| dc.description.abstract | The objective of this research was to determine the effects of mergers on the profitability of companies in Kenya. Theoretically, it's assumed that mergers improve company performance due to increased market power, enhanced profitability, and risk diversification. The research focused on the financial performance of the Kenyan companies which merged between 2004 and 2008 in Kenya. The study sampled seven companies, three that merged in 2004, two that merged in 2005 and two that merged in 2006. Profitability was compared for the three years after the merger against three years before the merger.
The companies sampled were in different sectors in order to eliminate effects of industry specific factors that may affect performance. In each of the three years though, one company sampled was in the banking industry. Comparative analysis of the seven companies' financial performance for the pre and post merger periods was conducted to establish whether the mergers had led to an improved financial performance after the mergers. Secondary data from the financial statements was collected for the 3 years period
before and after the merger. The data was then analyzed with the help of excel spreadsheets.
The study found that the mergers had no definite positive effect on the profitability of companies in Kenya. The analysis of the profitability of the seven companies provided different results. F our companies out of the seven had their profitability decline in the year immediately after the merger. Two companies displayed an increase while one company had erratic results in the whole period before and after the merger. For all the companies, profitability appeared to gradually improve in the next two years after that. | en_US |
