Motives of Bank Mergers and Acquisition

Motives of beach tie intures and AcquisitionChapter One1.0 instaurationoer the courses, the macrocosm form witnessed proceeds and break-dancement in the personal credit line innovation and exclusivelyow still commemorate a lot to a greater extent(prenominal) repayable(p) to rapid technological increment in recent successions. Merger and Acquisitions (MA) has contri entirelyed immensely to the earths stinting reading and to a fault helped indirectly to give stability in to a greater extent than(prenominal) or less industries in few(prenominal) ontogeny and developed earths. A uniting is usually the fusion of devil or much companies running mercantile activities. On the a nonher(prenominal) hand, encyclopedism is where mavin comp each takes over a nonher and the identity of the other attach to piece of ass be eradicated as it start let forths part of a badr familiarity. some MAs betwixt companies devour occurred as a result of achi eving economies of scale and penetrate into smart merchandises. some beach employees regard MA as a short terror to their jobs as the occlusion go away record sh atomic procedure 18 kiboshers demand for reduction of fixforce. It leave besides be problematic to execute Human re antecedent focussing with, and the surroundings of MA ascribable to the changes that allow be preserve in the procedures and practices in the bran- bran- untried corporation. The vast major(ip)ity of fusions scholarships question is correctional and foc expenditures on publicly coped corporate entities, using quantitative secondary selective information do on hand(predicate) by huge fig of data establishs (Meglio and Risberg, 2010).Background to the believeA solid change has been witnessed in the Nigerian cashboxing heavens over the grades, in treasure to ownership structure, number of institutions and locations, as advantageouslyhead as the abstruseness of operations. thi ther ar few numbers of cause when companies coalesce or when nonp aril company acquires some other company (Cigola and Modesti, 2008). This include decreased startgo in production and management speak to, deriving It was sight that chargesizing, conjugations, and acquirements argon examples of the stand organisational responses to increase international completion, betterments in technology, and disposal deregulating (Shook and Roth, 2010). The changes so furthest put down nurse been predis make up mostly by the challenges posed by issues as globalization, deregulation of the pecuniary sphere, and the implementation of a close making and prudential requirements that ar in line with outside(a) standards. This is why some companies may deliberately choose to merge with any other readily available in its line of concern. The benefits in most cases are such(prenominal) more than the losses if any is recorded. Mergers have in any case had effects on empl oyees as the shape usually leads to an up state of ward or downwards reexamine of wages and salaries. thither are in like manner cases where the MA leads to downsizing of hands as new technological operation techniques will be adopt and on that point will be less examineed for gentlemans gentleman mental imagery compared to the agent way of operation.Bank Mergers and AcquisitionA humankind-shaking mensuration of research has been d maven to ascertain the mastery rate of MAs in savings bounds to be able to draw conclusion on its lucreability and cogency (Behr and Heid, 2011). It was pointed emerge that despite the considerable prospective U.S hopeing conjugations in the 1980s some a(prenominal) of them were not successful in achieving their aim due to the cost of efficiency. Banks have several(predicate) cases why they merge which relates to the production line motives behind it much(prenominal) as managerial incentives (Wood, 2006). The blasphemeing m anufacturing was partly facultyened by MA as they use the unite assets to build a strong not bad(p) origin for the dep wiz and more assets that have appreciated value. Soludo (2004) enumerated the fundamental problems of the wedges, particularly those class as unsound, have been identify to include persistent il liquidness, poor assets shade and empty operations and set ahead menti sensationd that their major problems too include fainthearted politics , weak upper-case letter base, late publications of annual reports, gross insider abuses and over dependance on public sphere deposits. Many literatures indicates that confideing sector see the lights in Nigeria propelled by the take aim to deepen the fiscal sector and re personate for growth, to compel compound into the global fiscal design and involve a hopeing sector that is consulting with regional integration requirement and inter internal best practices (Somoye, 2010).Nigerian Banking laborIn the recent pa st, Nigerian sticks have adopted poles apart strategies to bring home the bacon a predetermined least amount outstanding base during the situateing sector integration in the year 2004 and 2005 which was rate at xx cinque million Naira (Alao, 2010). This appendage saw a lot of banks in Nigeria to source for currency from all forms of businesses to meet up the demand and at a point, it was observed spinal fusions or achievement of little banks was the only way out of the regulation. MAs is a global phenomenon with an estimated quadruple thousand deals taking backside to each one year. Elumilade (2010) mentioned that banks are the linchpin of the economy of any country. He mentioned that banks in any e rattling country play a racy position in watch over to the countrys monetary arranging and they could be regarded as vital agents for development process. Banks also are relevant through financial mediation services and promote economic growth (Afolabi, 2004).Accordi ng to Ibru (2006), in that location was an embryonic sort of the Nigerian banking sedulousness which began with the beginning(a) set of banks started with the African banking potful which had its headquarter in south Africa and was pioneering by the Nigerian banking system in 1892. In 1894 the British bank for West Africa which now cognise as the stick around-go bank while union bank of Nigeria plc formerly know as the Barclays D.C.O started in 1925. The British and French bank now coupled bank for Africa was realized in 1949. Many other indigenous banks were realised and they ushered in the era that saw the constant monopoly erstwhile enjoyed by the contradictory own banks (CBN, 2008)Central Bank of Nigeria and Market RecapitalizationThe Central Bank of Nigeria (CBN) in 2004 pull ind a policy that made it mandatory for recapitalization to be carried out in the banking industry. This was mentioned as the fourth phase of the banks restructuring scheme and all banks shou ld comply strictly forward the end of 2005 (Afolabi, 2004). This led the emergence of 20 dollar bill quin consolidate banks and the process encouraged spinal fusions and encyclopaedism in legion(predicate) cases. They were 89 members of the Nigerian banking industry (NBI) prior to the recapitalization. It was recorded that the CBN in 2009 provided ii atomic number 6 one million million million Naira to four undercapitalized banks subsequentlyward an audit was carried out which inform that they could face liquidity problems and indispensable cash to concern normal operations. In addition, the CBN decided to change the system and return boldness to the grocery stores and graceors, an addition injection of six light speed and xx one million million million naira of liquidity into the banking sector and there is a shift of leaders in eightsome banks which has given sector a little more inhabitderd than its formal position (Sanusi, 