AN INVESTIGATION INTO THE EFFECTS OF MERGERS AND ACQUISITIONS ON FINANCIAL PERFORMANCE OF COMPANIES IN KENYA (2003 - 2007

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BY KENNEDY MURITHI BUS-3-2371-3/07

A THESIS SUBMITTED IN PARTIAL FULFILLMENT FOR THE REQUIREMENT FOR THE AWARD OF MASTER OF BUSINESS ADMINISTRATION (MBA –FINANCE) KENYA METHODIST UNIVERSITY

MAY 2010

DECLARATION I declare that this is my original work and has not been submitted for examination in any other University. Signature: ________________________Date: _________________________

KENNEDY MURITHI BUS-3-2371-3/07

This thesis has been submitted for examination with our approval as the University supervisors. Signature: ______________________Date: DR. T. M. NYAMACHE LECTURER, FINANCE KENYA METHODIST UNIVERSITY ___________________

Signature:

_________________________Date: _________________________

DR. FRANCIS MAMBO LECTURER, FINANCE KENYA METHODIST UNIVERSITY

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ACKNOWLEDGEMENT I would like to take this opportunity to express my sincere appreciation and gratitude to the following people and organizations without whose assistance, guidance and valuable support, this study would not have been successful.

Dr. Nyamache and Dr Mambo, supervisors, for directing and giving in-depth input for a comprehensive proposal.

All the staff and management of Kenya Methodist University, Nairobi Campus, who assisted and contributed to the success of this proposal.

To my colleagues in the MBA class for their support and team work that gave me a lot of support morally.

Finally, to Kenya Methodist University for having given me this opportunity to be part of this comprehensive Masters Degree Programme.

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DEDICATION To my wife Lydia and children Celine and Cynthia for their unwavering love, support, encouragement and dedication during the challenging and trying study.

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to establish the extent to which mergers and acquisitions assist in the attainment of returns on investments.This review also monitored the trend of amalgamations of companies in Kenya. From the findings. The research design was descriptive. Mergers and acquisitions also assisted in the v . diversify business growth. The focus was between the fiscal years 2003 to 2007.ABSTRACT The general objective of this study was to establish the effects of mergers and acquisitions on financial performance of companies in Kenya. acquire states of art and technology. types of mergers and the importance of mergers on company performance were reviewed. Literature was reviewed on effects mergers and acquisitions . The specific objectives were: To determine the significance of mergers and acquisitions in the increase of market share of companies in Kenya. comply with new legislation. In the same section. the nature of mergers and acquisitions. to find the role the mergers and acquisitions play in achieving and enhancing profitability in companies. and to determine the benefits of synergy that is achieved once companies adopt mergers and acquisitions in Kenya. acquire brand loyalty and overcome entry barriers. The study also explored the impact of corporate restructuring to firms in Kenya. the study found that that mergers and acquisitions increase the market share of companies the firms entered into new geographical areas. The design was appropriate to the study as it sought to obtain complete and effective corporate restructuring in Kenyan firms.

achievement of synergy and return on investment. complying with new regulation . increased market share. acquiring state of technology. vi . the study also concludes that the benefits of synergy that is achieved through adoption of merger and acquisition were. profitability of the company. diversification of risk.attainment of returns on investment in companies. acquire brand loyalty and overcome entry barriers. The study also established that there exist positive relationships between merger and acquisition and predictor factors which are market share.

LIST OF ABBREVIATIONS M&A: Mergers and Acquisitions FTC : Federal Trade Commission NAVPS: Net Asset Value Per Share NAV: Net Asset Value EPS: Earnings Per Share ROIC : Return On Investment Capital NSE: Nairobi Stock Exchange ABSA: Amalgamation of Banks in South Africa MPC: Monopolies and Price Control vii .

Market capitalization: The total market value of a company at the bourse.LIST OF OPERATIONAL TERMS Horizontal mergers: It takes place between firms that are actually or potentially competitors occupying similar positions in the chain of production. Conglomerate mergers: This is a merger between firms that are neither competitors nor potential or actual customers or suppliers of each other. viii . Vertical mergers: It takes place between firms at different levels of production. Agency problems: Agency problems arise when managers own a fraction of the ownership of their firm.

