An evaluation of post-merger performance of acquiring firms :A case of commercial banks in Kenya

Abstract

Mergers and acquisitions have been very common incidents since the turn of the 20th century. These are used as tools for business expansion and restructuring. Through mergers the acquiring company gets an expanded client base and the acquired company gets additional lifeline in the form of capital invested by the purchasing company. Despite the increasing popularity of mergers and acquisitions, it was reported that, more than two-thirds of large merger deals failed to create value for shareholders in the medium term. Thus, the study evaluated the post merger performance of acquiring firms with reference to commercial banks in Kenya in an attempt to fill the existing gap that has been left by the previous studies. This was an event study. An event study is designed to investigate the effect of an event on a specific dependant variable. The main objective of the study was to evaluate the post merger performance of acquiring firms with reference to commercial banks in Kenya. The study was conducted in three stages namely; collection of the data required, calculation and tabulation of the variables under the study, analysis and interpretation. The data was collected through verification of the financial statements of four commercial banks considered in the sample and from merger information available in CBK Handbooks from year 2002 to 2011.