18

TABLE 1. Distribution showing the Sex of Respondents. ..................................... 30

TABLE 2. Distribution showing the Age Respondents.......31

TABLE 3. Distribution showing the Marital Status of Respondents..31

TABLE 4. Distribution showing the Educational Qualification of Respondents..32

TABLE 5. Distribution showing the Position of Respondents....33

TABLE 6. Distribution showing the Working Experience of Respondents..34

TABLE 7. Do you agree that Merger and Acquisition affect the liquidity position of
the bank? ..............................................................................................................35

TABLE 8. Do you believe Merger and Acquisition has any positive impact on performance of banking instittion?..............................................................................36

TABLE 9. Does Merging and Acquisition increase the capital base of Nigerian
banks?....................................................................................................................37

TABLE 10. Do you agree that Merger and Acquisition can lead to an increase in
banks profit merging?............................................................................................38

7
TABLE 11. Are of you the opinions that merger and acquisition has led to growth
of banking sector in Nigeria?..................................................................................39

TABLE 12. Do you agree that Merger and Acquisition can bring effectiveness and
efficiency in the banking sector?............................................................................40

TABLE 13. Are you of the opinion that merger and acquisition lead to efficient usage of funds and resources?..................................................................................41

TABLE 14. Do Merger and Acquisition increases productivity?.............................42

TABLE 15. Do you agree with the opinion that Merger and Acquisition will increase
the expenditure pattern of an organization?...........................................................43

TABLE 16. Does merger and acquisition has any significance relationship with the
level of output?.......................................................................................................44

TABLE 17. Does Merger and Acquisition lead to an increase in the employee portfolio?.......................................................................................................................45

TABLE 18. Do you believe that, merger and acquisition can lead to economic
growth and sustainable development?...................................................................46

TABLE 19. Do you agree Merger and Acquisition has any effect on GDP?.........47

TABLE 20. Are you of the opinion that Merger and Acquisition could have any
negative implication in the banking sector?...........................................................48

TABLE 21. Do Merger and Acquisition serves as a threat to workers in the banking
sector?...................................................................................................................49

TABLE 22. Does merger and acquisition enable banks to manage and serve nation foreign debt portfolio?......................................................................................50

1 INTRODUCTION
The banking sectors is crucial to the survival of any economy and in order for the
banking industry to achieve its objectives, the industry must be stable, safe and
sound.

In Nigeria, the rapid increase in the number of bank failure has reached an unprecedented level and as a result, the regulatory authorities have adopted measure aimed at ensuring safely and soundness of the banking industry. Such measure includes: Holding actions, assumption of management control as well as outright liquidation among others.

Merger and Acquisition strategies are gaining more popularity because of the
globalization, deregulation of multiple industries in many different countries, and
favorable legislation, the number and size of domestic and cross-border merger
and acquisitions has increased significantly. (Hitti , Ireland , and Hoskisson , 2005,
225.)

1.1 Background of the Study

The restructuring of the Nigeria economy since 1986 has increased the competitiveness of the Nigeria economy since the principal trust of the structural adjustment program (SAP) was the deregulation of Nigeria financial system with the following key measure licensing of new financial institution including the finance
companies, mortgage banks, community bank and peoples bank, deregulation of
pricing of financial services through interest rate became regulated. The regulatory
authorities are the central bank of Nigeria (CBN) and Nigeria deposit insurance
corporation (N.D.I.C).

9
The Nigeria financial system approach for resolving the distress of banks suggested by both official and private circle is MERGER AND ACQUISITION.

Several strategies are available in most of the developing countries. The corporate
world is usually opened to an investor for raising capital in the capital market. One
often, which has been found most useful in many developed economics and gradually gaining ground in many developing nations, is through merger and Acquisition.
A merger is defined by the companies and allied matters decree 1990 as any
amalgamation of the undertaking of any part of the undertakings or interest of two
or more companies or the undertakings or part of the undertaking of one or more
companys bodies corporate

An acquisition is the buying over of a company by the payment of cash to its

shareholders by another company with the target company still continuing its existence but as a subsidiary of the buying company which becomes the acquired
companys holding company.

According to Ade Oyedijo (2004, 167) A merger occurs when two companies under different ownerships and management combines together to become a single
enterprise.

Hence, Nancy Hubbard (2001) argued that there are psychological differences
between acquisitions and merger as the latter involve two partners of relatively
equal size and power and a genuine attempt is made to combine the two entities
into a culturally new one.

10
1.2 Statement of the Problem

There are several factors that can make a company adopt merger and acquisition.
However, merger and acquisition is a deliberate effort undertaking by two or more
organization involved and in the process of doing this, some problem need to be
solved.

Stifling Competition:

Some individuals or companies may use merger and acquisitions to stifle competing organization by taking them over, stripping their assets and reaping a fortune,
especially where the taken over company and been sold as a going concern at
stock exchange prices which may be lower than its physical asset valuation. Individuals engaged in the practice apart from becoming selfishly rich had contributed
by no small means to domestic misery in some homes since a lot of jobs would
have been lost due to the selfish actions.