...................37 3....1 Horizontal mergers..............................................7 Conceptual Framework......18 2........................28 2............4 Importance of Mergers in Company Performance..........3 Information in merger review..............................2 Types of Mergers and Acquisitions/Corporate Restructuring.....TABLE OF CONTENT DECLARATION................................................................................................viii LIST OF TABLES..........................................4......................................................................2 Vertical merges...........................................................................................................11 1.................................6 1...............................................5 Sample Design and Size.......................3 Motives behind Mergers....1 1..................24 2...........2.33 2...................10 1............................1 1...............1 1..........................................................40 3....................................................................................4...............................................................iii DEDICATION.........3 Research Questions................................................................................................................................2.........................................................................................................................................................1 Background of the Study.....0 LITERATURE REVIEW......4 Merger remedies.............38 3............................................................................31 2.....................ii ACKNOWLEDGEMENT............................................................................................................................26 2.....................................................................1General objective......................1 Nature of Corporate Restructuring..........4 Objectives of the Study............22 2..........................................................................................................................................................................................................................iv ABSTRACT.....................v LIST OF ABBREVIATIONS................40 3.................................................................................................................................................................10 1.....................................2......vii LIST OF OPERATIONAL TERMS........................3 Conglomerate mergers......................................11 CHAPTER TWO...................27 2...............................................................................xii CHAPTER ONE...................................................................................................................................10 1................................37 3......................................................38 3..........................xi LIST OF FIGURES.......................................................................5 Significance of the Study.2 Specific objectives.......................19 2...........................................................1 Other measures of performance............................................36 CHAPTER THREE....2 Empirical studies of mergers....................................37 3........19 2.....................................17 2....................................................4 Research Area...............................1 Merger analysis...............0 RESEARCH METHODOLOGY.............................0 INTRODUCTION.................................................................................13 2..............................................................................................................................10 1...............................................................3 Data Collection Methods and Instruments..........................14 2...........7 Limitations of the Study...............................................................................................................................................................................................................................................................................................................29 2.......................2 Statement of the Problem......................................4....4.............6 Market Based Valuation....................................................2 Target Population ............... Interpretation and Presentation.............................................................4.............................................5.............................................................................................1 Research Design..........................5 Performance Measures...........6 Data Analysis...........................41 ix .........................................................13 2................................................6 Scope of the Study...................4.....................................9 1.............................................................13 2............

.....65 Appendix II : Questionnaire.................................................................................56 5.........48 4.................................................................................................72 Appendix IV: Budget Estimate........65 Appendix I: Introduction Letter...........................................................................72 APPENDIX V: MERGER CONTROL NOTIFICATIONS.42 4................................................................................56 5...............................................2.............................................................2................................66 Appendix III: Time Plan..................2 Firm’s Profile..56 5.................................................52 CHAPTER FIVE:...........0 DATA ANALYSIS AND INTERPRETATION..................0 DISCUSSION CONCLUSION AND RECOMMENDATION.............................................................................................................1 Personal Data........2 Analysis and Interpretation ..............................................................42 4.......................1 Introduction.....................................................................2 Discussion ......................................................................45 4.........................................................................................4 Regression Analysis ...........................................................................................................................................................................CHAPTER FOUR:.....74 x .........56 5.........................................................................................................3Conclusion .....................................................................3 Experience of the Firm.......................................................................................................................4Recommendation.......................................................................2......60 REFERENCES......................................................60 5...........................................................................61 APPENDICES .....1 Introduction..........................42 4..............................................2004......................................................................................42 4.........................................SOURCE MPC ANNUAL REPORTS 2001 .42 4...........................................................................2.............................

.....................52 Table 4................13: Model Summary .........54 xi .51 Table 4.......................LIST OF TABLES Table 4.................................................5: Sector of the organization.....................................................................................52 Table 4..............................12: Whether the Respondents Would Recommend a Merger or an Acquisition Again..................................4: Classification of organization in terms of ownership......44 Table 4............2: Type of company............6: The Sort of Merger or Acquisition That the Company Undertook.........................10: The Degree of Involvement of Managers in the Acquisition or Merger Process ........11: Whether The Merger or Acquisition Undertaken the Firm Is A Success............................................49 Table 8: Whether the Firm Was Subjected To Appeal to the Tribunal................45 Table 4..48 Table 4.......46 Table 4......................................................................................................................................3: Legal structure of the firm....................................................................................................................................................................................................1: Education level ........................47 Table 4..........................................50 Table 4......................................47 Table 4...................14: Coefficients results..................7: Reason/S Why the Organization Undertook the Merger.........9: Whether the Firm Appealed To the High Court..50 Table 4....................53 Table 4..........................................................................