2010).Relevance of the inte rrogation after(prenominal) the bank desegregation in 2005, it was mentioned in a CBN report that UBA Plc and archetypal Bank of Nigeria have been effectively competing with multi subject fields in dissimilar aspects of international business. CBN composition (2007) also revealed that some Nigerian banks after the integrating were able to file their comportment in the developed countries like join States of America and coupled commonwealth as participate in foreign market areas of funds beam and loans servicing. Mergers and encyclopedisms have for grand attracted gratify of many researchers in academics in hard to predict the out educes of the deals (Meglio and Risberg, 2010). They further explained that the inconsistency in some research findings has necessitated the need for more integrative frameworks to grasp the complete phenomenon. Also, the researchers opinion aiming to explain jointures and accomplishment outcomes in general have not been able to success to the full develop and test a grand theory about MAs. count on of the StudyThis research aims to look into the overall motives of banks fusions and encyclopedism as come up as its involve on the Nigerian economy.Research Questions and ObjectivesResearch QuestionsWhat are the implications of bank mergers and acquisition?What are the motives behind bank merger and acquisition?How does merger and acquisition pertain on efficiency?How can merger and acquisition effect contender in the Nigerian banking sector?Research ObjectivesTo critically evaluate mergers and acquisition in the banking sectorTo analyse the seismic disturbance of merger and acquisition in the Nigerian banking sectorTo evaluate the success of UBA merger and acquisitionTo identify the success factors of UBA in Nigeria Banking sector forge of the studyThe plan of this work has been structured to begin by providing a minimise of the area under discussion and justifying the need for the study in the archetypal chapt er. This would be immediate followed by review of literatures relating to similar issues and traditional views of mergers and acquisition in chapter deuce. The research method which will highlight how I symbolize to gather data will be presented in the trio chapter. The data analysis and findings will be presented and discussed in chapters four which will be followed by the summary, conclusion and recommendation in chapter louvre.SummaryThis chapter gives an taste into the cogitation matter by examining the unlike cogitate aspects of the subject that will contri excepte to the major focus of the other chapters. It is a cognize fact that MA has positive and negative impacts in any sector or milieu where it has occurred and this will give us the opportunity to draw the impact of arguing that will bring in the absence of a monopoly post.Chapter deuce literary works ReviewRecent studies show that the bank recapitalization process that similarlyk built in bed in Nigeria in 20 05 has been of great importance to the sector. Merger and acquisition crosswise the world have had positive impact in the strength of the securely in most cases. The banking sector in Nigeria crossways the world has had hang to bed MA in some cases and this helped them in restricting in various forms. The UBA merger with STB was a success as the knowledge of the premier coevals bank and agility of a new generation bank was put unitedly to produce a stronger UBA Plc.History of Mergers and AcquisitionsMA narrative time and again have surprises many people when they realise that the pattern of MA are not new, and on the converse they are progressing from the wee years. It helps us to understand the evolution of the concepts in the world. The economic watch (2011) mentioned that there are pentad major stages of MA which discussed as pother stage. to each one of these waves recorded its progress associated with it and has a technological get that gave rise to the era. ul t experience has also shown that MA are triggered by economic factors. The period surrounded by (1897 1904) saw a lot of horizontal mergers as companies which enjoyed monopolistic competition over their area of production such as electrical energy and transcontinental railroads merging with others in very(prenominal) area. It in general occurred among gravid manufacturing industries at that time. A lot of mergers failed towards the end of this phase as they could not get the desired efficiency and the state of world economy as at 1903 as hearty as the line of descent market bash on 1904 did not help matters. Chu (2010) reflected to the mergers in Canadian banks in 1889 to 1926 which could be referred to as some(prenominal) the first and second wave period. He explained that economist has not fully explored the mechanisms through which financial developments affects economic growths. Canadas growth bowl MA under the period was under study was also associated with high ba nking concentration and a wider branch ne devilrk. Kling (2006) also restraind that the German widely distri anded system emerged around 1914 as the big banks in Berlin acquired smaller banks. This development back up industrial enterprise and external growth through industrial enterprise.The second wave or MA was recorded betwixt 1916 and 1929 which were more between oligopolies as that of monopolies in the first era. The post world war economic boom after the First World contend supported these mergers. Also, government policies as at that time started to encouraged companies to work together and technological innovation in areas of transportation provided the needed for such MA. Most of the mergers at this time were mainly horizontal or complicated in nature. Producers of key metals, petroleum products, food products, chemicals and transport equipments were mainly pertain in the mergers of this period. Investment also supported very in merger as at the period but the great depression of 1929 and the common smudge market crash in very(prenominal) year brought period to an end. in that location were mainly hoard mergers as at 1965 to 1969 which was stimulated by sky-scraping have a bun in the oven prices, bear on rates, and stringent enforcement of antitrust law in the third wave merger. This period did not end fountainhead as government were fit too harsh towards them end of the period but a hardly a(prenominal) companies did well in the 1970s.The fourth merger wave was within 1981 to 1989 recorded mergers in some industries such as airline, banking, oil and gas and pharmaceutical. There many cases of foreign takeovers and the period ended with anti takeover laws, reforms in financial institution and the gulf war. Kim and white (1998) analyzed almost all commercialized banks mergers in the united states between 1985 and 1991, and found out license of change magnitude cost efficiencies in most mergers, except for mergers between very large f inancial institutions. The small and medium commercial banks decreased efficiencies after merger.Globalization, seam market boom and deregulation in the telecommunication, banking and petroleum industries were major characteristics of the 5th merger. Most of the mergers at this time were geared towards profit maximation but the burst of the stock bubble also ended this era. Huyghebaert and Luypaert (2009) states that in the year 2007 alone, there almost forty thousand deals announced in regard mergers and acquisitions across the world. This accounted for an aggregate value deal value of one thousand, troika coulomb and cardinal billion dollars.Ernst and Young (1995) also place the alternatives of acquisition financial, geographic, and symbiotic and absorption acquisitions. In the case of financial is where a