Poor Technical Manpower:

The Nigerian economic system lacks the expertise in terms of manpower to tackle
the technical problems of merger and acquisition. The scarcity of merger technocrats had been one of the factors militating against the proper development of
merger and acquisition practice in Nigeria. It is hoped that with the reestablishment and intensified activities of the chartered institute of stock broker,
the institute of chartered accountants of Nigeria and other professional bodies, the
manpower problems will be alleviated.

Family Businesses:

Coupled with the foregoing, most businesses in Nigeria are family owned and
even had been passed on to successive family generations in some cases. Such,
families equate the taking over of their family businesses (in case of death of the

11
man business actor or manager) to a family shame and disgrace rather than regarding it as economic reality, which may be on their best advantages.

Reduction in Gross Net Profit (GNP):

Mergers and acquisitions may cause a down turn in saving investment and the
Gross National Product (GNP) where the acquirer lay off the staff of the acquired
and later on strip off the asset in an action that would only been motivated by selfinterest and greed.

1.3 Research Objective

The main objective of the study is to examine the efficacy of merger and acquisition on Nigerian banking sector.

1. To establish the impact of merger and acquisition if it can improve the competitive power of the bank.

2. To examine if the practice of merger and acquisition improve the banking

industry profitability.

3. To determine if merger and acquisition can provide an engine for economic

growth and sustainable development.

4. To evaluate if there is any negative implication in process of merger and

acquisition in banking sector.

5. To find if the practice of merger and acquisition can affect family business.

12

1.4 Significance of the Study

Merger and acquisition is a recent development as a result of the globalization

process on course organization need to be solid and strong to be able to complete
favorably in todays economic environment and as much there is need for merger
and acquisition but in the part of the world there is low skill and knowledge enhancement.

However the banking system itself had been self-adjusting, going by the fact that
some mergers had been taking place in the banking industry. The spate of mergers now is of an economic imperative taking into consideration market expectation that every existing bank must have a survival plan. Hence banks had been
announcing merger plans and the signing of memorandums of understanding.

The study also provides an insight into the impact of merger and acquisition on the
Nigeria banking industry. It is not surprising therefore that the Nigeria capital market has in recent times witness an increase in corporate business combinations as
companies look for qualified and willing investors for merger arrangements in order to blend their synergy.

1.5 Structure of the Thesis

The structure of the study is the extent of work the researcher tends to carry out.
The research method will be aimed towards ascertaining the influence of merger
and acquisition on Nigerian banking industry.

13
Furthermore, both primary and secondary source of data collection are to be
viewed. The primary source of data collection is the distribution of questionnaire
and personal interview with the bank officials.

Also, secondary sources are the materials gotten from the bank, internet and other
written textbooks on merger and acquisition like journals, and current published
materials on the subject matter.

14

2 REVIEW OF RELATED LITERATURE

2.1 Introduction

The former governor of central bank of Nigeria (CBN), Prof Charles Soludo, in July
2008 make a formal public statement of N25 billion as the new minimum capitalization for banks in Nigeria which all banks are expected to comply to the new directive by the year 2005.

Nigeria banks experience another reform (recapitalization) in 2009, during the present regime of the CBN Governor Sanusi Lamido Sanusi. This transformation restructured and reduces the number of banks via merger and change of ownership
from 24 to 22.

However, in most of the developing countries, the corporate world is usually characterized by low investment rate occasioned by inadequacy of investable funds
and poor economic conditions.

For this reason, one of the strategies Nigeria has used to move its economy forward is the liberalization of the economy capital market reforms and privatization
and commercialization of public enterprise.

Meanwhile, the development of the accounting and allied expertise needed for
structuring corporate reorganization had been so slow in Nigeria due to the general literacy level as well as the stage of technical development. This has compounded the problem posed by shareholders apathy by most providing motivation
technocrats who can initiate deals that are hitter to neglect by the shareholder and
management. The current interest generated in merger and acquisition in Nigeria
might not have been, if not for the mid 2004 declaration by the central bank that
must achieve a specific capital base by December 2005.

15
This can only be achieved by massive capital injection or through the instrument of
merger and acquisition, therefore giving a satisfactory single definition of merger
and acquisition poses a difficult problem that is, acquisition of companies takes
more than a form, and each form of merger is dictated by the nature, characteristics, aims and ethics of the companies concerned and prevailing economic situation.

Merger is the fusing together to submerge than separate identifies into a new
company formed to acquire the assets and assume the liabilities of the liquidated
company. While acquisition on the hand seen as where a party gains control over
a company by acquired to control the interest by voting share capital. This is also
known as take over.

According to Gbede Omotayo (2005) merger is a form of business combination

whereby two or more companies join together either with one being voluntarily liquidated by having interest taken over by the other and enlarge surviving of the
company.

A merger was defined by the companies and Allied matter Decree 1990 as any
amalgamation of the undertaking or any part of the undertaking or interest of two
or more companies and one or more bodies corporate.

