Effect of Mergers and Acquisitions on the Financial Performance of the Companies Listed at the Nairobi Securities Exchange

Abstract

The objective of this research project was to establish the effect of mergers and acquisitions on the financial performance of the companies listed at the Nairobi securities exchange. It is assumed that mergers and acquisitions improve the financial performance of business entities as a result of synergies and market power. This research focused on the financial performance of companies listed at the Nairobi Securities Exchange and had been involved in mergers and acquisitions between 2009 and 2014. Secondary data for the annual financial statements was collected from NSE and comparative analysis of the companies’ pre mergers and acquisitions and post mergers and acquisitions was conducted to establish whether mergers and acquisitions affected the financial performance of the companies listed at the Nairobi Securities. Comparisons were made between the mean of 3 years pre-mergers and acquisitions and 3years of post mergers and acquisitions variables for the six merged and acquired companies listed at the Nairobi Securities Exchange. A paired‘t’ test was conducted at 5% level of significance to determine if the effect was significant or insignificant. From the research findings, mergers and acquisitions have insignificant effect on the financial performance of the companies listed at the Nairobi securities Exchange.