Effects of Mergers and Acquistions Strategy on Performance of Britam Insurance Company Limited in Kenya

Abstract

The market has become very dynamic, influenced by a myriad of factors; regulations, economic booms, recessions, globalization and technological advancement. Due to these changes, organizations are continuously adopting new ways of doing business to counter threats as well as exploit new opportunities. One of the key strategies that organizations have embraced to improve firm growth is M& A. It is alleged that mergers and acquisition maximizes the growth of a firm and expands it through enhancement of its marketing and production operations. Many insurance firms in Kenya have turned to M& A as key strategy towards growth and profitability as well as gaining competitive advantage. Some of the reasons put forward for M&A in insurance entities are expansion of the distribution networks, meeting the high levels of market share and capital share and to earn benefits from the most desirable practices globally. The push for market share among large insurance companies comes against a framework of increased share capital in underwriting industry of Kenya. The industry will be adopting the risk based model which is in its pilot stage and is expected to be implemented at the beginning of 2018.This study mainly seeks to establish the influence of M&A on performance of Britam Insurance in Kenya after acquiring Real insurance company. The research was anchored in two main theories, namely resource dependency theory and market power theory. The resource dependency theory was crucial as it states that a company can utilize its inward resources and capabilities in a manner that enables it to have an edge over its competitors. The market power theory was important as it stated the manners in which an organization is able to gain an edge over its competitors through improved synergies. The study was executed using a case study analysis of the firm. Interview guides were used for data collection to the key managers in charge of strategy and marketing as well as through secondary data collected through the company’s financial statements and data on the company’s website. Data analysis was done using content analysis. The study found that Britam Insurance was able to achieve its objective by increased market share and regional expansion. The company is still undergoing transition challenges in terms of cultural differences, high staff turnover, integration of ICT system and loss of renewal business. However, the efforts to resolve the challenges have borne fruit and after one year of merger, employees seem to be comfortable working in the new environment. It is recommended that a prospective study on Britam performance of this M&A be conducted for the next few years to see if this merger was helpful.