Hitti, Ireland, and Hoskisson, (1999) defined merger as a transaction in which two
firms agree to integrate their operations on a relatively coequal basis because they
have resources and capabilities that together may create a stronger competitive
advantage and alternatively defined acquisition as a transaction in which one firm
buys controlling or 100 per cent interest in another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary business within its portfolio.

Dictionary of economics however defined merger and acquisition as a union of two

or more independent business firm under a single ownership; accompanied by the

16
completion of acquisition of one company stock by another, either for cash or
stock in acquiring company.

Finally, Nancy Hubbard (2001) defined merger as a situation which involve similarsized entities where both companies share are exchanged for shares in a new
corporation.

2.2 Theoretical Framework for Merger and Acquisition

In trying to understanding the frame work of merger and acquisition, we have to

look into the economics of scale in Nigeria economy, economic of scale is the
most valid motive for banks that involved in merger and acquisition which arise
from the ability to spread overhead cost of operation over a large volume of output
and yield decline average cost of operation.

Pat Utomi (2002) said that, the size of merger and acquisition cost or premium is
very critical to the determination of the net benefit or value of merger and acquisition proposal. It implies that merger and acquisition can be combination of cash
shares and debt. In financing merger and acquisition may be influenced by its impact on the acquiring firms capital structure financial condition and liquidity position.

Moreover, professor Charles Soludo in 2004, emphasis the valuation of banks involves in merger and acquisition has opportunity that its cost he out the estimation
of the expected incremental cash flow (after tax) as the benefit from the merger
and acquisition while the cost of the merger is determined and compared against
benefit determine the net benefit.

He stated further that the cost of merger and acquisition consist of the value of
exchange which could be cast outlay or its equivalent value of the securities exchange for the acquired banks.

17
2.3 Types of Merger

Merger and Acquisition are classified into four types which can be explained blow:

Horizontal Merger:

Horizontal merger is a type of merger which two companies concerned are engaged in the same line of business. This means companies that operate in the
same industry for example, standard trust bank merged with United Bank for Africa
Plc. and continental trust bank in Nigeria because they share the same re-source.

Horizontal merger can lead to efficient use of shared resource and exploitation of
the learning and experience due to increased seals of production. Also merger is
often consummated to increase market share and is usually of great concern to
regulatory authorized due to the monopolistic tendency business enterprise can
stimulated efficiency and enhance productivity.

Vertical Merger:

Vertical merger is the combination of two or more companies towards the source
of raw-material toward the market also dictionary of business and economics seen
vertical merger as the expansion of more division of other forms engaged in earlier
or later stage of production of it.

Lateral Merger:

Lateral merger involved two companies which produce related goods in which do
not complete directly with each other. It is also a strategic decision leading to the
maximization of a companys growth by enhancing its production and making operations which are important issue of balance sheet and liabilities.

18
Finally, lateral merger takes advantage of raw materials and marketing outlet
common to both processes only.

Conglomerate Merger:

Conglomerate merger is a large company that consist of divisions of often seemingly unrelated businesses. It could also be seen as the consolidation of a previously independent firm with separate and distant markets as a new subsidiary of
the holding among the business acquired.

19
2.4 Reasons and Problem for Merger and Acquisition

Figure 1 below: Explained the reasons for merger and acquisitions and problems
associated to the concept. (Hitt, Ireland & Hoskisson 2005, 211)

There are numerous reasons for merger and acquisition, both financial managers
and theorist to account for high level of merger activity in the current business
would have proposed many good reasons.

20
Hitt, Ireland & Hoskisson 2005 in their views put their reasons together for merger
and acquisition thus; the principle reason is to increase the value of share of the
company.

According to Hitt, Ireland & Hoskisson the following are reasons for merger and
acquisition:

Increased market power

Business managers and owners often face a psychological pressure for increased
market power. They simply get tired of doing the same thing. The possibility of increased market power by merger and acquisition, of facing the challenges of a
new set of business circumstances, is often too attractive to forgo.

Overcoming entry barriers

Another reasons for merger and acquisition is overcoming entry barriers, when
barriers to entry into a new market exist, the next alternative is to acquire a company already having a presence in the industry or market.

Cost of new product development and increased speed to market

Merger and Acquisition is another way of developing a new product within the organization to avoid time wasting and cost required in establishing a new firm and
achieving a positive return. Internal development of new products is often perceived by managers to be costly and to represent high-risk investments of company resources.

Lower risk compared to developing new products

Internal product development processes is believed by manger as risky, merger

and acquisition is seen as an alternative way of entering into a new market because earning an acceptable return on investment requires significant resources

21
and time. Merger and Acquisition can be easily estimated and accurate compared
to the consequence of an internal product development process.

Increased diversification

Merger and Acquisition strategy are commonly used by companies to diversify.

This occurs when a company adds to its business either in terms of customer
functions, customer groups or alternative technologies. It is used to identify the
directions of development, which take the organization away from its present markets and its present products at the same time.

Figure 1 also shown several problems faced in merger and acquisitions.

Integration Difficulties

There are many difficulties associated with integration of two companies following
merger and acquisitions this includes melding two disparate corporate cultures,
linking different financial and control systems, building effective working relationship in a situation where management styles differ and resolving problems regarding the status of the newly acquired companys board of directors.