....4: Ownership composition of company.......................................LIST OF FIGURES Figure 2..3: Number of years of service ......................2: Gender of the respondents ................................................................................44 xii .43 Figure 4.............................................................36 Figure 4..............................1:-The Conceptual Framework.......................................43 Figure 4....................

some M&As succeed. Thomas and Weston(1992). few companies made mergers a key element of their growth strategy. Mergers were an afterthought or episodic. The change imperatives are strong. For large samples. The central strategy for most firms seeking Mergers and Acquisitions (M &A) is to seek to become the leading player in the product-market area of the strategic business unit. Today. debt availability. others fail. 1 .CHAPTER ONE 1. There is no question that the pent-up demand for mergers has been brought back to life due to various factors such as convergence of low interest rates.0 INTRODUCTION 1. Twenty years back. This has forced many of them to adopt many forms of restructuring activity. private equity and venture capital.1 Background of the Study The existing capabilities of a firm influence the kind of acquisition activity that will make business and economic sense. cash infusions from initial public offers and the perceived lack of organic growth opportunities due to a saturated marketplace. many companies look to achieve over 50 percent of their growth from M&As. The changing environments and the new forms of competition have created new opportunities and threats for business firms. and firms must adjust to new forces of competition from all directions.

in at least twothirds of the cases.But well conceived and effectively implemented M&A activity can yield returns to shareholders in excess of broad stock market indexes . Many firms engage in a series of M&A activities over time thus making it difficult lo isolate the influence of a single acquisition event. which usually focuses on the short-term. Some acquirers have developed processes that facilitate the achievement of highly impressive track records. Anslinger and Copeland (1996) found out that samples of both corporate and financial buyers were able to achieve superior performance. As mentioned by Chakrabarli and Burton (1983). But studies also reveal that for the largest combinations during the period of strategic mergers (1992-98). Kraillinger (1997). For example. economic effects. 2 . Other recent contributions suggest that long-term positive results for mergers are found for mergers across related product lines.The Economist (2000). value is increased. on average acquiring firms earn at least the same as their cost of capital. The returns to acquiring firms are influenced by a number of factors. If the time period over which the returns to the shareholders of acquiring firms includes a year or two before a specific acquisition. performance related incentives for mergers affect long term strategic variables which tend to be underestimated in much of the current empirical research. It is important to note the long-term effects on performance of merger deals.

3 . Pre-merger planning has become especially critical as companies face pressure to deliver synergies as soon as possible.Cosh. but a holistic approach to the deal. but when the likely risks and challenges of the integration are considered al the very beginning of the merger process. there should not be separate mergers and postmerger integration process. The probability of deals success goes up considerably when the key elements of postmerger integration are not only started before closing.Hughes. when the acquirer is deciding what to buy and what to pay. the expected synergistic characteristics of mergers can contribute to improved performance through successful efficiency of operations. are positively related to long-term performance. This effect of merging companies is a well-known classic issue. through internal growth or by means of mergers. Schumpeter (1942). Another efficiency gain is achieved by combining complementary activities. especially the culture of the companies. from strategy to target identification and valuation to integration. All of the elements that affect Post merger integration success.In these long-term effects. In essence. An example is combining a company strong in research with one strong in marbling. whereby economies of scale spread the large fixed costs of investing in machinery or computer systems over a larger number of units. must be assessed and rolled into the synergy (and price to pay) calculation. where increased size of companies and synergies.Lee and Singh(1989). .

breaking of trade barriers. Berger (1999). Berger (1999). reduced availability of goods or services. 4 . a number of industries formerly fragmented into many small-scale operations have been rolled up into larger firms. Most mergers actually benefit consumers by allowing firms to operate more efficiently.This involves looking downstream al core processes and the nuts and bolts of how things work and in getting the people who know how to design and implement changes to these systems and processes involved up front. Berger (1999). some mergers create a concentrated market while others enable a single firm to raise resources. especially during the valuation stage. can lead to higher prices. and less innovation. But some are likely to lessen competition. Further. That. Mergers have become popular because of the enhanced competition. horizontal mergers can be used to shut down some high-cost plants to reduce industry supply and to increase efficiency in the remaining firms. This form of merger is what is referred to as consolidation and a good example in Kenya is what the Coca Cola Company is carrying out by closing bottling facilities countrywide while expanding the company's bottling facilities in the city. lower quality of products. free flow of capital across countries and globalization of business as a number of economies are being deregulated and integrated with other economies. in turn. The larger firm has been able to achieve efficiencies not achieved by the separate units. With excess capacity in an industry. Indeed.

