Impact of mergers and acquisitions on organizational performance

Globally used terms to ensure the firm’s survival and to achieve the growth of business is named as merger and acquisition. According to Amedu, (2004); Bello, (2004); Katty, (2005), the meaning of the merger is that when two firms join hands together for the future ventures. Whereas carrying on the similar core objectives is called as an acquisition.

A similar sort of explanation is given by a researcher Soludo (2004) who said that the aim of going for the merger and acquisition is to achieve the efficiency in cost, this can be done via economies of scale, the other core objective is expansion of the business and enhanced performance of the business. There are a number of studies which tried to examine that does merger or acquisition are handy in solving the bank problems of any firm.

There are authors who have provided those researches which identified the correlation between profits and the mergers and acquisition of banks. Cabral et al. (2002), Carletti et al. (2002) and Szapary (2001).There are other studies too, which are in complete agreement with it that when mergers and acquisitions are acquired in financial institutions they impact the firms positively by enhancing their efficiency (De-Nicolo 2003 and Caprion 1999). In general some of the researchers projected the mixed sort of viewpoint on either mergers in financial institutions impact positively or not. Some of the researchers even failed to show that there exist any correlation between firms' performance and the merger and acquisitions. According to Kwan and Elsenbeis (1999) there are very sparse evidences that the merger's impact the cost efficiency.

There are studies which point that the mergers and acquisitions in the banks and other financial institutions lead to increased profitability, there is a researcher named Okpanachi (2006) who identified that there are instances that firms enjoy superior profitability period after mergers, the reason for which he identified as the capability of the merged company to attract more loans. He identified the instances too, where after the merger the productivity of the employee increased too, which ultimately resulted in an increase in the net growth of the organization. Two of the authors Uche and Walter (2005) conducted their research on the mergers of Nigerian banks, they examined the data via percentage and the results of their study suggests that when the Nigerian banks went for mergers and acquisitions they became more efficient.The chi square has been used by Akpan (2007) in order to test his hypothesis, the results of his test showed that the capitalization and the strategy of consolidation increased the confidence of the people on the Banks in Nigeria.

Sobowale (2004) and Osho (2004), believed that those firms which are engaged in mergers and acquisition would have the highest value because their profits of the future ventures are expected to rise which in return would increase the efficiency of the firms. Stiroh (2002) in his study when the firms merge with the banks of larger size, the profits would be ultimately bigger too, he studied the case of American banks in his study.

Two of the authors named as Choi and Russell (2004) have examined the impact of mergers and acquisitions in the construction industry of the US, and the results of the study suggest that mergers and acquisitions in the construction industry prove beneficial, in the study the authors have also identified those factors which after acquisition may enhance the performance of the firms. Those factors are mentioned below.

• Acquisition timing
• Transaction size
• Method of payment

These two authors in their study have examined almost one hundred and seventy-one transaction, the time period, which is selected is from the year 1980 to the year 2002. In order to measure the financial impact, the authors have measured the cumulative abnormal returns. The results of that research are mentioned below

• In late ninety’s the number of acquisitions has seen a dramatic increase.
• A trivial enhancement in the performance of the firms has been seen
• They have found no evidence that if the acquisition has impacted the performance of the firm, even a little as the time passed.

The results of the above-mentioned study were considered reliable for the reason that, they covered twenty-two years of acquisition history. The primary factor which impacts the mergers and acquisition is considered as “method of payment” many of the researchers have agreement on it, but two of the authors Choi and Russell (2004) found no evidence to support this argument.

An author named as Andre et al (2004) analysed the performance of mergers and acquisitions in Canada in the long run, he also examined those determinants which impac