Inadequate Evaluation of Target

The acquirer need to take due diligence in evaluating the targeted company for
merger and acquisition including taking into consideration the differences in cultures between the acquiring and targeted company, tax related issues of the
transaction and the financing for the intended transaction, failure to put all these
into consideration may lead to the acquiring firm paying an excessive premium for
the targeted company.

22
Too Much Diversification

Diversification is used to identify the directions of development, which take the organization away from its present markets and products at the same time but too
much diversification may require additional investment in marketing infrastructure
or new technology. It also exposes a firm to the risk of untried markets.

Too Large

This is another problem in merger and acquisition. The risks and problems of
managing and coordinating entirely new businesses with the existing ones could
be high also there is a problem of diversion of resources and attention to other
areas leading to a potential loss of concentration and strategic effectiveness.

23

3 IMPACTS OF MERGER AND ACQUISITION TO NIGERIA ECONOMY

The banking sectors are crucial to the survival of any economy and the current
reform have brought about a new mind set to the industry as banks are putting in
place best practices in the areas of corporate governance and risk management.
Transparency and public disclosure of transactions have remarkably improved.
Nigerian Banks are now key players in the global financial market with many of
them falling within the top 20 banks in Africa and among Top 1000 banks in the
world. Number of banks have returned to the profit-making path and improved
their balance sheets, as the recent results of their financial statements have
shown. A new code of corporate governance has been issued; the CEO of banks
shall serve a maximum tenure of 10 years. (Sanusi 2012)

In Nigeria, the rapid increase in the number of Bank failure has reached an unprecedence level and as a result, the regulatory authorities have adopted measure
aimed at ensuring safety and soundness of management control, holding actions
among others.

According to Ekungbe (2000), corporate merger and acquisition are not very
common in Nigeria. This is notable cases on recent years, which are merger of
banking sector in Nigeria in the restructuring and competitiveness of the Nigeria
economy. Since the principal thrust of the structural adjustment programme (SAP/
was the deregulation of Nigeria financial institution including the finance companies, mortgage banks, community bank and peoples banks, deregulation of pricing
of financial services through interest rate became regulated.

3.1 Legal Requirement for Merger and Acquisition in Nigeria

There are various stages, under Nigerian Law, that a merger or acquisition has to
pass through. They include:

24
1. The intending companies are required, either alone or together, to apply to
a Federal High Court, who in turn orders separate meetings of the intending
companies, to approve the proposed merger or acquisition (the scheme);

2. The members of each company, compromising three quarters in value of

the shares of each company, are required to consent by resolution to the
scheme;

3. The above consent is then required to be referred to the Securities and Exchange Commission (SEC) for approval;

4. On SEC giving its approval, the parties or one of them is required to apply
to the Federal High Court who must sanction the scheme;

5. The sanction of the Federal High Court must then be forwarded to the Corporate Affairs Commission (CAC) within seven (7) days of the Order of the
Federal High Court.

6. Also, a notice of the Order of the Federal High Court must be published in
two government gazettes and in at least one National Newspaper.

The above stages are as provided for in Section 591 of the Companies & Allied
Matters Act, 1990 (CAMA). (Ehijeagbon O.O, Jan, 2004)

3.2 Procedures for Merger in Nigeria

The formalities of a merger usually include the following steps:

1. The company may execute a Memorandum of Understanding which spells

out the understanding of the parties and sets the stage for honest and confident negotiation and anticipates the future steps to be taken by the parties. This document is not subject to regulation by the Securities and Ex-

25
change Commission. The management of the acquiring and target companies will reach a preliminary agreement

2. The Board of directors of both companies would then adopt a merger

agreement. Both companies must notify their respective shareholders of the
terms of the pro-posed merger and the shareholders must approve the
transaction by majority vote.

3. Notification and voting materials usually are provided to shareholders of

public companies as part of proxy statements required by statutory instrument. The proxy statements will include the terms of the merger, the consideration that will be offered to the targets shareholders and information
about the two companies. These considerations may include stocks and
shares or other securities in the acquiring company, debentures, or cash

4. If the merger is approved by the required number of shares, the shareholders of the merging company will exchange their stocks for the prenegotiated consideration. All shareholders must be entitled to receive equal
consideration of each of their shares. However a choice of the form of consideration is sometimes permit-ted. (Ajogwu F. Aug. 2011)

3.3 Reason for Regulating Merger and Acquisition Transaction

Merger and acquisition transaction are regulated in order to ensure that they do
not lead to restraint of trade through the creation of monopolies. This is more
common with horizontal mergers as it increase the market control of the merged
entity.

Perhaps merger and acquisition activities are regulated in order to ensure that it
procedures are not abused through sharp practice like insider dealing of special
situation. Regulating provisions are set for merger and acquisition transaction to

26
make sure that the shareholder of the target company get a fair deal and are not
unduly exploited.

Nevertheless, the shareholders of both the target and the acquiring companies will
need to ratify the merger deal based on information presented to them, there is
need for legal codes that will ensure that they presented with the current information and are not rail loaded into making decision.

