| dc.description.abstract | Mergers and acquisitions are not limited to economic enterprises or businesses but they also occur in other areas such as political, social as well as in religious sectors. Despite managerial over-optimism, research by both academics and consulting firms consistently shows that 50-75 percent of M&As fail to live up to expectations. Mergers are one of the possible routes to high growth but 'neither theory nor empirical work provides any castiron arguments in favour of a presumption that their operations are generally efficient'. This study focused on the application of mergers and acquisitions as market entry strategies. This academic research aims to answer the question: how effectively has the application of mergers and acquisitions served Opportunity International in the microfinance industry in Kenya? This study intended to unearth certain factors critical in creating successful M&A's as well as affirming or negating the value creation theory that goes with M&As.
The study aimed to deepen the understanding of importance of communication and efficient human resource management in the pre and post merger phases and relate the findings to pre-identified behavior patterns of senior managers during M&A implementation. This research was conducted through a case study. An interview guide with open-ended questions was used to collect in-depth information from the Executive Management Committee which comprises of the Chief Executive Officer, Chief Operations Officer, Chief Financial Officer, Chief Internal Auditor, Human Resource Manager and the two regional relationship managers who represented the Chief Relationship Officer who is the researcher in this academic project.
The data collected was mainly qualitative in nature and thus was analyzed using conceptual content analysis. The study found out that in Kenya the main laws governing business combinations are: Restrictive Trade Practices, Monopolies and Price Control Act which an Act of parliament that encourages competition in the economy by prohibiting restrictive trade practices, controlling monopolies, concentration of economic power and prices and connected purposes. The merger between the two organizations happened within the same industry for the purpose of restructuring.
Despite the success of life-transforming micro finance services, the World Bank says that the industry is not close to meeting the demand. In an environment characterized by widespread poverty, increased presence of suitable merger targets, need to diversify geographically, desire to grow the asset base and achieve financial and operational sustainability, Opportunity International felt compelled to enter into M&As as a means of market penetration, sharing the costs of innovation and accessing new technological assets to augment its innovatory capabilities.
It is this drive that led the management of Opportunity International to acquiring of two local microfinance institutions in Kenya, namely WEDCO and SUNLINK. Since the mergers were horizontal, economies of scale were generated and strategic benefits resulted from the opportunities that came from entering the Kenyan market. The competitive advantage provided by Opportunity International generally arose from the existence of firm-specific intangible assets such as extensive micro financing expertise and skills, marketing capabilities and superior brand names and greater management capabilities. Marketing gains arose from more effective advertising, economies of distribution, and a better mix of products.
There may be circumstances under which one or the other of the firms would have become insolvent, but the combined firm would not. These efficiency gains came by virtue of the size of the combined company; as it proved to be cheaper to offer services on a larger scale. WEDCO and SUNLINK both had some weaknesses in raising capital for growth whereas Opportunity International had some significant strength in capital base and resource mobilization. Merging the human resources and intellectual capital of the two organizations was seen to contribute to innovative thinking and development within the company. Because of the mergers and acquisition, Opportunity International was in a better position to acquire and develop the market earlier served by WEDCO and SUNLINK and therefore this contributed to growth in the market.
Differences in managerial styles and accounting practices also contributed to tension during the integration process. According to Human Resources Manager there was observable resentment and resistance from the different members, which sometimes resulted in a loss of potential synergies during the initial stages of the merger. The differences in organizational culture were observed and the general timing of the mergers and acquisitions may have had negative external influence on the successful take off of the
organization. For M&As to be successful, this study concludes that companies must seize the opportunity by involving employees and customers in the integration process, retaining critical staff, generating momentum by quickly winning key accounts, solidifying the new organizational culture and formulating the right strategy for continuing with the business straight away. | en_US |