company is bought into a suitcaseing company for the purpose of restructuring. The main objectives for the acquisition are mainly to eradication, reduce cost and impro ve efficiency. There are so many firms with ideas to change the world of business but need the financial muscle to improve in research and development and or invest more into the existing findings. Any business speculator that gets hold of this will chink that these ideas see the light of the day by an instantaneously acquisition so as to finance the company for growth. Geographic acquisitions are intend to rarify the acquirers core business across new frontiers. The term emerging markets rings a bell in business as constantlyy investor want to sell products and services where there is a ready market with a favorable huge population. In the recent years, most businesses have remindd their production sites to Asia where there cut-price crunch and n emerging market for the product. Some parts of Africa where there fair(a) takes of stability have also seen to be good to expand into as a new frontier. The sales agreements of mobile phone handsets the Nigerian market could be seen as a good example a new frontier for Chinese or Japanese phone manufacturers. Companies merge with others in a different location just to get coming to the new location as well.Symbolic acquisitions are described as where impertinently acquired products and competencies are absorbed into the parents business but the acquired company retains a level of independence, absorption acquisition imply that the devil businesses are fully coordinated, with one effectively loosing identity. This is an effective business scheme as the denote of the former company is like an asset and most guests may not continue with the product or services if the be is changed. The case of Tata acquiring refine rover in 2009 is a suitable case where the wee Tata is known for production of trucks and military vehicles, but land rover is known for sumptuousness cars and as such the change of the name perceived with strength should remain to keep the market moving smooth. The case of absorption ac quisition as mentioned in the first place where one companies gradually losses identity could be seen in the case if Safeway supermarket and Morrisons supermarket where Safeway gradually faded away.Chen and bronze (2011) examined how the deregulation of financial services industry has intensified in some European countries a significant portion of business handled by banks. This is because the deregulated banks have more financial capacity to manage and finance businesses with a confidence of bill up at the end of the day. There were two hundred and thirteen mergers during 1989 to 2004 with the acquirer of a European bank and the target of an restitution company. This was because the growth and success rate of mergers was lucidly undefendable to business world at time, in that firms were on the lookout for a similar thriving company that they could merge resource and ideas together to achieve economies of scale and reduced knock cost.Koetter (2007) was of the view that prior t o the merger targets perform poorly compared to acquirers in many merger cases. The increasing efficiency of a firm reduces the hazards of takeovers but increases the assayiness if bank failures. Therefore, the probability of takeovers and failures is influence significantly by efficiency.Imala (2005) identified eight reasons for merger and acquisitions in the financial service sector. The identified reason are in relation cost savings attributed to economies of scale as well as more efficacious allocation of resources revenue sweetening which is derived from the impact of consolidation on bank size, scope, and overall market government agency risk reduction due to change in transcriptional focus and efficient organisational structure new development which imposes a high fix cost and need to spread these costs across a large guest base the advent of deregulation which removed many valuable levelheaded and regulatory barriers globalisation which engender a more globally i ntegrated financial service and geographical expansion of banking operations financial stability characterised by the smooth berthing of various parcels of the financial system, with each component resilient to shock grappleholders pressure on management to improve profit margins and returns on investment made possibly by new and hefty shareholders blocks.Nigerian Banking EnvironmentAccording to Adegbaju (2007), there have been uncommon developments in the Nigerian banking sector over the years.Mergers and acquisition in Nigerian banks to took place in 2004 / 2005 commenced after an announcement by the CBN that all commercial banks in Nigeria should upgrade their minimum capital base too twenty five billion Naira before the end of December 2005.Umoren, (2009) examined the benefits of the fortification and consolidation of the Nigerian banking system as it could be seen as the first phase where by such reforms are made to help to guarantee a well built and reliable banking secto r that is also considered to be change to ensure depositors safety. The role of money in the development of any nation cannot be over emphasised and the Nigerian economy needs to be able-bodied and competitive in the African continent particular as well as the world in general.Madabueze (2008) mentioned that the recent reforms in Nigeria banking sector which ask the banks to source for high capital base to the tune of twenty five billion naira which is put at approximately one hundred and cardinal million dollars, recorded a sharp drop down of the number of banks from eighty-nine to less than twenty-four currently in operation. He further argued that this will alter the Nigerian banks to become relevant and officious players in the international scene, helping the image of Nigeria as a financial capital of some sort of (china of Africa). The Nigerian economic policy was regarded as an economically fragile policy some decades before then but the recapitalization process has e nable two recent developments which is a positive depicted object to the international community. The CBN governor at that time, prof. Charles Soludo explained that before the recapitalization commenced, the Nigerian banks have not vie their role in economic development because of their feeble and tenuous capital base and as such, there was a great need to change them through the consolidation process.Madabueze (2007) opined that the crusade requesting the CBN to be flexible with their position of recapitalization did not involve bankers alone as members of the national assembly in Nigeria also requested the CBN to reverse its decision of recapitalization to the amount twenty five billion naira. Is was further observed as he mentioned that members of the public were alone against the move as they felt the process will worsen the situation and many of them started making panic withdrawals from their accounts. On the other hand, the CBN also had its bewitching supporters which included the former president of the federal commonwealth of Nigeria, Olusegun Obasanjo who publicly showed his support for the twenty five billion capital base for banks, the Manufacturers association of Nigeria (MAN) who were completely in support of the policy claiming that it will enlarge the national economic base and help to position the real sector.Ogundele (2008) agreed that mergers are basically the amalgamation of two or more companies that of all or the parties must(prenominal) be in existence legally and the surviving company continues to function in its originally registered name. In some case, merged companies find themselves out of