It would be appropriate to adopt a definition of corporate strategy that helps in understanding issues in mergers and acquisitions. This approach. but the cost of acquiring a company may be determined in advance. Successful firms use many forms of M&A and restructuring based on opportunities and limitations. Some surprises are still possible. An acquisition may also represent obtaining a segment divested from another firm. The factors favoring M&A in part relate to industry characteristics. but they can be mitigated to some degree by appropriate due diligence. they are mutually supportive and reinforcing.Internal growth and mergers are not mutually exclusive activities. It is important to observe that one of the greatest challenges of corporate raiding has always been identifying the business area in which a firm should participate in order to maximize its long-term profitability . Firms generally have internal development programs that are assisted by M&A activity. An acquisition generally involves paying a premium. Indeed. in contrast to the older system of increasing value through organic growth. 5 . Acquisitions and mergers have been popular methods of increasing the size and value of firms in modern times. Some other advantages of M&A or external growth may also be noted. is faster and in many cases cheaper. The characteristics and competitive structure of an industry will influence the strategy employed. Thomas and Weston(1992). The logic is that the segment can be managed better when added to the activities of the buying firm. An acquisition enables the acquirer to obtain an organization already in place with an historical track record.

In such a situation. define strategy as a pattern or a plan that integrates an organization’s major goals. Strategy therefore. be an appropriate phenomenon for an organization to merge with or acquire a supplier of its raw material so as to guarantee availability and quality of such raw material or with a competitor so as to expand its market share or with another firm in order to comply with changes in legislation. for instance. technology. a merger or an acquisition may be the only available option. 6 .Mintzberg and Quinn (1991). 1. therefore. Many managers will today regard buying a company for access to markets. resources or management talent as less risky and speedier than gaining the same objectives through internal efforts or organic growth.2 Statement of the Problem Mergers and acquisitions have become the main means of attaining higher performance which is the main goal of any company. products. may in some cases require major resources which are beyond firm’s existing capability. Jemison and Sitkin(1986). Failure to perform is critical to a business as it is the major cause of business failure. policies and actions. Many studies have been done in the area of M&A and results found from the studies have been inconsistent. Strategic decisions are based on building on or stretching an organization’s resources and competencies to create new opportunities or capabilities based on these resources. It may.

Jemison and Silkin(1986).There are quite a number of activities that go on behind the scenes of these mergers and acquisitions which need to be known. The law does not give a period within which ministerial approval should be given. The study would also give an insight of processes. such as the Banking Act or the Trade Licensing Act. yet the dynamic changes in the market place demand that such a law should be reviewed from time to time. Any delays could make firms loose out on a merger opportunity. and forms their substantial costs relating to professional services. Monopolies and Price Control Act (Cap 504) is the principal guide that gives guideline and direct all processes of mergers and acquisitions in Kenya. and highlight barriers encountered from the perspective of those who have 'been there’. There are heavy and punitive penalties that are imposed by this law if any merger or a takeover proceeds without such an approval. The study will tend to establish whether mergers and acquisitions always result in creation of shareholders' value. 7 . evaluation and screening takes up a lot of managers' time. It is universally recognized that target identifications. to support and promote effective competition . but are apparently not easily available. This Act has not been revised since 1989. This study will document in a comprehensive manner the experiences of companies that have undergone mergers and acquisitions in Kenya. The documented experiences would focus on factors that would include the approval processes and creation of shareholder value. The least a company could expect is to undergo an unfriendly approval process. The Restrictive Trade Practices. It is a law that is not in harmony with other sectional laws.

They were however unable to identify a positive relationship between the level of merger activity and profitability. Consequently. on 69 firms. 8 . will be established and documented. Lichtenberg. Chesang (2002) . They concluded that the market value of the acquiring firms rose on average by 5. Few studies have been done in Kenya concerning M&A and by conducting this research.In conducting this survey study among the Kenyan firms that have been involved in mergers and acquisitions activity. examined United Kingdom active acquirers and found some evidence that companies undertaking mergers earned a higher rate of returns than those that relied on internal growth. Her study did not cover mergers and acquisitions in other sectors of economy. the researcher will be able to know how companies perform.carried out a study on Merger Restructuring and Financial Performance of Commercial Banking in Kenya.6 % (significant at 10% level). and Siegel (1990). an opportunity to observe similarities or otherwise on these conclusions. creation of shareholders wealth and firms perception as regards factors that contribute to the success or failure of mergers and acquisitions among a broader range of Kenyan firms A study was conducted by Lev and Mandelker (1972). Frank. They compared the performance of merged firms using profitability measures for 5 pre merger and 5 post merger years. this study will include an insight in the field of mergers and acquisitions as to the approval processes.

