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 finacial performance of campanies listed at the Nairobi Securities Exchange in Kenya. Theoritically it is assumed that megers and acquisitions improve the company`s financial performance as a result of profitability and risk diversification. The reaserch focused on the financial performance of companies in Kenya which merged or were acquired between 2000 and 2010 and were listed at the Nairobi Securities Exchange. Comparative analysis of the campanies’ pre and post mergers and acquisitions periods was conducted to establish whether mergers and acquisitions lead 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 14 companies that had undergone mergers and acquisitions between 2000 and 2010. The study used mainly secondary data which was obtained from NSE for the period under study. Data was analysed 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 insignificant effect on the financial performance of the companies listed at the Nairobi Securities Exchange.