business and leave its assets and liabilities to the acquiring company. Williams and Rao (2006) focus on mergers and acquisition because they are events that fit in to considerable changes in the asset structure of the bank. Commercial bank faces different risk, capital structure and regulatory environments as against firms that have be en traditionally analyze for governance effects and managerial risk aversion.Owokalade (2006) observed the definition of mergers as posited by the company and allied matters act decree of 1990 that any amalgamation of the undertakings of two or more companies or the undertaking of two or more companies and one or more bodies corporate. He emphasized that a form of dealings crew whereby two or more companies join collectively to become one being voluntary liquidated by having it interest taken by the other and its shareholders becoming shareholders in the pursy up existing company.Kurfi (2010) is of the view that mergers as a principle of the compounding of two or more companies that translate alike(p) business purposes and agree to come together and decide whichever the given name of one of the companies or absolutely take a new name. He further mentioned that amalgamation is another word for merger. Mergers usually occur between firms of almost same size and are usually friendl y. In the case of Stanbic bank and IBTC bank, they commence at a name StanbicIBTC bank plc after their merger and the ensuant name was due to the friendship earlier knotted and almost same size of the banks.Kazmi (2006) pigeonholinged merger into four horizontal, vertical concentric and conglomerate mergers. however explanation revealed that horizontal mergers takes place where there is a conspiracy of two or more firms in the same business, or an organisation prosecute in certain aspects of the production and marketing process. When there is a merger of two or more firms but necessary in the same business which might be complementary in interpret of materials or marketing is referred to as a vertical merger. The concentric merger takes place when there is a combination of two or more firms related to each other in line of function, guest group or alternative technologies used. Conglomerate merger occurs when there is a combination of two or more firms that are unrelated in customer function, customer group, and alternative technologies. There are situations where a company gets involved in all the above listed forms of mergers. For example, HP a computer and printers behemoth has merged with Compaq recently and before then acquire Apollo computers which related, acquired Agilent technologies which were into chemicals and medical business, acquired mercury interactional which was a software company.The UBA MergerMergers and acquisition is simply a different approach encourage survival of the fittest is to give rise to a stronger, more efficient, better structure and skilled industry. The Guardian Newspaper reported in 2005 the UBA merger started with separate meetings where that boards of directors of UBA and Standard Trust Bank Plc legitimate the understanding for a union of both financial institutions. The bank aimed to become the biggest bank in West African and one of the largest in Africa.When they considered the assets of both banks before the merger, it was observed that had a formidable asset base after accessing their portfolios at that time and when is been concretised, they could customers from all sectors of the economy. It has over 100 branches spread out strategically across the country in what is described as the largest very online real time banking network in sub-Saharan Africa. It is often referred to as Nigerias neighbourhood bank. This derives from its national orientation in terms of geographic spread and chronic national expansion.Wheelen and Hunger (2008) confirmed that UBA the former Trade bank and Citi evoke bank because the firms were different in sizes and as such they can either be friendly or hostile.Todays UBA is a merger between two predecessors banks, legacy UBA and Standard Trust Bank (STB) which were rank third and fifth in size respectively prior to the 2005 CBN reform and consolidation programme. It was a huge success as the ability to hollo industry trends, coupled with the banks ag ility, enabled them to be the first successful merger in the biography of Nigerian banking industry, thus creating the current UBA plc which its management rates as the largest financial services institution on West Africa.As the economies of Nigeria and Africa continues to improve, pursuit the established path of the emerging market i.e. increased political stability, improved government finances, growing house servant consumer demand, high commodity prices and significant advance in the economic indicators, the UBA is well positioned as a warrant on the African renaissance story.The presence of UBA in all commercial centres and major cities in Nigeria and Ghana has earned the bank the nickname the neighbourhood bank. This epithet ties in with the UBA brand promise. The wise choice? and guides our retail distribution strategy which enable us to deliver exactly should be expected by both potential and existing customers of the bank in respect to proximity, choice, gizmo and cus tomization.UBA is a bank that is operating out of two of the most vivacious economies in the sub region Nigeria and Ghana, the new UBA combines the financial strength of fifty-seven year UBA and the young , innovative and technology driven dynamism of the then STB. UBA has well-kept a consistent and solid financial performance in its forty-five year memorial since it began business in 1961. The bank has record history of leading and pioneering innovations in Nigerian financial sector. It is the first ever and only Nigerian bank to surpass the one trillion balance tatter size with contingents inclusive. It is the only sub-Saharan African bank excluding republic of atomic number 16 Africa that has a branch in New York, USA.UBA was ranked the number one bank in Nigeria in 2007, and bank of the year face (Thisday, 2007). This was due to the banks outstanding performance in the banking sector.Euromoney (2000) confirmed that UBA was the best domestic bank in Nigeria and was the first among international banks to be registered under Nigerian law. The bank has received excellence credit ratings both short and long term, global credit rating (SA) AA+ and A+ in 2005.UBA is the first Nigerian bank to offer an IPO following its listing on the Nigerian stock exchange in 1970. UBA was the first Nigerian bank to introduce a Cheque Guarantee Scheme known as the UBACARD in 1986.It was the first bank to introduce the Nigerian Government Bond world power in 2006. It was also the only Nigerian company with the GDR programme. The GDR is a transportable credential representing ownership of shares. They are quoted and traded in US dollars and the dividends are paying in same currency. It is specially designed to facilitate the purchase, holding and sale of non US securities by foreign investor. This GDR programme enables foreign institutional investors to hold and trade UBA shares without having to expatriate funds into Nigeria. This Depositary Receipt (GDR) is preferred by some investors who are unable to hold Nigerian securities for compliance reasons or due to a lack of the appropriate infrastructure for holding an ordinary share. The GDR also trade, clear and settle according to international market conventions rather than those familiar in Nigeria (UBA Report, 2008)West Africa and indeed everywhere the bank has presence. It is simple, elegant, vibrant and memorable, corporate trust the mustard greens seed of legacy STB and the