A Survey Of The Factors That Determine The Choice Of Mergers And Acquisition Partners In Kenya

Abstract

The principal objective of this study was to establish the determinants of choice of mergers and acquisitions partners in Kenya. The study endeavored to cover all firms that have been involved in mergers and acquisitions in the recent past. The study was therefore carried though a cross-sectional survey design. The target population included all those firms that had gone into merger and acquisitions between 2001 and 2004 and notifications issued accordingly as at that period. The data was collected through a structured questionnaire where respondents were required to score on a 5-point likert scale indicating how important they considered the factors presented as important in determining the choice of merger and acquisition partners. Data that were obtained were analyzed using frequencies, percentages, mean scores and factor analysis and were presented in tables. The results of the data collected indicate that the proportion of firms opting for a merger is slightly higher at 53.1% as compared to that for acquisition. The results also indicate that the firms exhibit a mixture of ownership and legal structures. The following factors were identified as important determinants of choice of mergers and acquisition partners: knowledge transfer and management; cultural distance; organizational distance; resource redeployment and revenue-based synergistic considerations; potential cross effects after a merger and/or an acquisition; asymmetry between the firms with regard to anticipated post merger and/or acquisition joint decision-making process and political processes; location specific factors; management styles compatibility, acquisition performance; and reward and evaluation systems compatibility among others. From the findings of the study, it was generally concluded that firms in Kenya take into account various factors before entering into mergers and acquisitions agreements. This was evidenced by the fact that most of the various aspects with regard to each of the above factors were highly and moderately rated. There was no single aspect that was lowly rated. Also, the factors that were considered in determining the choice of a particular M&A partner are to a greater dependent of the mode of combination, type of merger or acquisition, the sector of operation, and the growth prospects.