Factors Motivating Mergers and Acquisitions in Kenya: Case of Firms Listed on the Nairobi Stock Exchange

Abstract

The study sought to investigate the factors motivating mergers and acquisitions among firms listed on the Nairobi Stock Exchange. A descriptive survey was undertaken. The population of the study was all the firms listed on the Nairobi Stock Exchange that had participated in mergers and acquisitions, whose number stood at five (5) as at June 2011. A census of all these firms was conducted. Primary data was collected from the Heads of Finance function with the aid of semi-structured questionnaires that were administered by drop-and-pick method. The data pertaining to profile of the respondents and their respective organizations was analyzed using content analysis. Data pertaining to the study objectives of the study was conducted using descriptive statistics, which includes measures of central tendency, measures of variability and measures of frequency among others. Findings of the study further show that the following are the factors motivating mergers and acquisitions among firms listed on the Nairobi Stock Exchange (according to the importance attached to each factor) are: acquisition of specific assets; economies of scale; managerial motives; risk reduction; decrease in cost of capital; and economies of scope. The findings also show that other factors motivating mergers and acquisitions among firms listed on the Nairobi Stock Exchange (according to the importance attached to each factor) are: financial synergy; diversification; operation synergy; human capital; customer capital; and good growth prospects. The findings also indicate that mergers and acquisitions is a source of synergy, the cost reduction that occurs as a result of a corporate combination and the ability of a firm to utilize one set of inputs to provide a broader range of products and services.