Effects of mergers and acquisition on financial performance of Atlas Mara bank, Zambia.

Abstract

A merger is the process of combining two or more companies on the behalf so as to raise capital to survive in the industry. Commercial banks are expected to collect excess funds from fund sectors and lend to customers with insufficient funds. Changes in bank lending behaviour have an impact on the country’s economy. Banks are faced with problems that affect their ability to gain greater share on the market and reducing business risks. These problems include the entry of new products and new players with advanced technology, the change in customers’ behaviour pattern, and consumer’s needs for cheaper services. Therefore, Mergers and acquisitions are used by Banks to strengthen their position in the market place. Mergers and acquisitions are a fast way to expand to new markets and incorporate new technology. Shareholders and bank managers turn to mergers and acquisitions in the hope of improving financial performance in their banks. However, various studies have shown various results concerning mergers and acquisitions. This research will sought to investigate the effects on the performance of Banc ABC and Finance bank after merging to form Atlas Mara Bank by analysing the performance prior to the merger and comparing to performance after the merger of the banks using financial analysis, which is the audited financial statements that have been made public. The metrics used to measure financial performance for the purpose of this study were return on assets, return on equity and net income. According to this study, the main reason why organizations and mostly within the banking industry merge and/or acquire others, is to enlarge their market share and increase their profitability. Further, it was observed that mergers and acquisitions expand the capital base of the organization thus enabling the organization to access more resources and especially credit facilities that ensure that the business is liquid throughout the year. This enhances the stability and effectiveness of operations of the organization increasing the customer’s satisfaction. In return, the profits may rise in the short and medium term while the organization increases the chances of growth and expansion in the long term. The findings from the financial reports indicated that pre and post-merger measures of financial performance, i.e. ROA, ROE and Net Income, had statistical significance. The findings of the analysis of the financial statements can be said to be, however, inconclusive as the Bank has currently sold its stake to a Kenya’s Biggest Bank by assets (African Markets, 2019).The Merger and Acquisition between FBZ and Bank ABC had a significant impact on the financial performance of Atlas Mara bank.