What is the significance of mergers and acquisitions in the increase in market power of companies in Kenya? ii.3 Research Questions The research questions had been decided as follows: i. This study will be set to find out the effects of mergers and acquisitions. To what extent have mergers and acquisitions assisted in the attainment of returns on investment in companies in Kenya? iv. The question for the study will therefore be: Would the performance of the firm be the same before and after merging? 1. What is the role that mergers and acquisitions play in achieving enhanced profitability of companies in Kenya? iii.Many companies in Kenya use share price as their measure of performance and by which they are judged by investors and stockholders alike. What are the benefits of synergy that is achieved once companies adopt mergers and acquisitions? 9 . if any on the performance of the companies in Kenya.

ii.4 Objectives of the Study 1. To establish the extent to which mergers and acquisitions assist in the attainment of returns on investment in companies in Kenya. iii.1. 10 .4. iv. Academicians and researchers by providing more insight into the relationship between mergers and acquisitions and company performance.5 Significance of the Study This study will be of value to: Current investors and firms at the Nairobi Stock Exchange(NSE) and elsewhere and any other firm in competitive industry as it will add knowledge on the understanding of the importance of mergers and acquisitions in analyzing company performance. 1.1General objective To establish the effects of mergers and acquisitions on financial performance of companies 1. To find out the role that mergers and acquisitions play in achieving enhanced profitability of companies in Kenya.2 Specific objectives The specific objectives have been decided as follows: i. To determine the benefits of synergy that is achieved once companies adopt mergers and acquisitions. To determine the significance of mergers and acquisitions in the increase in market share of companies in Kenya.4.

As the environment is very dynamic. Emphasis was. To the executives and managers of the companies listed at the NSE. Financial constraints: This restricted the scope of this study because of lack of sufficient funds. the study will cover all the companies which have merged and the relative performance. however. the researcher was compelled to take a case of only those companies that operate in Nairobi. This however. ii. The researcher however. 1. the practitioners of management need to update themselves and their respective industries on the best practices required. yielded reliable and valid results. This study will also contribute to the bulk of knowledge and research at the university as it will be used as a basis of reference by students for any future study in the field of mergers. 11 . be on Nairobi since it is the capital city and most of the head offices are located in Nairobi. acquisition and restructuring of companies.6 Scope of the Study The scope of this study covered all the companies in Kenya that have undergone mergers and acquisitions between the year 2003 and 2007.7 Limitations of the Study The major constraints of this study were: i. engaged the use of his personal savings and went for cost effective data collection tools and methods to cut on costs. 1. Time factor: Due to the fact that the time allocated for this study was short.

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Lack of cooperation: The researcher encountered a lot of resistance while carrying out this study due to the fact that the topic under study touched on the sensitive issue of mergers and acquisitions. The researcher overcame this limitation by accompanying each questionnaire with a cover letter informing the respondents that the research study was purely for academic purposes and that the responses given would be treated with utmost confidentiality between the researcher and the respondent.

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CHAPTER TWO 2.0 LITERATURE REVIEW This chapter considers literature relevant to the subject under study. The main issues under review were; the nature of mergers, types of mergers and acquisitions, motives of mergers, importance of mergers in company performance, performance measures, market based valuation and the conceptual framework.

2.1 Nature of Corporate Restructuring Merger can be defined as any transaction that forms one economic unit from two or more previous ones. Takeovers and related activities in the 1980s are much broader in scope and raise more fundamental issues than previous merger movements. Thus the traditional subject of M&A has been expanded to include takeovers and related issues of corporate restructuring, corporate control and changes in the ownership structure of firms. Thomas and Weston (1992).

Many mergers have little or no negative impact on competition. Some may be procompetitive, for example, by enhancing production efficiencies resulting from economies of scale or scope. Mergers may also create new synergies, lead to innovation by combining talents of different firms, and provide additional resources to develop new products and services. Chakrabati and Burton (1983).

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Concerns about mergers, acquisitions and other corporate combinations are generally based on the same concerns about anti-competitive behavior. The main concern is that a larger merged firm may increase its market power. Hoskisson and Hitt(1994).

To the extend a merged firm becomes more dominant in a market, there is a greater potential to abuse the accumulation and exercise of market power to the detriment of competitors and customers.

2.2 Types of Mergers and Acquisitions/Corporate Restructuring Thomas and Weston (1992), found that business firms have used a wide range of activities in seeking to exploit potential opportunities. The major objective of mergers, tenders offers and joint ventures is to achieve expansion and growth. Merger is any transaction that forms economic unit from two or more previous separate business units. Tender offer is a method of making a takeover via a direct offer to target firms’ shareholders to buy their shares, while a joint venture is a combination of subsets of assets contributed by two (or more) business entities for a specific business purpose and for a limited duration. Each of the venture partners continues to exist as a separate firm, and the joint venture represent a new business enterprises.

Sell-off is a general term for divestiture of part or all of a firm by any one of a number of means e.g. sale, liquidation, spin-off, and so on. Spin-offs is a transaction in which a company distributes on a pro rata basis all of the shares it owns in a subsidiary to its own shareholders. 14

This creates a new public company with (initially) the same proportional equity ownership as the parent company. Divestiture is the sale of a segment of a company, ,assets, a product line or a subsidiary to a third party for cash and/or securities. Equity carved is a transaction in which a parent firm offers some of a subsidiary common stock to the general public to bring in a cash infusion to the parent no longer exists and only the new offspring survive.