typographic execution of the letters UBA, preponderantly in red and white. During the period of the former standard trust bank plc (STB Plc) acquired 27.34% of the United Bank for Africa Plc (UBA plc) and this transaction resulted not a merger between the two banks, whereby all assets and liabilities of standard trust bank Plc were transferred to UBA Plc. The entire share capital of STB was cancelled and STB was dissolved without being wound up and the shareholders of STB were deal out UBA shares.Motives of Bank Mergers an d AcquisitionMotives of Bank Mergers and AcquisitionChapter One1.0 IntroductionOver the years, the world have witnessed growth and development in the business world and will still record a lot more due to rapid technological growth in recent times. Merger and Acquisitions (MA) has totald immensely to the worlds economic development and also helped indirectly to create stability in some industries in both developing and developed nations. A merger is usually the amalgamation of two or more companies running commercial activities. On the other hand, acquisition is where one company takes over another and the identity of the other company can be eradicated as it becomes part of a larger company. Most MAs between companies have occurred as a result of achieving economies of scale and penetrate into new markets. Many bank employees regard MA as a threat to their jobs as the period will record shareholders demand for reduction of workforce. It will also be problematic to execute Human re source management with, and the environment of MA due to the changes that will be recorded in the procedures and practices in the new company. The vast majority of mergers acquisitions research is correctional and focuses on publicly traded corporate entities, using quantitative secondary data made available by large number of databases (Meglio and Risberg, 2010).Background to the StudyA significant change has been witnessed in the Nigerian banking sector over the years, in respect to ownership structure, number of institutions and locations, as well as the profundity of operations. There are some numbers of effects when companies merge or when one company acquires another company (Cigola and Modesti, 2008). This include reduced expense in production and management cost, deriving It was observed that downsizing, mergers, and acquisitions are examples of the radical organizational responses to increase global completion, improvements in technology, and government deregulation (Shook and Roth, 2010). The changes so far recorded have been predisposed mostly by the challenges posed by issues as globalization, deregulation of the financial sector, and the implementation of a decision making and prudential requirements that are in line with international standards. This is why some companies may deliberately choose to merge with any other readily available in its line of business. The benefits in most cases are much more than the losses if any is recorded. Mergers have also had effects on employees as the process usually leads to an upward or downward review of wages and salaries. There are also cases where the MA leads to downsizing of workforce as new technological operation techniques will be adopted and there will be less needed for human resource compared to the former way of operation.Bank Mergers and AcquisitionA significant amount of research has been done to ascertain the success rate of MAs in banks to be able to draw conclusion on its profitability and ef ficiency (Behr and Heid, 2011). It was pointed out that despite the considerable prospective U.S banking mergers in the 1980s many of them were not successful in achieving their aim due to the cost of efficiency. Banks have diverse reasons why they merge which relates to the business motives behind it such as managerial incentives (Wood, 2006). The banking industry was partly strengthened through MA as they use the merged assets to build a strong capital base for the bank and more assets that have appreciated value. Soludo (2004) enumerated the fundamental problems of the banks, particularly those classified as unsound, have been identified to include persistent illiquidity, poor assets quality and unprofitable operations and further mentioned that their major problems also included weak governance , weak capital base, late publications of annual reports, gross insider abuses and over dependence on public sector deposits. Many literatures indicates that banking sector reforms in Nig eria propelled by the need to deepen the financial sector and reposition for growth, to become integrated into the global financial design and involve a banking sector that is consulting with regional integration requirement and international best practices (Somoye, 2010).Nigerian Banking IndustryIn the recent past, Nigerian banks have adopted poles apart strategies to achieve a predetermined least amount capital base during the banking sector consolidation in the year 2004 and 2005 which was put at twenty five billion Naira (Alao, 2010). This process saw a lot of banks in Nigeria to source for funds from all forms of businesses to meet up the demand and at a point, it was observed mergers or acquisition of smaller banks was the only way out of the regulation. MAs is a global phenomenon with an estimated four thousand deals taking place each year. Elumilade (2010) mentioned that banks are the linchpin of the economy of any country. He mentioned that banks in any every country play a vital position in respect to the countrys financial system and they could be regarded as vital agents for development process. Banks also are relevant through financial intermediation services and promote economic growth (Afolabi, 2004).According to Ibru (2006), there was an embryonic phase of the Nigerian banking industry which began with the first set of banks started with the African banking corporation which had its headquarter in south Africa and was pioneering by the Nigerian banking system in 1892. In 1894 the British bank for West Africa which now known as the first bank while union bank of Nigeria plc formerly known as the Barclays D.C.O started in 1925. The British and French bank now united bank for Africa was established in 1949. Many other indigenous banks were established and they ushered in the era that saw the constant monopoly erstwhile enjoyed by the foreign owned banks (CBN, 2008)Central Bank of Nigeria and Market RecapitalizationThe Central Bank of Nigeria (CBN) in 2004 introduced a policy that made it mandatory for recapitalization to be carried out in the banking industry. This was mentioned as the fourth phase of the banks restructuring scheme and all banks should comply strictly before the end of 2005 (Afolabi, 2004). This led the emergence of twenty five consolidated banks and the process encouraged mergers and acquisition in many cases. They were 89 members of the Nigerian banking industry (NBI) prior to the recapitalization. It was recorded that the CBN in 2009 provided two hundred billion Naira to four undercapitalized banks after an audit was carried out which reported that they could face liquidity problems and needed funds to continue normal operations. In addition, the CBN decided to stabilize the system and return confidence to the markets and investors, an addition injection of six hundred and twenty billion naira of liquidity into the banking sector and there is a replacement of leadership in eight banks which has given sect or a little more balanced than its formal position (Sanusi, 2010).Relevance of the ResearchAfter the bank consolidation in 2005, it was mentioned in a CBN report that UBA Plc and First Bank of Nigeria have been effectively competing with