Mergers and acquisitions as a growth strategy by Commercial Banks in Kenya

Abstract

This research was a study of mergers and acquisitions as a growth strategy by commercial banks in Kenya. There are various reasons why mergers and acquisitions are applied by businesses in Kenya. Compared to its neighbors Kenya is hailed as having the most resilient financial system a mature private sector devoid of protection and is one of the most profitable and vibrant sectors in the country with a consolidated profit before tax of Kenya Shillings 61.5 billion for the period January to June 2013 according to data released by Central Bank of Kenya. This study focused on why commercial banks adopt mergers and acquisition as long term growth strategies. This study utilized the survey design. The population of study consisted of all sixteen the commercial banks in Kenya that have adopted mergers and acquisitions as a strategy for growth after the year 2000. Data analysis was done through descriptive statistics since the data obtained from participants was not in numerical form. This study was a census of all the commercial banks and used primary data. The data collected was analyzed using Statistical Package for Social Sciences (SPSS) and presented using table and figures. The study revealed banks use the mergers a. A good number of banks have adopted mergers and acquisition. In addition, mergers and acquisition help in the growth of sales of the banks. Further, mergers and acquisition as growth strategy help in market power of the bank. Mergers and acquisition as growth strategy help in bank’s stock value. The major reason for employing mergers and acquisitions by commercial banks in Kenya has been to bring strengths of the involved entities to be stronger as one. One plus one equals two is the popular reason why mergers and acquisitions are used and the research was able to show that the arithmetic add up. Two merged entities are better than two competing entities. Finally, mergers and acquisition as growth strategy help in acquisition impact of GDP. The study recommends that banks need to adopt mergers and acquisition which will maximize the shareholders wealth. Merger/acquisition is a strategic tool that must be cautiously applied and implemented.