Under changes in ownership structures, we have exchange offer, it’s a truncation which provides one class (or more) of securities with the right or option to exchange part or all of the holdings for a different class of the firm’s securities, e.g. an exchange of common stock for debt. It enable a change in capital structure with no change in investment share purchases here a public corporation buys its own shares by tender offer, on the open market, or in negotiated buybacks.

Going private is a transformation whereby a public corporation is converted into a privately-held firm, often via a leveraged buyout or a management buy-out Leveraged buyout is where the company is purchased by a small group of investors, financed largely by debt. We also have leveraged cash-outs. a defensive reorganization of the firm ‘s capital structure in which outside shareholders receive a large one-time cash dividend, and inside shareholders receive new shares of stock instead, and lastly Employee Stock Ownership Plans (ESOPs) – a defined contribution pension plan designed to invest primarily in the stock of the employer firm.

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These include: supermajority voting provisions. The outsiders are referred to as “dissidents” or “insurgents” who seek to reduce the control position of the “incumbents” or existing board of directors. 80%) of stockholders to approve a merger. changes in management systems to improve revenue growth and to achieve efficiency increases including cost reductions. requiring a percentage (e. golden parachutes which award large termination payments to existing management if control of the firm is changed and management terminated and poison pill provisions which give present stockholders the right to buy at a substantial discount the shares of a successor company formed by a stock takeover. asset redeployment. staggered terms of directors which can delay change of control for a number of years.Restructuring is the changes in product-market participation. Anti takeover amendments are changes in the corporate by laws to make acquisition of the company more difficult or more expensive.g. Corporate control is another type of merger. financial engineering. under corporate control we have premium buybacks it’s the repurchase of a substantial stockholder ownership interest at premium above the market price (called green mail) standstill agreement – these represent voluntary contracts in which the stockholder who is bough out agrees not to make further investment in the company in the future. 16 . Proxy contest is a type of merger where an outside group seeks to obtain representation on the firm’s board of directors.

2. Joint ventures represent a flexible method of exploring new areas with partners whose capabilities are complementary. proxy contents are often regarded as directed against the existing management.Since the management of a firm often has effective control of the board of directors. Joint venture can be used to have the seller transmit knowledge about the operation and the buyer to learn more about what is being acquired. 2. contraction and efforts to improve the efficiency of operations. 17 . new technologies. Especially promising in this connection are crossborder transactions (like the Nation Media Group in the East African region) either in the form of joint venture or mergers and acquisitions to achieve new products. It is clear from the above list that the strategies include expansion. a firm may improve motivations and performance by creating separate operations. by defining they reduce the number of competitors and the relevant markets. and new geographic markets. With regard to split-ups and spin-offs.1 Horizontal mergers This takes place between firms that are actually or potential competitors occupying similar positions in the chain of production. Merger reviews typically focus on horizontal mergers since. Also of concerns are mergers between a firm which is active in a particular market and another which is a potential competitor. when an activity does not fall into an effective organization structure of the parent.

2.In a horizontal merger. The USA Federal Trade Commission (FTC) was concerned that Time Warner could refuse to sell popular video programmes to competitors of cable TV companies owned or affiliated with Time Warner or Turner or offer to sell the programmes at discriminatory prices. The merger has reduced the number of competitors. This is called a “vertical foreclosure” or “bottleneck” problem. Another example is the merger of Time Warner Inc. (a big bank in South Africa) by Barclays Bank (another big bank).. producers of HBO and other video programming and Turn Corp. An example is the acquisition of Amalgamated Banks of South Africa (ABSA). Owino (2005). the acquisition of a competitor could increase market concentration and increase the likelihood of collusion. The elimination of head-to-head competition between two leading firms may result in unilateral anticompetitive effects. 2.a manufacturer merging with a supplier of component products. TBS. 18 . vertical mergers can also be of concern. or a manufacture merging with a distributor of its products. often leaving Barclays Bank as the only major bank in the area. in many areas of South Africa. producers of CNN. A vertical merger can harm competition by making it difficult for competitors to gain access to an important component product or to an important channel of distribution. and other programmes. Vertical mergers involve firms in a buyer-seller relationship.2 Vertical merges This takes place between firms at different levels in the chain of production (such as between manufactures and retailers).