Since merger and acquisition is a common practice in developed economics before the introduction in Nigeria. It may be imperative to appraise the means
through which attempts had been made to ensure a reasonable regulation of merger and acquisition.

27

4 RESEARCH METHODOLOGY

4.1 Introduction

This chapter deals with the method that would be used in carrying out the study,
the method of collection, of the information. It describes the sources of data, the
population and sample. It also explains the research instrument and the procedure
in which the instrument was used.

4.2 Research Design

A research design is a plan, structure and strategy of investigation so conceived

as to obtain answers to research questions or problems. The plan is the complete
scheme or program of the research. It includes an outline of what the investigator
will do from writing the hypotheses and their operational implications to the final
analysis of data. (Kerlinger 1986, 279).

According to Thyer (1993) also define a research design as a blueprint or detailed

plan for how a research study is to be completed-operationalizing variables so
they can be measured, selecting a sample of interest to study, collecting data to
be used as a basis for testing hypotheses, and analysing the result.

Research methodology is the strategy or design used by a researcher to carry out

an investigation during his research in an organized and efficient manner in order
to help decision making to be more effective and objective.

The research method used in this study involved the collection of data from both
primary and secondary sources, perhaps adequate and reliable information was
obtained while the researcher made use of survey research design.

28
4.3 Sources and Method of Data Collection

The two main sources of data for the research work were primary and secondary
data. To get a realistic outcome of the findings both sources of data were taken
with high precautions in order to get authentic results for the findings.

The study also makes use of secondary data such as journals, newspaper, financial magazines and textbooks.

4.4 Study Population

The population size of this research covered about 20 staff of United Bank for Africa Plc. (UBA) at the head office in Marina Lagos, Nigeria.

A sample size of 20 staff was drawn from the total population with relevance to the
study. The questionnaire was designed and answered based on position, age, and
educational qualification, working experience, marital status and sex.

The re-

spondents were given enough time to send the response across and the results
were sent without an ambiguity.

4.5 Research Instrument

Questionnaire was the main instrument used for this thesis in order to obtain effective information. Questionnaires were sent by the researcher through email to the
respondents. The questionnaire was well planned to achieve the main objective of
the research work.

29
4.6 Limitation of the Research work

The limitation of this research work was the limited time involved in gathering data
and the fact that the questionnaire had to be administered by staffs of the Bank
make it difficult to cover a large sample size.

Furthermore, delay in the part of the respondent in answering and sending questionnaire is also another limitation.

30

5 PRESENTATION AND DATA ANALYSIS

5.1 Introduction

This chapter deals with data collection, presentation and analysis. The collected
data were presented and analyzed.

5.2 Data Analysis Procedure

Section A: Bio data of respondents

Table 1: Distribution showing the Sex of respondents

Sex

Respondents

Percentage

Female

12

60

Male

40

Total

20

100

In the table, the female are 60% out of the 20 respondents used in the study while
male was 40%

31
Table 2: Distribution showing the Age of respondents

Age

Respondents

Percentage

25 35 yrs.

10

60

36 45 yrs.

20

46 50 yrs.

20

Total

20

100

60% of the respondents fall within the age bracket 25 35 yrs.; 20% for 36 45
yrs. and 20% for 46 50 yrs.

Table 3: Distribution showing the marital status of respondents

Marital Status Respondents

Percentage

Single

30

Married

15

70

Total

20

100

30% of the marital status was single, while 70% were married.

32
Table 4: Distribution showing educational qualification of respondents

Educational

Respondents

Percentage

Diploma

30

First Degree

10

40

Qualification

Higher Degree 5

30

Total

100

20

Qualification respondents with diploma were 30%, first degree 40% and higher
degree was 30%.

33
Table 5: Distribution showing position of the respondents

Position

Respondents

Percentage

Senior Level

10

Middle Level

40

Junior Level

10

50

Total

20

100

On position, respondents for senior were 10%, middle level 40%, and junior level
50%.

34
Table 6: Distribution showing working experience of respondents

Working

Ex- Respondents

Percentage

perience

0-5 yrs.

6- 10 yrs.

15

11- 15 yrs.

16-20 yrs.

40

21 yrs. above

35

Total

20

100

Working experience, respondents of 0- 5yrs was 5%, 6- 10yrs 10%. 11-15yrs 5%,
16-20yrs 45%, while 21 above were 35%.

35
Section B: Research Question

Table 7: Do you agree that Merger and Acquisition affect the liquidity position of
the bank?

Variables

Respondents

Percentage

Agreed

30

Strongly Agreed

10

50

Disagreed

15

Strongly Disagreed

Total

20

100

On this question 30% of respondents agreed, 50% strongly agreed, 15% disagreed, and 5% strongly disagreed, this implies that, Merger and Acquisition do
affect liquidity position of the bank.

36
Table 8: Do you believe Merger and Acquisition has any positive impact on performance of banking institution?

Variables

Respondents

Percentage

Agreed

12

60

Strongly Agreed

20

Disagreed

15

Strongly Disagreed

Total

20

100

60% of the respondents agreed, 20% strongly agreed, 15% disagreed, and 5%
strongly disagreed, this shows that Merger and Acquisition has positive impact on
performance of banking institution.

