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THE EFFECTS OF MERGERS AND ACQUISITION ON CORPORATE GROWTH AND PROFITABILITY: EVIDENCE FROM NIGERIA
It is a widely held view that a strategic solution to financial distress in corporate organizations is mergers and acquisitions. This view remains a presumption, which has not been empirically tested through a research study. Corporate organizations facing difficulty have in recent times often followed or are compelled by regulators to follow the path of extensive reconstruction through mergers and acquisitions, apparently as the only option to liquidation. This paper fills a gap in the literature by investigating the effects of mergers and acquisitions on the efficiency, growth and profitability of corporate organizations in the post consolidated environment of the Nigerian banking industry. The methodology used is a survey of companies incorporated in Nigeria under the Companies and Allied Matters Act , which have undergone a merger or an acquisition process. The elements of the survey were selected randomly. A total of ten incorporated banks were selected using simple random sampling technique. The collected data were analyzed using key financial ratios. The results support the idea that mergers and acquisitions are not a prima facie solution to the problem of financial distress in corporate organizations. This is especially so when mergers are regulatory imposed than business environment driven. The study further revealed that while mergers and acquisitions can drive growth and profitability in some organizations, operating efficiency suffers at least in the short-term in the post merger and acquisition corporate entity. The evidence also shows that mergers and acquisitions provided only a temporary solution to financial distress and no solution at all to operating indiscipline.
KEYWORD: Merger, Acquisition, Corporate Growth, Profitability.