2. electronic products and advertising agencies. The FTC allowed the merger. That would allow Time Warner – Tuner affiliate cable companies to maintain monopolies against competitors like Direct Broadcast Satellite (DBS) and new wireless cable technologies. The first is through internal growth. 2.Mantel and Eudema(2000).2. and of horizontal merger. This can be slow and ineffective if a firm is seeking to take advantage of a window of opportunity in which it has a short-term advantage over competitors.. There are two broad ways a firm can grow. fertilizers products. This is a combination of firms engaged in unrelated lines of business activity. the Time Warner-Turner affiliates could hurt competition in the production of video programming by refusing to carry programmes produced by competitors of both Time Warner and Turner. Mixed mergers have aspects of both pure conglomerate merger.3 Conglomerate mergers According to Hamed (1999) Conglomerate Mergers between firms that are neither competitors nor potential or actual customers or suppliers of each other which vary in types and attributes and they may be pure or mixed in form whereby pure mergers have no economic relationships between the acquiring firm and the acquired firm. 19 . What’s more.3 Motives behind Mergers One of the most common motives for merges is growth. for examples merging of different businesses like manufacturing of cement products. but prohibited discriminatory access terms at both levels to prevent anti-competitive effects .

but also give some support for similarities across the industries. The results clearly demonstrate similarities in merger motives within the industries. 20 . dynamism and valueenhancing capability of a company.The faster alternative is to merge and acquire the necessary resources to achieve competitive goals. What are the motives that have made M&As such a widely used strategy? Baker (1999) looks at the similarities within and across industries regarding merger motives. manufacturing. Growth is essential for sustaining the viability. banking and information technology. Their analysis makes use of three different perspectives. During the twentieth century. His empirical material consists of primary and secondary data collected from two merger in three industries respectively. Using a multi perspective approach they have come up with a number of motives which include: Enhanced profitability: when two or more companies’ combine they result in rise in profit because they realize cost reduction and efficient utilization of resources. M&As have occurred in waves where times of low activity frequently have turned into periods of high activity. the reason for this being to create understanding and furthermore illuminate the complexity of the problem.

Synergy: another commonly cited motive for mergers is the pursuit of synergistic benefits. Thus by combining with a profit making a company. energetic gains are often hard to realize. the combined company can utilize the carry forward losses and save tax. This is the new financial math that shows that 2+2=5. However. a company is allowed to carry forward its accumulated loss to set-off against its future earnings for calculating its tax liability. Diversification of risk: Other motives for mergers and acquisitions include diversification. the merged company generally has lower per-unit costs. Reduction in tax liability: Under the Kenyan tax law. whereby companies seek to lower their risk and exposure to certain volatile industry segments by adding other sectors to their corporate umbrella. When such synergies are realized. 21 . this is the exceptions rather than the norm. A loss making company may not be in a position to earn sufficient profits in future to take advantage of the carry forward provision. that is. Cost economies are the easier of the two to achieve because they often involve eliminating duplicate cost factors such as redundant personnel and overhead. as the equation shows a combination of two firms will yield a more valuable entity than the value of the sum of the two firms if they were to stay independent: Value (A+B)> Value (A) + Value (B) Although many merger partners cite synergy as the motive for their transaction. There are two types of synergy: that which is drive from cost economies and that which comes from revenue enhancement.

The Stock Market is one of the most closely observed economic phenomenon in the world. company car etc) because the majority owners bear most of the cost. overview of studies on the economic effects of M&A performed during the late fifties and sixties reveals that there is substantial ex post evidence that mergers and acquisitions have positive effects on the performance of firms. This partial ownership may cause managers to work less vigorously than otherwise or to consume perquisites (luxurious officers. Such indicators quantify movements in stock market prices and act as a standard in evaluating the returns on money invested in the stock market.4 Importance of Mergers in Company Performance Mergers & Acquisitions can be seen as instruments used by companies externally acquire capabilities developed by their partners. 2. suggest that related acquisitions can have a positive effect on company performance if these acquisitions support innovative activities of firms. 22 . Market indicators meet the demand for measures of stock market performance. However. Hoskisson and Hilt (1994). As such they can have a positive economic effect on companies that are active in the M&A Market.Agency problems An agency problem arises when managers own only a fraction of the ownership of their firm. emphasized that the market for corporate control and viewed mergers as a threat of takeover if a firm’s management logged in performance either because of inefficiency because of agency problem. Manne (1965).