37
Table 9: Does Merging and Acquisition increase the capital base of Nigerian
banks?

Variables

Respondents

Percentage

Agreed

45

Strongly Agreed

25

Disagreed

20

Strongly Disagreed

10

Total

20

100

45% of the respondents agreed, 25% strongly agreed, 20% disagree, while 10%
strongly disagree, this indicate that, Merger and Acquisition increase the capital
base of Nigerian banks.

38
Table 10: Do you agree that Merger and Acquisition can lead to an increase in
banks profit merging?

Variables

Agreed

Respondents

Percentage

12

60

Strongly Agreed

20

Disagreed

30

Strongly Disagreed

10

20

100

Total

60% of the respondents agreed 20% strongly agreed, 30% disagree, 10% strongly
disagree, this result shows that, Merger and Acquisition can lead to an increase in
banks profit merging.

39

Table 11: Are of you the opinions that merger and acquisition has led to growth of
banking sector in Nigeria?

Variables

Respondents

Percentage

Agreed

10

50

Strongly Agreed

20

Disagreed

20

Strongly Disagreed

10

Total

20

100

50% of the respondents agreed, 20% strongly agreed, 20% disagreed, and 10%
strongly disagreed, this implies that Merger and Acquisition has led to growth of
banking sector in Nigeria.

40

Table 12: Do you agree that Merger and Acquisition can bring effectiveness and
efficiency in the banking sector?

Variables

Respondents

Percentage

Agreed

10

50

Strongly Agreed

10

Disagreed

30

Strongly Disagreed

20

Total

20

100

50% of the respondents agreed, 10% strongly agreed, 30% disagreed, and 20%
strongly disagreed, this implies that Merger and Acquisition can bring effectiveness and efficiency in the banking sector.

41

Table 13: Are you of the opinion that merger and acquisition lead to efficient usage
of funds and resources?

Variables

Respondents

Percentage

Agreed

12

60

Strongly Agreed

20

Disagreed

10

Strongly Disagreed

10

Total

20

100

60% of the respondents agreed, 20% strongly agreed, 10% disagreed, and 10%
strongly disagreed, it indicate that Merger and Acquisition led to efficient usage of
funds and resources.

42

Table 14: Do Merger and Acquisition increases productivity?

Variables

Respondents

Percentage

Agreed

30

Strongly Agreed

20

Disagreed

40

Strongly Disagreed

10

Total

20

100

30% of the respondents agreed, 20% strongly agreed, 40% disagreed, and 10%
strongly disagreed, that Merger and Acquisition increases productivity.

43

Table 15: Do you agree with the opinion that Merger and Acquisition will increase
the expenditure pattern of an organization?

Variables

Respondents

Percentage

Agreed

40

Strongly Agreed

20

Disagreed

30

Strongly Agreed

10

Total

20

100

40% of the respondents agreed, 20% strongly agreed, 30% disagreed, and 10%
strongly disagreed, this implies that Merger and Acquisition increase the expenditure pattern of an organization.

44

Table 16: Does merger and acquisition has any significance relationship with the
level of output?

Variable

Respondents

Percentage

Agreed

12

60

Strongly Agreed

10

Disagreed

20

Strongly Disagreed

10

Total

20

100

60% of the respondents agreed, 10% strongly agreed, 20% disagreed, while 20%
strongly disagreed, this means that Merger and Acquisition has significance relationship with level of output.

45

Table 17: Does Merger and Acquisition lead to an increase in the employee portfolio?

Variables

Respondents

Percentage

Agreed

40

Strongly Agreed

20

Disagreed

30

Strongly Disagreed

10

Total

20

100

40% agreed, 20% strongly agreed, 30% disagreed, while 10% strongly disagreed,
this implies that merger and acquisition led to an increase in the employee portfolio.

46

Table 18: Do you believe that, merger and acquisition can lead to economic
growth and sustainable development?

Variables

Respondents

Percentages

Agreed

10

50

Strongly Agreed

20

Disagreed

20

Strongly Disagreed

10

Total

20

100

50% agreed, 20% strongly disagreed, 20% disagreed, while 10% strongly disagree, this means that, merger and acquisition can led to economic growth and sustainable development.

47

Table 19: Do you agree Merger and Acquisition has any effect on GDP?

Variables

Respondents

Percentage

Agreed

40

Strongly Agreed

20

Disagreed

25

Strongly Disagreed

15

Total

20

100

40% of the respondents agreed, 20% strongly disagreed, 25% disagreed, and
15% strongly disagreed, this implies that merger and acquisition has significant
effect on GDP.

48

Table 20: Are you of the opinion that Merger and Acquisition could have any negative implication in the banking sector?

Variables

Respondents

Percentage

Agreed

30

Strongly Agreed

10

Disagreed

40

Strongly Disagreed

20

Total

20

100

30% of the respondents agreed, 10% strongly agreed, 40% disagreed, 20%
strongly disagreed, meaning that merger and acquisition cannot cause any negative implication in the banking sector.

