RELATIONSHIP BETWEEN MERGERS AND PRODUCTIVITY IN NIGERIAN FIRMS
1.1 BACKGROUND TO THE STUDY
Every business has complex involvement with people, groups and organizations in the society. Some are intended and desired; others are unintentional and not desired. The people and organizations, with which a business is involved, according to Post et al (1999), have interest in the decisions, actions, and practices of the firm. Customers, suppliers, employees, owners, creditors and local communities are among those affected by the productivity and economic success of the business. These they added, are critical to a firm’s success or failure.
Organizations are set up by entrepreneurs to render services and deliver product output to satisfy societal needs. Satisfaction of societal needs is satisfaction of the operating, business and financial objectives of the organization. The needs of the society, habits, ethics, attitudes and tastes change over time, requiring changes to how the services should be rendered to the society by the organization, the quality of such services, the value for it; the design and quality of products from the organization to the society, transfer of such from the firm to the society; and exchange value for such products. Provisions of these services require the use of labour, raw material inputs, finance to acquire them and remunerate the firm labour force. The characteristics, quality, availability of national education, cost of living, levels of education and social pressures; material inputs whose qualities varies with adulteration, counterfeiting; inflation affecting input prices, import regulations and international trade policies. Organizations operating in a regulated environment need to operate within the fiscal, monetary, political and legal regulations. Policies guiding this change from time to time to which an organization must adjust, to be policy and a law abiding institution.
These changes pose challenges to organizations to which it must adjust to remain in business. They may be opportunities or threats. The organization must thus identify its strengths and weaknesses, harness the opportunities using its strength to cope with these challenges (Koontz et al, 1980). Sundry attempts to cope with these challenges have in some cases being futile leading to the demise of such organizations.
To cope, separate firms fuse together as one entity, relying on their combined strengths. These combinations may be in form of mergers, where two firms fuse together to form one entity; or acquisition, where one firm takes over another. These create synergies in the new firm, taking advantage of tax shields, gains from operating synergies due to cost reduction and rationalization
Mergers are common in today’s global marketplace. They are a way for companies to acquire technologies or products, improve profits and productivity, while reducing overall expenses. They may not allow for long adjustment periods, however, so the best approach is to plan. The overall organizational plan should include all areas which are bound to impact the workforce, including staffing, communication, training, and customer relationships, just to name a few (Mandi, 2003).
When corporations merge, there are usually instances of redundancy. In these cases, redundancy can lead to lay–offs, or may require shifting roles of your employees. While lay–offs most often cannot be avoided, reducing uncertainty amongst employees is best. Those employees that are being laid off should be told immediately and be provided with severance packages, if possible, and most importantly treated in a respectful manner. Remaining employees should have clear guidelines on their role within the new organization, and a development plan that will help them adjust to subsequent changes. These some researchers believed influences productivity.
Merger is at its infancy stage in Nigeria compared with other developed countries. Merger is an important concept that contributes to the growth of a national economy through increase in productivity and profitability. Mandi (2003) contributing in this regard said that in the last three years, growth through merger has been a critical part of the success of many companies operating in the new economy. In fact, merger has been the single most important factor in building up their market capitalization through increased productivity.
Merger has been defined as the combination of two or more separate firms into a single firm. The firm that results from the process could take any of the following identities, Acquirer identity or a complete new identity (Hitt, Harrison & Ireland, 2000). Mergers have been identified as important features of corporate structural changes (Pandey, 2000).
1.2 STATEMENT OF THE PROBLEM
The current economic situation in Nigeria can best be described as very turbulent with the problems reflecting more in all the service sector of the Nigerian economy. The nation economy is currently in recession has announced by the minister of finance in the third quarter of the years. The dimension of the problem is such that banks in the country are fast losing their market share, in addition to facing continuous operating losses and liquidity crisis leading to inability to pay depositors. Other major challenges facing banks in the country include low turnover, low profit, low dividend payout, declining growth rate and high operating cost. Recently, there have been problems associated with scarce foreign exchange in Nigeria making it very difficult for firms to survive on their own. From the foregoing, the researcher is examining the relationship between mergers and productivity in Nigerian firms.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
1. To examine the relationship between mergers and productivity in Nigerian firms.
2. To examine the relationship between acquisitions and productivity in Nigerian firms.
3. To determine the effects of mergers on Nigerian firms generally
1.4 RESEARCH QUESTIONS
1. What is the relationship between mergers and productivity in Nigerian firms?
2. What is the relationship between acquisitions and productivity in Nigerian firms?
3. What are the effects of mergers on Nigerian firms generally?
HO: There is no significant relationship between mergers and productivity in Nigerian firms
HA: There is significant relationship between mergers and productivity in Nigerian firms
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
1. The findings from this study will; be an eye opener for business managers in Nigeria and the general public on the relationship between merger and productivity in a firm. This study will also help is management decision making process.
2. This research will be a contribution to the body of literature in the area of the relationship between mergers and productivity in Nigerian firms, thereby constituting the empirical literature for future research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study is limited to the financial sector of the Nigeria economy. It will also cover the relationship between merger and productivity in a firm.
LIMITATION OF STUDY
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
H. Koontz; C. O’Donnell, and H. Weihrich, Management, McGraw-Hill. New York, 1980.
Hitt, M. A., Harrison, J. S., and Ireland, R. D. (2000) Mergers and Acquisitions: A guide to creating value for stakeholders, New York, USA.
J.E. Post; A.T. Lawrence, and J. Werber, Business and society: corporate strategy, public policy, ethics, McGraw-Hill, Singapore, 1999
Mandi, A. (2003) Lessons from master acquirers: A CEO Roundtable on making merger succeed, Harvard Business Review, USA.
Pandy, I.M. (2000) Financial Mangement, Vikas Publishing House Pvt. Ltd.