Impact of Acquisitions on the Financial Performance of the Acquiring Companies in Kenya: A Case Study of Listed Acquiring Firms at the Nairobi Securities Exchange
Journal of Finance and Accounting
Volume 2, Issue 5, September 2014, Pages: 108-115
Received: Oct. 26, 2014;
Accepted: Nov. 13, 2014;
Published: Nov. 18, 2014
Views 4099 Downloads 742
George Gitonga Inoti, Faculty of Commerce, Department of Accounting, Finance & Management Science, Egerton University, Nakuru, Kenya
Samuel Owino Onyuma, Department of Economics & Business Studies, Laikipia University, Nyahururu, Kenya
Monicah Wanjiru Muiru, Faculty of Commerce, Department of Accounting, Finance & Management Science, Egerton University, Nakuru, Kenya
This study sought to determine whether acquisitions enhance corporate financial performance. The general objective of the study was to assess the effects of acquisitions on the financial performance of the acquiring companies in Kenya. The specific objectives of the study were; to determine the effect of acquisitions on the profitability of the acquiring company and to determine the effect of acquisitions on asset utilization of the acquiring company. Purposive sampling procedure was used to select a sample of all the acquisitions involving listed acquiring companies. Three years pre and post-acquisition financial statements of the acquiring company were examined. Key financial ratios were computed and used to determine the company’s pre and post-acquisition financial performance. Paired t-test was used to determine whether there was significant difference between the means of the two periods for each ratio. From the findings it was apparent that there was no significant difference in pre and post-acquisition ratios measuring profitability and asset utilization. The study therefore concluded that corporate acquisitions do not affect the financial performance of the acquiring company.
George Gitonga Inoti,
Samuel Owino Onyuma,
Monicah Wanjiru Muiru,
Impact of Acquisitions on the Financial Performance of the Acquiring Companies in Kenya: A Case Study of Listed Acquiring Firms at the Nairobi Securities Exchange, Journal of Finance and Accounting.
Vol. 2, No. 5,
2014, pp. 108-115.
Asquith, P., Bruner R., & Mullins, D. (1983). The Gains to bidding firms from Acquisitions. Journal of Financial Economics, 11, 121-140.
Azhagaiah, R., & Kumar T. (2011). Mergers & Acquisitions: An empirical study on the Short- term Post–Acquisition Performance of Corporate Firms in India. International Journal of Research in Commerce, Economics & Management, 1, 80-104.
Chesang, C. (2002). Acquisition Restructuring and Financial Performance of Commercial Banks in Kenya. Unpublished MBA Thesis. University of Nairobi.
Cuts. (2002). Promoting Competitiveness & Efficiency in Kenya. The role of Competition Policy & Law.Nairobi, Institution of Economic Affairs of Kenya.
Gupta, K.,(2012). Mergers and Acquisitions: The Strategic Concepts for the Nuptials of Corporate Sector. Innovative Journal of Business and Management. 1, 60-68.
Hunt, P. (2004). Structuring Mergers and Acquisitions: A guide to creating shareholder value. (2nd ed). New York: Aspen Publishers.
Johnson, G. & Scholes, K. (2002). Exploring Corporate Strategy. New York: Prentice hall.
Kithinji, M. (2007). Effects of Acquisitions on Financial Performance of Non Listed Banks in Kenya. Unpublished MBA Thesis. University of Nairobi.
Koller, T., Goedhart, M., & Wessels, D.(2010). Valuation: Measuring and Managing the Value of Companies. Hoboken, John Wiley & Sons.
Korir, E. (2006). Effects of Acquisitions on Financial Performance of Companies listed at the NSE. Unpublished MBA Thesis. University of Nairobi.
Maditinos, D., Theriou, N. & Demtriades, E. (2008). The Effect of Mergers & Acquisitions on Performance of Companies- the Greek case of Ioniki – Laiki Bank and pisteos Bank. Journal of European research Studies, 11, 111-130.
Mwenda, J. (2009). A empirical evaluation of pre and post acquisitions success factors and the impact of culture on acquisitions and acquisitions in Kenya. Unpublished MBA thesis. University of Nairobi.
Ndura, K. (2010). Effects of Acquisitions on Financial Performance of Insurance Companies in Kenya. Unpublished MBA Thesis. University of Nairobi.
Piaskoski, M., & Finkelstein, N. (2004). Do Merger Efficiencies Receive Superior Treatment in Canada? Some legal, Policy and Practical Observations Arising from the Canadian Superior Propane Case. World Competition, 2, 259-298.
Pilloff, S., & Santomero, A. (1997). The Value Effect of Bank Mergers and Acquisitions, Working Paper, No. 97 (7), The Wharton Financial Institutions Centre.
Ramaswamy, K., & Waegelein, J. (2003). Firm Financial performance following acquisitions. Review of Quantitative Finance and Accounting, 20, 13-23
Roll, R. (1986). The Hubris Hypothesis of Corporate Control. Journal of Business, 59, 197 – 216.
Ross, S., Westerfied, R., & Jaffe, J. (2004). Corporate Finance. New Delhi: Tata Mcgraw-Hill. Ross, S.,Westerfield, R., Jaffe, J., & Jordan, B.(2007). Corporate Finance. Core Principles and Applications. (2nd ed). New York: McGraw- Hill/Irwin.
Selcuk, A., & Yilmaz, A. (2011). The Impact of Acquisitions on acquirer performance: Evidence from Turkey. Business and Economics Journal, 22,1-7.
Surgiarto, A. (2000).The Effect of Mergers & Acquisitions on Shareholder Returns. Unpublished Phd Thesis. Victoria University of Technology.
Wesonga, M. (2006). A survey of Factors that Determine the Choice of Mergers and Acquisitions Partners in Kenya. Unpublished MBA Thesis. University of Nairobi.
Weston, J., & Weaver, S.(2001). Mergers and Acquisitions. New York: McGraw-Hill.
Yeh, T., & Hoshino, Y. (2002). Productivity and Operating Performance of Japanese Merging Firms: Keiretsu- related and Independent Acquisitions. Japanese and the World Economy,14, 243-366.