ISSN: 2225-8329
Open access
Purpose – The purpose of this paper is to examine the effect of pre-merger and acquisition capability strategies on value-based corporate financial performance of banks in Ghana.
Design/Methodology/Approach: A cross-sectional survey was employed comprising four (4) acquirer banks listed on Ghana Stock Exchange (hereafter GSE) and four hundred and eighty-two (482) respondents purposively selected for this study. Data were analyzed using descriptive statistics, principal component analysis (PCA) and regression analyses. All the analyses were performed using SPSS v21.
Findings: The findings reinforce the important position pre-merger and acquisition capability strategies on value-based corporate financial performance of acquirer banks. Amongst the pre-M&A success capability strategies that maximise shareholder value are: strategic intent; clear criteria; choice and evaluation of strategic partner and size mismatch; financial, legal and operational due diligence; integrative approach that strengthens the core business, expands the core business and unlocks new business areas; and effective communication before acquisition).
Research Limitations/Implications: The study employed only a single research methodological approach, therefore future research could be undertaken using a mixed approach and triangulate to compare findings. Furthermore, the findings from the present study are cross-sectional, considering the limitations there in, a longitudinal approach should be explored.
Practical Implications: Emphasis should be place on pre-merger and acquisition capability strategies that maximise shareholder value. This will help practitioners make legitimate decisions and conclusions that can foster business growth.
Originality/Value: the effect of pre-merger and acquisition capability strategies on value-based financial performance was tested; previous studies have tended to test the direct effects.
Aggarwal, M., and Singh, S. (2015). Effect of Merger on Financial Performance: A Case Study of Kingfisher Airlines. XVI Annual Conference Proceedings. pp 399-413
Agyapong, K. A. (2015). Post-Acquisition Performance; A Study of Bank of Africa - Amalgamated Bank, Ghana. MBA Thesis, KNUST
Akktar, S., and Iqbal, J. (2014). An empirical analysis of Pre- and Post-merger or acquisition impact on financial performance: a case study of Pakistan Telecommunication Limited. European Journal of Accounting Auditing and Finance Research, 3(1), 69-80
Angwin, D. (2013). Motive archetypes in mergers and acquisitions (M&A): The implications of a configurational approach to performance. In: C. L. Cooper & S. Finkelstein, eds. Advances in Mergers and Acquisitions. 6th ed. NY: JAI Press.
Barnor, R., and Adu, Twumwaah. (2015). Bank Performance, Mergers and Acquisitions in Ghana: The Case of Ecobank Ghana -TTB Takeover and UT Financial Services -BPI Merger International Journal of Sciences: Basic and Applied Research, volume 24, issue 6, p. 77 – 91 Posted: 2015
Beitel, P., Schiereck, D., and Wahrenburg, M. (2004). Explaining the M&A-success in European bank mergers and acquisitions. European Financial Management 10(1):109-139.
Bhaskar, A. U., Bhal, K. T., and Mishra, B. (2012). Strategic HR integration and proactive communication during M&A: A study of Indian bank mergers. Global Business Review, 13(3), 407–419.
Bowditch, J. L., and Buono, A. F. (2003). The Human Side of Mergers and Acquisitions: Managing Collisions Between People, Cultures, and Organizations
Bower, J. L. (2001). Not all M&As are alike – and that matters. Harvard Business Review 79: 92–102.
Bruner, R. F. (2004). Applied Mergers and Acquisitions, University of Virginia Publications.
Buadee, T. (2015). Assessing the Takeover of Intercontinental Bank Ghana Limited by Access Bank Ghana Limited (ABG) and Its Impact on the Financial Performance of ABG. MBA Thesis, KNUST.
Campbell, J. A., Lo, F., and MacKinlay, C. (1997). The econometrics of financial markets, Princeton University Press.
Datta, D. K., and Puia, G. (1995). Cross-border acquisitions: An examination of the influence of relatedness and cultural fit on shareholder value creation in U.S acquiring firms. Management internal.
Davenport, J., & Barrow, S. (2009). Employee Communication During Mergers and Acquisitions. Farnham: Ashgate Publishing Group.
Davis, D., Robertson, K., & Yang, D. (2012). Integrated branding with mergers and acquisitions. Journal of Brand Management, 19, 438-456. doi:10.1057/bm.2011.52
Economist. (2013). Riding the Wave. Available: http://www.economist.com/news/business/21587207-corporate-dealmakers-should-heed-lessons-past-merger-waves-riding-wave. Accessed: 22/03/2019
Finkelstein, S., Hambrick, D. C., and Cannella, A. (2009), Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards, Oxford University Press, Oxford.
