Mergers and Acquisition Strategies and Performance of Commercial Banks in Kenya
Mutembei, Anthony Mwenda
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The productivity of commercial banks in Kenya has been under intense scrutiny in the recent past owing to the unprecedented failure of some top mid-tier banking institutions. This is occurring despite comprehensive regulatory mechanism being in place. This research sought to examine the strategies adopted by commercial banks in response to poor productivity of certain operators in the financial sector. Further, despite varying mechanism having been undertaken by commercial banks towards stabilizing their financial performance there has been minimal impact, resulting in the rise in mergers and acquisitions occurring regularly among financial institutions. The purpose of the research was to examine how mergers and acquisitions influence the organization performance of commercial banks in Kenya. The study specifically examined how financial synergy, operational synergy, market diversification and managerial synergy influence financial return capability in banking institutions. The researcher used the theory of diversification, the synergy theory and the stewardship theory as guides for the study and adopted a descriptive research design. The 14 banks that had undergone M&As between 2006 and 2017 were considered as the research population. The study adopted purposive sampling of 4 high ranking bank personnel across each of the commercial banks. A census survey of 56 bank personnel was then utilized. The study utilized mixed data with semi-structured questionnaires being applied to collect primary data while financial statements of commercial banks, and regulatory reports provided secondary data. The research conducted a pretest of the research instrument, with 10% of the study respondents. The data that the researcher collected was analysed using descriptive and inferential statistics with assistance from SPSS and Microsoft Excel. Research findings were presented in the form of charts, tables and figures. An 88% response rate was received from the population with findings indicating that 54.5% -R2=.545 of the variations in bank performance are determined by the mergers and acquisitions. The research concludes that operational synergy, financial synergy, managerial synergy and market diversification positively enhanced banks performance. It was the recommendation of the study that commercial banks improve their operational efficiency and work environment respectively. Further, the commercial banks should strive to improve their management competency and skills as this will enhance bank profitability. It was also the study’s recommendation that banks enhance their product development and marketing strategies.