The effect of mergers on profitability of family owned businesses in Kenya
Abstract
Family owned businesses in Kenya develop from small outfits and grow to businesses
which contribute positively to the growth of the economy. According to the Kenya
Bureau of Statistics Data, the Kenyan GDP grew by 0.3 percent from 4.4 percent in 2011
to 4.7 percent 2012, and rose to 5.7 percent in 2013. This growth was mainly attributed to
the growth of the small-scale sector in the economy that was mainly composed of family
owned businesses. The objective of this research was to determine the effects of mergers
on the profitability of family owned businesses in Kenya after dilution of the
concentrated ownership. 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 family owned
businesses in Kenya which merged between 2006 and 2013 in Kenya. The study sampled
four companies. Profitability was compared for the three years after the merger against
three years before the merger. 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 did indeed have a significant
effect on profitability of family owned. Three companies out of the four had their
profitability decline in the year immediately after the merger. One company displayed an
increase in the whole period before and after the merger.
Publisher
University of Nairobi
Description
Thesis MBA