Gleich, R., Kierans, G., & Hasselbach, T. (2010). Value in Due Diligence: Contemporary strategies for merger and acquisition success. Ashgate Publishing Group, 0-243.
Goergen, M., and Renneboog, L. (2004). Shareholder wealth effects of European domestic and cross-border takeover bids. European Financial. Management. 10 (1), 9–45
Gomes, E., Angwing, D. N., Weber, Y., & Tarba, S. Y. (2013). Critical Success Factors through the Mergers and Acquisitions Process: Revealing Pre- and Post-M&A Connections for Improved Performance. Thunderbird International Business Review , 55.
Greenwood, J. (1994) Realism, Identity and Emotion London: Sage.
Gupta, R., & MacDonald, C. (2000). The Implementation of Value-Based Metrics and the Next Steps in Corporate Valuation. Value-Based Metrics: Foundations and Practice, 229-252.
Habeck, R. V., Amick, B. C., Hunt, A., Fossel, A. H., Chapin, A., Keller, R. B., & Katz, J. N. (2000). Measuring the impact of organizational behaviors on work disability prevention and management. Journal of occupational rehabilitation, 10(1), 21-38.
Hagedoorn, J., and Duysters, G. (2002). External sources of innovative capabilities: the preference for strategic alliances or mergers and acquisitions. Journal of Management Studies, 39 (2),167
Hair, J. F., Black, W. C., Babin, B. J., and Anderson, R. E. (2010). Multivariate Data Analysis. 7th ed. Prentice Hall.
Haleblian, J., and Finkelstein, S. (1999). The Influence of Organizational Acquisition Experience on Acquisition Performance: A Behavioural Learning Perspective. Administrative Science Quarterly, 44(1): 29-56.
Harroch, R., & Lipkin, D. (2014). 20-Key due-diligence activities in a merger and acquisition transaction. Forbes
Haspeslagh, P., & Jemison, D. (1991). Managing acquisitions: Creating value through corporate renewal. New York: The Free Press.
Hayward, M. (2002). When do firms learn from their acquisition experience? Evidence from 1990–1995. Strategic Management Journal 23(1): 21–39
Haleblian, J., and Finkelstein, S. (1999). The Influence of Organizational Acquisition Experience on Acquisition Performance: A Behavioural Learning Perspective. Administrative Science Quarterly, 44(1): 29-56.
Hill, C., and Jones, T. (2000), “Stakeholder–agency theory”, Journal of Management Studies, Vol. 29 No. 2.
Hopkins, H. D. (2008). Cross-border mergers and acquisitions: Do strategy or post-merger integration matter? International Management Review, 4: 5-12.
Hora, M., and Klassen, R. D. (2013). Learning from others' misfortune: factors influencing knowledge acquisition to reduce operational risk. J. Oper. Manag. 31 (1), 52–61
Howard, P. (2003). Heritage: Management, Interpretation, Identity, London: Continuum
Inkpen, A., Sundaram, A. K., Rockwood, K. (2000). Cross border acquisitions of U.S. technology assets. California Management Review 42(3): 50–71.
Inkpen, A., and Currall, S. C. (2002). A multilevel approach to trust in joint ventures. Journal of International Business Studies, 33: 479-495.
Ismail, A., and Davidson, I. (2007). The Determinants of Target Returns in European Bank Mergers. The Service Industries Journal, Vol. 27, No. 5, 617-634.
Jemison, D. B., & Sitkin, S. B. (1986). Acquisitions-the process can be a problem. Harvard Business Review, 64(2), 107-116.
Kim, J. Y. J., Haleblian, J. J., and Finkelstein, S. (2011). 'When Firms are Desperate to Grow via Acquisition: The Effect of Growth Patterns and Acquisition Experience on Acquisition Premiums'. Administrative Science Quarterly. 56, 26-60
Koller, T., Goedhart, M., and Wessels, D. (2005). Valuation: measuring and managing the value of companies, 4th edition, John Wiley & Sons Inc., New Jersey.
Marfo, I. O., and Agyei, S. K. (2013). Mergers & Acquisition and Firm Performance: Evidence from the Ghana Stock Exchange. Research Journal of Finance and Accounting, 4(7), 99-108
Marks, M. L., and Mirvis, P. H. (2001). Making mergers and acquisitions work: Strategic and psychological preparation. The Academy of Management Executive, 15 (2), 80-92.
