Growth through acquisition by CFC Bank Limited
Abstract
The use of acquisition as a growth strategy has increased tremendously in the
last decade. The main motivation for the use of acquisition as a corporate growth
strategy is the speed with which it allows firms to enter new product or market
areas. Acquisitions can be classified as either related or unrelated. Related
acquisitions are where there is some level of product-market relatedness
between the acquirer and the acquired firm. Unrelated acquisitions occur
between firms that do not share any product or market relatedness.
This study examined the use of related acquisition as a growth strategy by a
Kenyan firm. It studies the case of CFC Bank Limited which is structured both as
a corporate with its core business in banking and also as a parent company for
its insurance division. The study aimed to seek out the important factors that
have contributed to CFC Bank's successful use of acquisition to grow its
insurance division.
The research uses a case study design, and is conducted through in-depth
interview sessions at CFC. The research data was qualitative in nature, and was
analyzed by use of content analysis.The study glosses over CFC's acquisition
history before zeroing in on an in-depth study of the company's latest acquisition.
The acquisition under study was transacted in its insurance division and involved
the acquisition of the life assurance business of ALICO Kenya Limited. The
research also gives insight into .both the process and the management of
acquisitions. Few researches have ventured into understanding why some
acquisitions fail and why others succeed. By understanding how CFC
successfully manages its acquisition strategy, the study sought information that
may help explain variations in post-acquisition performance.
The research findings show how-if managed correctly, related acquisitions can
help firms achieve synergy benefits that create value to their businesses. The
value created can be in form of increased efficiencies that reduce cost, or in form
of revenue enhancement mechanisms. Other benefits of acquisitions include
access to new markets, and achieving geographical expansion. A well managed
acquisition strategy can help a firm achieve growth without going through the
long process of developing internally.
Lastly, the researcher suggests measures that CFC Bank can take to further the
benefits of its latest acquisition. Recommendations on further researches that
can help bridge the knowledge gap in this area are also made.
Citation
Masters Of Business Administration (MBA) Degree, University of NairobiPublisher
University of Nairobi School of Business
Description
A management research project submitted in
fulfillment of the requirements of the Degree of
Master of Business Administration, (MBA), School Of
Business, University Of Nairobi