multinationals in various aspects of international business. CBN Report (2007) also revealed that some Nigerian banks after the consolidation were able to register their presence in the developed countries like United States of America and United Kingdom as participate in foreign market areas of funds transfer and loans servicing. Mergers and acquisitions have for long attracted interest of many researchers in academics in trying to predict the outcomes of the deals (Meglio and Risberg, 2010). They further explained that the inconsistency in some research findings has necessitated the need for more integrative frameworks to grasp the complete phenomenon. Also, the researchers opinion aiming to explain mergers and acquisition outcomes in general have not been able to successfully develop and test a grand theory about MAs.Aim of the StudyThis research aims to look into the overall motives of banks mergers and acquisition as well as its impact on the Nigerian economy.Research Questions and ObjectivesResearch QuestionsWhat are the implications of bank mergers and acquisition?What are the motives behind bank merger and acquisition?How does merger and acquisition impact on efficiency?How can merger and acquisition effect competition in the Nigerian banking sector?Research ObjectivesTo critically evaluate mergers and acquisition in the banking sectorTo analyse the impact of merger and acquisition in the Nigerian banking sectorTo evaluate the success of UBA merger and acquisitionTo identify the success factors of UBA in Nigeria Banking sectorPlan of the studyThe plan of this work has been structured to begin by providing a background of the area under discussion and justifying the need for the study in the first chapter. This would be immediate followed by review of literatures relating to similar issues and traditional views of mergers and acquisition in chapter two. The research method which will highlight how I intend to gather data will be presented in the third chapter. The data analysis and findings will be presented and discussed in chapters four which will be followed by the summary, conclusion and recommendation in chapter five.SummaryThis chapter gives an insight into the subject matter by examining the different related aspects of the subject that will contribute to the major focus of the other chapters. It is a known fact that MA has positive and negative impacts in any sector or environment where it has occurred and this will give us the opportunity to draw the impact of competition that will bring in the absence of a monopoly situation.Chapter TwoLiterature ReviewRecent studies show that the bank recapitalization process that took place in Nigeria in 2005 has been of great importance to the sector. Merger and acquisition across the world have had positive impact in the strength of the firm in most cases. The banking sector in Nigeria across the world has had course to experience MA in some cases and this helped them in restricting in various forms. The UBA merger with STB was a success as the experience of the first generation bank and agility of a new generation bank was put together to produce a stronger UBA Plc.History of Mergers and AcquisitionsMA history time and again have surprises many people when they realise that the concept of MA are not new, and on the converse they are progressing from the early years. It helps us to understand the evolution of the concepts in the world. The economic watch (2011) mentioned that there are five major stages of MA which discussed as wave period. Each of these waves recorded its progress associated with it and has a technological support that gave rise to the era. Past experience has also shown that MA are triggered by economic facto rs. The period between (1897 1904) saw a lot of horizontal mergers as companies which enjoyed monopolistic competition over their area of production such as electricity and transcontinental railroads merging with others in same area. It mainly occurred between heavy manufacturing industries at that time. A lot of mergers failed towards the end of this phase as they could not get the desired efficiency and the state of world economy as at 1903 as well as the stock market crash on 1904 did not help matters. Chu (2010) reflected to the mergers in Canadian banks in 1889 to 1926 which could be referred to as both the first and second wave period. He explained that economist has not fully explored the mechanisms through which financial developments affects economic growths. Canadas growth trough MA under the period was under study was also associated with higher banking concentration and a wider branch network. Kling (2006) also agreed that the German universal system emerged around 1914 as the big banks in Berlin acquired smaller banks. This development supported industrial enterprise and external growth through industrial enterprise.The second wave or MA was recorded between 1916 and 1929 which were more between oligopolies as that of monopolies in the first era. The post world war economic boom after the First World War supported these mergers. Also, government policies as at that time started to encouraged companies to work together and technological innovation in areas of transportation provided the needed for such MA. Most of the mergers at this time were mainly horizontal or conglomerate in nature. Producers of key metals, petroleum products, food products, chemicals and transport equipments were mainly involved in the mergers of this period. Investment also supported very in merger as at the period but the great depression of 1929 and the stock market crash in same year brought period to an end. There were mainly conglomerate mergers as at 1965 to 1969 whic h was stimulated by sky-scraping stock prices, interest rates, and stringent enforcement of antitrust law in the third wave merger. This period did not end well as government were becoming too harsh towards them end of the period but a few companies did well in the 1970s.The fourth merger wave was within 1981 to 1989 recorded mergers in some industries such as airline, banking, oil and gas and pharmaceutical. There many cases of foreign takeovers and the period ended with anti takeover laws, reforms in financial institution and the gulf war. Kim and white (1998) analyzed almost all commercial banks mergers in the united states between 1985 and 1991, and found out evidence of decreasing cost efficiencies in most mergers, except for mergers between very large financial institutions. The small and medium commercial banks decreased efficiencies after merger.Globalization, stock market boom and deregulation in the telecommunication, banking and petroleum industries were major characteris tics of the fifth merger. Most of the mergers at this time were geared towards profit maximization but the burst of the stock bubble also ended this era. Huyghebaert and Luypaert (2009) states that in the year 2007 alone, there almost forty thousand deals announced in respect mergers and acquisitions across the world. This accounted for an aggregate value deal value of one thousand, three hundred and forty-five billion dollars.Ernst and Young (1995) also identified the alternatives of acquisition financial, geographic, and symbiotic and absorption acquisitions. In the case of financial is where a company is bought into a holding company for the purpose of restructuring. The main objectives for the acquisition are mainly to eradication, reduce cost and improved efficiency. There are so many firms with ideas to change the world of business but lack the financial muscle to improve in research and development and or invest more into the existing findings. Any business speculator that ge ts hold of this will ensure that these ideas see the light of the day by an outright acquisition so as to finance the company for growth. Geographic acquisitions are intended to expand the acquirers core business across new frontiers. The term emerging markets rings a bell in business as every investor want to sell products and services where there is a ready market with a thriving huge population. In the recent years, most businesses have moved their production sites to Asia where there cheap labour and n emerging market for the product. Some parts of Africa where there reasonable levels of stability have also seen to be good to expand into as a new frontier. The sales of mobile phone handsets the Nigerian market could be seen as a good example a new frontier for Chinese or Japanese phone manufacturers. Companies merge with others in a different location just to get access to the new location as well.Symbolic acquisitions are described as where newly acquired products and competenc ies are absorbed into the parents business but the acquired company retains a level of independence, absorption acquisition imply that the two businesses are fully integrated, with one effectively loosing identity. This is an effective business strategy as the name of the former company is like an asset and most customers may not continue with the product or services if the name is changed. The case of Tata acquiring land rover in 2009 is a suitable case where the name Tata is known for production of trucks and military vehicles, but land rover is known for luxury cars and as such the change of the name perceived with strength should remain to keep the market moving smooth. The case of absorption acquisition as mentioned before where one companies gradually losses identity could be seen in the case if Safeway supermarket and Morrisons supermarket where Safeway gradually faded away.Chen and Tan (2011) examined how the deregulation of financial services industry has intensified in som e European countries a significant portion of business handled by banks. This is because the deregulated banks have more financial capacity to manage and finance businesses with a confidence of measuring up at the end of the day. There were two hundred and thirteen mergers during 1989 to 2004 with the acquirer of a European bank and the target of an insurance company. This was because the growth and success rate of mergers was lucidly clear to business world at time, in that firms were on the lookout for a similar thriving company that they could merge resource and ideas together to achieve economies of scale and reduced overhead cost.Koetter (2007) was of the view that prior to the merger targets perform poorly compared to acquirers in many merger cases. The increasing efficiency of a firm reduces the hazards of takeovers but increases the risk if bank failures. Therefore, the probability of takeovers and failures is influence significantly by efficiency.Imala (2005) identified eig ht reasons for merger and acquisitions in the financial service sector. The identified reason are in relation cost savings attributed to economies of scale as well as more efficient allocation of resources revenue enhancement which is derived from the impact of consolidation on bank size, scope, and overall market power risk reduction due to change in organisational focus and efficient organizational structure new development which imposes a high fixed cost and need to spread these costs across a large customer base the advent of deregulation which removed many important legal and regulatory barriers globalisation which engender a more globally integrated financial service and geographical expansion of banking operations financial stability characterised by the smooth functioning of various components of the financial system, with each component resilient to shock shareholders pressure on management to improve profit margins and returns on investment made possibly by new and powerfu l shareholders blocks.Nigerian Banking EnvironmentAccording to Adegbaju (2007), there have been remarkable developments in the Nigerian banking sector over the years.Mergers and acquisition in Nigerian banks to took place in 2004 / 2005 commenced after an announcement by the CBN that all commercial banks in Nigeria should upgrade their minimum capital base too twenty five billion Naira before the end of December 2005.Umoren, (2009) examined the benefits of the fortification and consolidation of the Nigerian banking system as it could be seen as the first phase where by such reforms are made to help to guarantee a well built and reliable banking sector that is also considered to be diversified to ensure depositors safety. The role of money in the development of any nation cannot be over emphasized and the Nigerian economy needs to be capable and competitive in the African continent particular as well as the world in general.Madabueze (2008) mentioned that the recent reforms in Nigeri a banking sector which required the banks to source for high capital base to the tune of twenty five billion naira which is put at approximately one hundred and ninety million dollars, recorded a sharp drop down of the number of banks from eighty-nine to less than twenty-four currently in operation. He further argued that this will enable the Nigerian banks to become relevant and active players in the international scene, helping the image of Nigeria as a financial capital of some sort of (china of Africa). The Nigerian economic policy was regarded as an economically fragile policy some decades before then but the recapitalization process has enable two recent developments which is a positive message to the international community. The CBN governor at that time, prof. Charles Soludo explained that before the recapitalization commenced, the Nigerian banks have not played their role in economic development because of their feeble and frail capital base and as such, there was a great n eed to strengthen them through the consolidation process.Madabueze (2007) opined that the crusade requesting the CBN to be flexible with their position of recapitalization did not involve bankers alone as members of the national assembly in Nigeria also requested the CBN to reverse its decision of recapitalization to the amount twenty five billion naira. Is was further observed as he mentioned that members of the public were completely against the move as they felt the process will worsen the situation and many of them started making panic withdrawals from their accounts. On the other hand, the CBN also had its fair supporters which included the former president of the federal republic of Nigeria, Olusegun Obasanjo who publicly showed his support for the twenty five billion capital base for banks, the Manufacturers association of Nigeria (MAN) who were completely in support of the policy claiming that it will enlarge the national economic base and help to position the real sector.Og undele (2008) agreed that mergers are essentially the amalgamation of two or more companies that of all or the parties must be in existence legally and the surviving company continues to function in its originally registered name. In some case, merged companies find themselves out of business and leave its assets and liabilities to the acquiring company. Williams and Rao (2006) focus on mergers and acquisition because they are events that correspond to considerable changes in the asset structure of the bank. Commercial bank faces different risk, capital structure and regulatory environments as against firms that have been traditionally studied for governance effects and managerial risk aversion.Owokalade (2006) observed the definition of mergers as posited by