49

Table 21: Do Merger and Acquisition serves as a threat to workers in the banking
sector?

Variables

Respondents

Percentage

Agreed

10

50

Strongly Agreed

20

Disagreed

10

Strongly Disagreed

20

Total

20

100

50% of the respondents agreed, 20% strongly agreed, 10% disagreed, and 20%
strongly disagreed, that merger and acquisition serves as a threat worker in the
banking industry.

50

Table 22: Does merger and acquisition enable banks to manage and serve nation
foreign debt portfolio?

Variables

Respondents

Percentage

Agreed

30

Strongly Agreed

45

Disagreed

15

Strongly Disagreed

10

Total

20

100

30% of the respondents agreed, 45% strongly agreed, 15% disagreed, while 10%
strongly disagreed, the above result shows that merger and acquisition can enable
banks to manage and serve nation foreign debt portfolio.

51

6 SUMMARYS, CONCLUSIONS AND RECOMMENDATIONS

6.1 Summary of Findings

It is necessary to give concise summary of findings and also make useful recommendation in fulfilling the objective of this study and method and data analysis in
evaluating the effect of merger and acquisition strategy in banking industry in
which United Bank for Africa Plc. was used as a case study. To this end, some
findings were discovered; some appeared based on the data gathered from the
analysis in chapter V.

The findings are listed below:

1. It is discovered that merger and acquisition in banking industry can be seen

as a global phenomenal.

2. It ensures sanity and stability in the sector and economy at large.

3. The implementation of merger and acquisition really improve management

efficiency in baking industry.

4. Merger and acquisition leads to efficient use of shared resources and exploitation of the leaning and experience due to increased scale of production.

5. Finally, merger and acquisition make the bank to have the ability to muscle
out other international bank and withstand the rigors of doing business on
such side thus, benefiting Nigeria economy.

52
6.2 Conclusions

The reforms in the Nigerian banking sector have greatly improved Nigeria economy and encouraged consolidation of banks through merger and acquisition.

Merger and Acquisition is a strategy used by the regulatory bodies in Nigeria to

save the banking sector from liquidation. This strategy brings about the consolidation between United Bank of Africa Plc. (UBA) and Standard Trust Bank of Nigeria
Ltd. Bank with merger in its programs should consider both economic and social
input of merger. Also the interest of owners, creditors, employees, government,
cost and benefits on interest should be taken into consideration before undertaken
merger transaction.

In furtherance, there should be proper enlightenment of the public as regards the

implication and benefits of Merger and Acquisition by the Securities and Exchange
Commission (SEC) as the apex regulatory body. The legal and statutory requirement and the bureaucratic process should be also made feasible without abuse.

Finally, the macro-economic environment must be made conducive for the operations of the market. Policy inconsistency must be kept to the minimum level while
the on-going liberalization of the financial sector must continue to enhance access
to investors funds and promote overall investment process.

6.3 Recommendation

The objective of this research work is to evaluate or review the effect of merger
and acquisition strategy in Nigerian banking industry.

The following are therefore recommended:

Firstly, Merger and Acquisitions is the only solution to Nigerian bank liquidation
thus improving the competitive power of the banks. It is recommended that the

53
government and regulatory authorities should monitor the activities and encourage
a free market economy of merging banks to be able to extend their operations to
the highest level in the economy. The government should stands as checks and
balances to non-compliance of their laid down regulations.

Secondly, The Pronouncement of merger and acquisition option recently by the

regulatory organs such as Central Banks of Nigeria (CBN), Securities Exchange
Commission (SEC) and Nigeria Deposit Insurance Corporation (NDIC) is highly
appreciated for improving the profitability of Nigerian banks. Merger and Acquisition make the bank to have the ability to muscle with other international bank and
withstand the rigors of doing business on the international market.

Thirdly, it also recommended that Merger and Acquisition should be given a pride
place in Nigeria economy as it remains one of viable tools for economic growth
and sustainable development. Merger and Acquisition assist to look how debt financing will be used and their level of competitiveness between the required
banks. The viability of the banks is much important for growth of the national
economy and sustainable development.

Lastly, it was revealed in this study that Merger and Acquisition cannot pose any
negative implications in the banking sector. Merger and Acquisition ensure sanity
and stability in the sector and the economy at large. The implementation of merger
and acquisition really improve management efficiency in banking industry.

54

BIBLIOGRAPHY
Ajogwu, F. 2011. Corporate Counsel Forum, at the Nigeria Bar Association 2011
Annual Conference, Port Harcourt on August 24, 2011, as basis for discussion at
the forum of Lawyers. [Online Publication].[Ref. 12.10.2013]. Available at:
http://kennapartners.com/upload/8e296a067a37563370ded05f5a3bf3ecMergers_
&_Acquisitions_-_Identifying_the_Opportunities_&_Avoiding_the_Pitfalls.pdf

Oyedijo, A.2004. Strategic Management. An Introductory Text. Lagos: Strategic

International Press Ltd.

Ehijeagbon, O.O. 2004. Merger and Acquisition. [Webpage]. [Ref.10.10.2013].

