EFFECT OF MERGERS, ACQUISITION ON PERFORMANCE OF SELECTED COMMERCIAL BANKS IN KENYA
Sigilai Cherono - Student, Department of Business, School of Business Economics and Tourism, Kenyatta University, Kenya
Dr. Salome Musau - Lecturer, Department of Business, School of Business Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Kenyan banks have a crucial function in fostering economic development by providing financial services, credit, and facilitating investments. They contribute to economic growth by supporting businesses and individuals, promoting savings and investments, and facilitating monetary transactions. Nevertheless, they have been facing performance challenges despite the vital role that they play. The general objective determined the effect of mergers and acquisition on financial performance. It assessed the effect of share capital, operational synergy and customer portfolio on financial performance. The study was underpinned on agency cost theory, capital buffer theory, synergistic mergers theory and value-destroying theories. This study made use of an explanatory research design. 9 commercial banks that were either merged or acquired over the project's time frame, which was from 2015 to 2020 was targeted. The descriptive analysis showed that respondents largely agreed that share capital influences the financial performance of Kenyan banks. The correlation analysis indicated a statistically significant and positive linear association between share capital and financial performance. Operational synergy further showed respondents generally agreeing that it increases financial performance. Thirdly, customer portfolio strategies showed that it has similar findings. Consequently, the study concludes that share capital helps banks to lend more, handle risks better and open more doors to growth. Further, it is concluded that institutions are able to cut expenses and deliver stronger services when they leverage synergies. Finally, the review shows that when banks tailor their offerings and focus on client outreach, satisfaction levels are raised. In Recommendation, commercial banks are advised to do targeting fundraising so that they can increase their share capital. This can be done by issuing new shares or even attracting long-term investors. Further, banks should focus on pursuing strategic acquisitions, alliances or reorganizing workflows internally if they want to boost their operational synergy. On customer portfolio, it is recommended that Kenyan commercial banks refine their customer segmentation strategies by focusing more on high-value and high-potential customers.