Martin, J. D., and Petty, J. W. (2000). Value Based Management. Harvard Business School Press 2000.
Mirvis, P., and Marks, M. (2004), Managing the Merger: Making it Work, Englewood Cliffs, NJ: Prentice-Hall
Moeller, S. B., Schlingemann, F. P., and Stulz, R. (2003). Do shareholders of acquiring firms gain from acquisition?
Obrycki, D.J., and Resendes, R. (2000), ?Economic margin: The link between EVA and CFROI?, in Fabozzi, F.J., and Grant, J.L. (eds.), Value-based metrics: Foundations
Ogden, J. P., Jen, F. C., and O’Connor, P. F. (2003). Advanced Corporate Finance: Policies and Strategies, Pearson Education Inc., New Jersey.
Perry, J. S., and Herd, T. J. (2004). Mergers and acquisitions: Reducing M&A risk through improved due diligence, Strategy and Leadership, 32 (2): 12-19.
Peterson, P. P., and Peterson, D. R. (1996), Company performance and measures of value added. The Research Foundation of The Institute of Chartered Financial Analysts, Charlottesville
Pitkethly, R., Faulkner, D., & Child, J. (2003). “Integrating Acquisitions”, in C. Cooper and A. Gregory (eds.), Advances in Mergers and Acquisitions. Amsterdam: JAI Press, 1, 27-58.
Reilly, F. K., and Brown, K. C. (2003). Investment analysis portfolio management, 7th edition, Thomson-South Western, Cincinnati
Roediger, T. (2010). Werte schaffen durch M&A-Transaktionen: Erfolgsfaktoren im post-Acquisitions management 1. edition, Gabler.
Scholes, K., Johnson, G., and Whittington, R. (2008): Exploring Corporate Strategy. Text and Cases. Seventh Edition. Pearson Education.
Schweiger, D. M., and Goulet, P. K. (2000). Integrating mergers and acquisitions: An international research review. Advances in Mergers and Acquisitions, 1, 61-91.
Seldeslachts, Jo., and Banal-Estaol, A. (2011). Merger Failures. Journal of Economics & Management Strategy, Vol. 20, Issue 2, pp. 589-624, 2011
Sirower, M. (1997). The Synergy Trap, Free, New York, London.
Stachowicz-stanusch, A. (2009). Culture due diligence based on HP/Compaq merger case study. Journal of Intercultural Management, 1, 6481.
Stewart, G. B. (1991). The quest for value. New York: Harper-Collins
Sudarsanam, P. S. (1995). The Essence of Mergers and Acquisitions, Hartnolls, Bodmin.
Lindén, M., & Törnell, H. (2013). Exploring the M&A Process: a study on how to enhance the M&A performance.
Van, L. E., Van, K. D., & Ellemers, N. (2003). Continuing and changing group identities: The effects of merging on social identification and ingroup bias. Personality and Social Psychology Bulletin, 29: 679–690
Vernersson, H., & Vuopio, M. (2006). Hur framgång skapas genom ledarskap och ekonomistyrning: en fallstudie av fyra framgångsrika företag i Norrbotten.
Weber, Y., & Schweiger, D. M. (1992). Top management culture conflict in mergers and acquisitions: A lesson from anthropology. The International Journal of Conflict Management, 3, 1-17.
Weber, Y., Tarba, S. Y., and Oberg, C. (2014). A comprehensive guide to mergers and acquisitions: Managing the critical success factors across every stage of the M&A Process. New York – London: Pearson& Financial Times Press.
Wilcox, H. D., Chang, K. C., and Grover, V. (2001). Valuation of Mergers and Acquisitions in the Telecommunications Industry: A Study on Diversification and Firm Size’, Information and Management, 38, pp. 459-471
Young, S., and Stephen, F. O. (2001). EVA and value-based management: a practical guide to implementation, 2.
Zygmont, C., & Smith, M. R. (2014). Robust factor analysis in the presence of normality violations, missing data, and outliers: Empirical questions and possible solutions. The Quantitative Methods for Psychology, 10 (1), 40-55.
In-Text Citation: (Apreku-Djan et al., 2022)
To Cite this Article: Paul Kwasi Apreku-Djan, Francis Ameyaw, Francis Kuma, Frank Ahiale, Maxwell Owusu. (2022). Effect of Pre-Merger and Acquisition Capability Strategies on Value-Based Financial Performance of Banks in Ghana. International Journal of Academic Research in Accounting Finance and Management Sciences. 12(2), 259 – 284.
Copyright: © 2022 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode