Effects of Mergers and Acquisitions on Financial Performance of Commercial Banks in Kenya

Abstract

The objective of this review was to perceive what mergers and acquisitions meant for the financial performance of Kenyan commercial banks. Various commercial banks in Kenya have undergone mergers and acquisitions as strategic tools with the aim of enhancing their financial performance and as a competitive strategy in the banking industry. A portion of the banks have blended locally while others have gone through cross line consolidation and procurement as a method for corporate extension and development. Exploration has revealed that mergers and acquisitions influence the financial performance of the merged organizations due to the synergies created, monopoly power, enhanced management efficiency and improved profitability. The purpose for this review was to survey the influence of mergers and acquisitions on the financial performance of Kenyan commercial banks that went through mergers and acquisitions somewhere in the range of 2009 and 2020. The review was fundamentally founded on optional information. Comparative analysis of the post and pre-merger data was undertaken to establish if financial performance of the merged and acquired banks changed after. Secondary data was collected from 25 commercial banks in Kenya which had undergone mergers and acquisitions between 2009 and 2020. The data was obtained from NSE and CBK published information on the respective bank’s reports. Data analysis was conducted using SPSS. The data has been presented using tables and figures. Inferential measurements were embraced in this review. The relative investigation of the pre and post-consolidation and procurement information exhibited that commercial banks experienced higher financial performance after the mergers and acquisitions contrasted with previously. The review discovered that there was an expansion in the t-an incentive for ROE from 20.672 pre-merger to 22.975 post-merger, xii ROA from 7.382 before merger and acquisition to 12.266 after merger and acquisition and capital adequacy ratio from 18.085 pre-merger to 24.385 post-merger. On this basis, the study recommends the need for commercial banks especially tier 2 and 3 to consider mergers and acquisitions as a strategy in enhancing their financial outcome. Nonetheless, the banks ought to evaluate the total business and working similarity of the blending banks and accentuation on holding onto long haul financial advantages that give supportable worth to the stakeholders.