Available at: http://www.oseroghoassociates.com/news/news_2004_01.shtml
Ekungbe, J.2000. Merger and acquisition technique in a distress economy: A
paper presented at MCPE programme of ICAN.

Gbede, O. 2005. Strategic merger and acquisition. 3rd Edition.Lagos: Westbourne

Business School.

Hitt, A. Micheal, Ireland, R. Duane and Hoskisson, E. Robert. 1999. Strategic

Management. Competitiveness and Globalization, 3rd Edition, Ohio: SouthWestern College Publishing.

Hitt, A. Micheal, Ireland, R. Duane and Hoskisson, E. Robert. 2005. Strategic

Management. Competitiveness and Globalization (Concepts), 6th Edition, Ohio:
South-Western College Publishing.

Hubbard, N. 2001. Acquisition Strategy and Implementation, Revised Edition, New

York: Palgrave.
Kerlinger, Fred N., 1986. Foundations of Behavioral Research, 3rd Edition, New
York: Holt Rinehart and Winston.

55
Pat Utomi, 2000. Evaluation of merger and acquisition in Nigeria banking industry. Nigeria journal of banking and financial issues, vol. 3, pp. 51-75.

Sanusi, S.L.2012. Banking Reform and its Impact on the Economy. Central Bank o
fNigeria.[OnlinePublication].[Ref.04.10.2013].Availableat:
http://www.cenbank.org/OUT/SPEECHES/2012/GOV_WARWICK_150211.PDF

Omah, I., Durowoju, S:T, Adeoye, A.O and Elegunde, A.F. 2012. Post-Bank Consolidation: A debacle in the Survival of SMEs in Nigeria: An Empirical Study. Australian Journal of Business and Management Research. [Online Publication].[Ref.
28.09.2013]. Available at: http://www.ajbmr.com/articlepdf/aus-23-09i8n2a1.pdf

Soludo. C, 2004, Consolidation of banking institution through merger and acquisition, Business Day, July 7, pp. 12-13, July 9 pp. 21 -34, July 20 pp. 15-20.
Thyer, Bruce A., 1993. Single-systems Research Design in R.M. Grinnell, Social
Work, Research and Evaluation, 4th Edition, Itasca Illinois, F.E. Peacock Publishers.

APPENDICES
Thesis Questionnaire

This questionnaire is purely for research study. Please answer each question as carefully and sincerely as you can. All responses will be treated with
utmost confidentiality.

SECTION A

Please tick the option where appropriate.

The questionnaire is in two sections (A) is the bio data of the respondent
while section (B) shows the research question.

1. Sex:

i. Male ( )

ii. Female ( )

2. Age:

i. Less than 25 35yrs. ( ) ii. 36 45yrs. ( ) iii. 46 50yrs. ( )

3. Marital Status: i. Single ( )

ii. Married ( )

4. Educational Qualification: i. Diploma ( )

ii. First Degree ( ) iii. High-

er Degree ( )

5. Position: i. Senior Level ( )

ii. Middle Level ( )

iii. Junior Level ( )

6. Working Experience: i. 0 5yrs. ( ) ii. 6 10yrs. ( )

( )

iv. 16 20yrs. ( )

v. 20yrs. above ( )

iii. 11 15yrs.

SECTION B

Research Questions

Kindly mark (X) in the appropriate box

(1) Agreed

(2) Strongly Agreed

(3) Disagreed

(4) Strongly Disagreed

S/N RESEARCH

AGREED STRONGLY DISAGREED STRONGLY

QUESTIONS

1.

Do you agree that

Merger and Acquisition affect the liquidity position of the
bank?

2.

Do

you

believe

Merger and Acquisition has any positive impact on performance of banking institution?

AGREED

DISAGREED

3.

Does Merging and

Acquisition increase
the capital base of
Nigerian banks?

4.

Do you agree that

Merger and Acquisition can lead to an
increase in banks
profit merging?

5.

Are of you the opinions

that

merger

and acquisition has

led

to

banking

growth

of

sector

in

Nigeria?

6.

Do you agree that

Merger and Acquisition can bring effectiveness

and

effi-

ciency in the banking sector?

7.

Are you of the opinion that merger and

acquisition lead to
efficient

usage

funds

and

sources?

of
re-

8.

Do Merger and Acquisition

increases

productivity?

9.

Do you agree with

the

opinion

that

Merger and Acquisition will increase the

expenditure pattern
of an organization?

10.

Does merger and

acquisition has any
significance
tionship

rela-

with

the

level of output?

11.

Does Merger and

Acquisition lead to
an increase in the
employee portfolio?

12

Do you believe that,

merger and acquisition

can

economic
and

lead

to

growth

sustainable

development?

13.

Do you agree Merger and Acquisition

has any effect on
GDP?

14.

Are you of the opinion that Merger and

Acquisition

could

have any negative

implication

in

the

banking sector?

15.

Do Merger and Acquisition serves as

a threat to workers
in the banking sector?

16.
Does merger and
acquisition

enable

banks to manage
and

serve

nation

foreign debt portfolio?