The Relationship Between Mergers and Acquisitions and Financial Characteristics of Beverage Manufacturing Firms in Kenya

Abstract

Global markets have become increasingly competitive and in order for firms to remain relevant, they seek to create relationships that avail benefits thus giving rise to mergers and acquisitions. There has been an increase in acquisitions owing to their ability to reduce business risks and increase market share for companies. The objective of this study was to determine the relationship between acquisitions and financial characteristics of beverage manufacturing firms in Kenya. The study adopted a descriptive research design and sampled the three beverage manufacturing firms that had been involved in acquisitions between 2010- 2015. The study used secondary data which was obtained the financial statements of the companies for a period of 5 years pre-acquisition and 5 years post-acquisition. The study used the paired t-test to determine the difference between financial characteristics 5 years pre-acquisition and 5 years post-acquisition. The study managed to obtain complete data from two firms (EABL and Almasi beverages) hence making up a response rate of 66.7%. The findings revealed that EABL recorded a decrease in profitability and liquidity after mergers and acquisitions but recorded an increase in assets, sales and debt after acquisition while Almasi beverages ltd recorded a decrease in profitability, assets and liquidity after acquisition but recorded an increase in liquidity and leverage after acquisition. The study also found that there was a statistically significance difference between profitability, liquidity, asset tangibility and leverage before and after acquisition by EABL and a statistically significance difference between profitability, sales growth and leverage before and after acquisition by Almasi beverage ltd. The study concluded that firm profitability, liquidity, and leverage were the major firm characteristics that are influenced by acquisitions by beverage manufacturing firms in Kenya.