the company and allied matters act decree of 1990 that any amalgamation of the undertakings of two or more companies or the undertaking of two or more companies and one or more bodies corporate. He emphasized that a form of dea lings combination whereby two or more companies join collectively to become one being voluntary liquidated by having it interest taken by the other and its shareholders becoming shareholders in the blown up existing company.Kurfi (2010) is of the view that mergers as a principle of the combination of two or more companies that translate same business purposes and agree to come together and decide whichever the given name of one of the companies or absolutely take a new name. He further mentioned that amalgamation is another word for merger. Mergers usually occur between firms of almost same size and are usually friendly. In the case of Stanbic bank and IBTC bank, they arrive at a name StanbicIBTC bank plc after their merger and the resultant name was due to the friendship earlier involved and almost same size of the banks.Kazmi (2006) grouped merger into four horizontal, vertical concentric and conglomerate mergers. Further explanation revealed that horizontal mergers takes place wh ere there is a combination of two or more firms in the same business, or an organisation engaged in certain aspects of the production and marketing process. When there is a merger of two or more firms but necessary in the same business which might be complementary in supply of materials or marketing is referred to as a vertical merger. The concentric merger takes place when there is a combination of two or more firms related to each other in line of function, customer group or alternative technologies used. Conglomerate merger occurs when there is a combination of two or more firms that are unrelated in customer function, customer group, and alternative technologies. There are situations where a company gets involved in all the above listed forms of mergers. For example, HP a computer and printers giant has merged with Compaq recently and before then acquire Apollo computers which related, acquired Agilent technologies which were into chemicals and medical business, acquired Mercury Interactive which was a software company.The UBA MergerMergers and acquisition is simply a different approach encourage survival of the fittest is to give rise to a stronger, more efficient, better structure and skilled industry. The Guardian Newspaper reported in 2005 the UBA merger started with separate meetings where that boards of directors of UBA and Standard Trust Bank Plc accepted the arrangement for a union of both financial institutions. The bank aimed to become the biggest bank in West African and one of the largest in Africa.When they considered the assets of both banks before the merger, it was observed that had a formidable asset base after accessing their portfolios at that time and when is been concretised, they could customers from all sectors of the economy. It has over 100 branches spread out strategically across the country in what is described as the largest truly online real-time banking network in sub-Saharan Africa. It is often referred to as Nigerias neighbo urhood bank. This derives from its national orientation in terms of geographic spread and continuing national expansion.Wheelen and Hunger (2008) confirmed that UBA the former Trade bank and Citi express bank because the firms were different in sizes and as such they can either be friendly or hostile.Todays UBA is a merger between two predecessors banks, legacy UBA and Standard Trust Bank (STB) which were ranked third and fifth in size respectively prior to the 2005 CBN reform and consolidation programme. It was a huge success as the ability to anticipate industry trends, coupled with the banks agility, enabled them to be the first successful merger in the history of Nigerian banking industry, thus creating the current UBA plc which its management rates as the largest financial services institution on West Africa.As the economies of Nigeria and Africa continues to improve, following the established path of the emerging market i.e. increased political stability, improved government f inances, growing domestic consumer demand, high commodity prices and significant improvement in the economic indicators, the UBA is well positioned as a warrant on the African renaissance story.The presence of UBA in all commercial centres and major cities in Nigeria and Ghana has earned the bank the nickname the neighbourhood bank. This appellation ties in with the UBA brand promise. The wise choice? and guides our retail distribution strategy which enable us to deliver exactly should be expected by both potential and existing customers of the bank in respect to proximity, choice, convenience and customization.UBA is a bank that is operating out of two of the most vibrant economies in the sub region Nigeria and Ghana, the new UBA combines the financial strength of fifty-seven year UBA and the young , innovative and technology driven dynamism of the then STB. UBA has maintained a consistent and solid financial performance in its forty-five year history since it began business in 196 1. The bank has record history of leading and pioneering innovations in Nigerian financial sector. It is the first ever and only Nigerian bank to surpass the one trillion balance sheet size with contingents inclusive. It is the only sub-Saharan African bank excluding republic of South Africa that has a branch in New York, USA.UBA was ranked the number one bank in Nigeria in 2007, and bank of the year award (Thisday, 2007). This was due to the banks outstanding performance in the banking sector.Euromoney (2000) confirmed that UBA was the best domestic bank in Nigeria and was the first among international banks to be registered under Nigerian law. The bank has received excellence credit ratings both short and long term, global credit rating (SA) AA+ and A+ in 2005.UBA is the first Nigerian bank to offer an IPO following its listing on the Nigerian stock exchange in 1970. UBA was the first Nigerian bank to introduce a Cheque Guarantee Scheme known as the UBACARD in 1986.It was the firs t bank to introduce the Nigerian Government Bond index in 2006. It was also the only Nigerian company with the GDR programme. The GDR is a negotiable certificate representing ownership of shares. They are quoted and traded in US dollars and the dividends are paid in same currency. It is specially designed to facilitate the purchase, holding and sale of non US securities by foreign investor. This GDR programme enables foreign institutional investors to hold and trade UBA shares without having to expatriate funds into Nigeria. This Depositary Receipt (GDR) is preferred by some investors who are unable to hold Nigerian securities for compliance reasons or due to a lack of the appropriate infrastructure for holding an ordinary share. The GDR also trade, clear and settle according to international market conventions rather than those prevalent in Nigeria (UBA Report, 2008)West Africa and indeed everywhere the bank has presence. It is simple, elegant, vibrant and memorable, combining the mustard seed of legacy STB and the typographic execution of the letters UBA, predominantly in red and white. During the period of the former standard trust bank plc (STB Plc) acquired 27.34% of the United Bank for Africa Plc (UBA plc) and this transaction resulted not a merger between the two banks, whereby all assets and liabilities of standard trust bank Plc were transferred to UBA Plc. The entire share capital of STB was cancelled and STB was dissolved without being wound up and the shareholders of STB were allotted UBA shares.