Effect Of Mergers And Acquisitions On The Financial Performance Of Companies Listed At The Nairobi Securities Exchange

Abstract

The objective of this research was to determine the effect of mergers and acquisitions on the financial performance of companies listed at the Nairobi Securities Exchange in Kenya. Theoretically it is assumed that mergers and acquisitions improve the company’s financial performance as a result of synergy and risk diversification. The research focused on the financial performance of companies in Kenya which merged or were acquired between 2009 and 2013 and were listed at the Nairobi Securities Exchange. Comparative analysis of the companies' pre and post mergers and acquisitions periods was conducted to establish whether mergers and acquisitions led to improved financial performance. Secondary data from the annual financial statements were collected 3 years before and after mergers and acquisitions to determine whether there was any effect on the financial performance. The population used in this study was the 16 companies that had undergone mergers and acquisitions between 2009 and 2013. The study used mainly secondary data which was obtained from NSE and capital markets authority for the period under study. Data was analyzed on the basis of the mean and the t-paired test statistic was computed at 5% significance level. From the findings, mergers and acquisitions had significant effect on the financial performance of the companies listed at the Nairobi Securities Exchange.