Effect of Mergers and Acquisitions on the Financial Performance of the Companies Listed at the Nairobi Stock Exchange
Abstract
A merger can be looked at as the process in which two or more business operations are
combined into one business entity with the same management and ownership. From a
legal stance, mergers can be looked at as the consolidation of two or more entities into
one entity. An acquisition on the other hand, involves purchase of a controlling interest
by a company in the share capital of a second existing company. Various motivations for
mergers include synergy, diversification, acquiring market share, reduction of cost as
well as gaining access to resources. Mergers and acquisitions are a strategic tool in the
modern corporate world and the trend has been witnessed in the Nairobi Securities
Exchange. The study set out to determine the effect of mergers and acquisitions on the
financial performance of the companies listed at the Nairobi Securities Exchange. The
population of the study was the mergers and acquisitions that took place between the
years 2007 and 2013 and a census approach was adopted. Three year pre-mergers and
acquisitions and post-mergers and acquisitions data was collected from secondary sources
and compared to determine whether there was a significant change in the financial
performance after mergers and acquisitions by the use of a paired t test at 5% significance
level. From the findings of the study, mergers and acquisitions had a significant effect on
the financial performance.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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