An Evaluation of the Comparative Effects of Mergers & Acquisitions on the Profitability and Efficiency of Banks (A Case Study of Selected Banks in Nigeria)

Abstract

Nigerian banking industry plays a predominant role in driving Nigerian economy especially at a turbulent period when the world was just hit by global financial recession. Its players (money deposit banks) were found to be unhealthy with low capital base and low performance, hence the need by CBN (Apex Bank) to revive and reposition the industry. Mergers and Acquisitions which is one of the recapitalization strategies campaigned by the Apex Bank to build money deposit banks to a minimum of N25 Billion was adopted. The research work seeks to examine the evaluation of comparative effect of Mergers and Acquisitions on profitability and efficiency of Nigerian banks as the specific objective. A quantitative approach was adopted with secondary data collected from selected banks published annual financial reports while other data were extracted from journals, academic books, published speech, magazines and internet sources. The study adopted a purposive sampling method in selection of its sample size (Access bank Plc, First Bank of Nigeria Plc and Union Bank of Nigeria Plc) while financial ratios were subsequently used to analyze the secondary data with an in-depth interpretation for validity. The study revealed that Mergers and Acquisitions as recapitalization strategy so far show many benefits as it significantly leads to better performance of banks and repositioned them with a better outlook across the globe for improved efficiency and profitability.

Keywords: Mergers & Acquisitions, Consolidation, Capitalisation, Organic Growth