Diversification was also identified as a good reason to engage in a merger. taking advantage of market conditions. seek tax advantages. restructure capital and resolve antitrust concerns taking advantage of market conditions. seek tax advantages. A merger is believed to have a substantive effect on the stock market. Mergers assist companies to increase cash. They also cite operating economics as an important merger goal. Patrick (1994) . restructure capital and resolve antitrust concerns.Stock market indices as aggregate measures are an instrument to meet the information requirement of investors by characterizing the development of global markets and specified market segments. 23 . To better understand the importance of M&As in company performance. Most of those surveyed listed synergy as a leading motivation for both domestic and cross-border mergers.surveyed the executives responsible for corporations' M&A strategy. Synergies top the list of merger motives. They cite mergers as being important in increasing a company's focus and eliminating poorly performing units thus increasing managerial efficiency while creating a particular organizational structure at the same time.

the merging firms may he considered to be competitors. a broad market definition could lead to a conclusion that the merged entity will face sufficient competition from other firms in the market.) In the context of a merger review. A narrow definition could lead to a conclusion that the merged entity would have excessive market power in a smaller market. competition authorities may prohibit mergers or approve them subject to conditions. 24 . market definition is often the key factor in determining whether a merger is anti-competitive. acquisitions and some other corporate combinations require prior review and approval in some jurisdictions. As part of their review. The merger of a firm that provides essential inputs to other firms can be problematic if the supply of those inputs to other firms is threatened. A more narrow market definition may result in a determination that the firms operate in different markets. Mergers are usually only prohibited or subjected to conditions if the authority concludes that the merger will substantially harm competition. the merger of a dominant local provider with a major Internet Service Provider (ISP) can raise concerns about whether other ISPs will obtain local access services on fair and non-discriminatory terms. If a market is defined broadly.2.4. Sherman (1998.Blair(1993). Such a merger might be reviewed in order to ensure that adequate safeguards are in place to protect competing ISPs. For example.1 Merger analysis Large mergers. On the other hand.

The evaluation of market participants includes not only firms which actually participate in the relevant market. it may also prove difficult lo determine 25 . In practice. it is difficult for a competition authority to qualify the positive and negative aspects of the transaction and arrive at any verifiable net effect. Theoretically. In assessing the potential adverse effects of a proposed merger. will create conditions which make anti-competitive agreements among them more likely. There may also be concerns that the merger. the objective is to assess efficiency or other welfare gains which can be projected to result from the merger. Finally. by reducing the number of firms participating in a market. substantial efficiency gains or other public welfare gains could support approval of a merger even where anti-competitive risks are identified. attention will typically focus on the establishment or increase of the dominant position by the merged entity. These will be balanced against any anti-competitive effects which have been identified in the earlier stages of the review. In this stage. The evaluation of barriers to entry is an important aspect of merger review. The determination of market share will have a direct bearing on an assessment of market power and the potential for abuse of market power by the merged entity.The second stage of the analysis is the identification of firm competing in the relevant market and their market shares. the analysis concludes with an assessment of any efficiency to be realized as a result of the merger. A finding that there are low barriers to entry can help justify a merger. but also firms which could be expanded to enter it.

Bankruptcy is painful for shareholders. examined 39 companies which had undertaken large and or persistent mergers in the period 1954-1965. transactions of this sort should be carefully evaluated. it may be that another firm could expand productive capacity using the assets of the failing firm and that public welfare would be better served by this alternative solution. observes that acquiring firms tended to be faster growing than firms in their respective industries.4. Similarly difficult is the development of any means to ensure redistribution of efficiency gains to broader public advantage. For instance.anti-competitive effects may be permitted where one of the merging entities is in severe financial distress. The competition authority may be persuaded that the public interest is better served by a merger than by the failure of one of the merging entities. He concluded that the most that can be said there is no evidence from the sample that merger intensive firms have higher profitability than the average industry. 26 . Early literatures on mergers suggest synergistic motives as the main rationale behind merger activity. A study conducted by Jong (1976). Kouhm (1986).2 Empirical studies of mergers.how any efficiency or other welfare gains will be distributed between the producing firm and its customers. In exceptional circumstances. but does not always have a long-term negative effect on the economy. 2. Sometimes the merger is not the best solution. This being the case a merger of these two firms is expected to lead to improved performance. a merger which would have. However.

during which the reviewing authority will be entitled to request further information. From the above empirical studies done in the field of M&A. The initial information filing typically triggers a waiting period. in a study carried for the period 1958-1968 found that conglomerate as a group raised the depressed pre merger rates of return on total assets up to the average for all firms. If the competition authority decides to proceed with a further investigation.Reid (1968). This process concludes with a determination by the reviewing authority whether to proceed with a more detailed investigation. Singh and Montgomery (1987).4. It is standard practice in jurisdictions which impose merger review to require merging parties to submit advance notice of the proposed transaction. concluded that conglomerate mergers satisfied the desires of managers for larger firms but did not increase earnings or market prices. The information disclosed in the pre-merger notification will normally be used to determine if any anti-competitive concerns are present and whether to proceed with a more detailed review of the proposed transaction. 27 . 2. the merging firms must normally provide information to the reviewing authority.3 Information in merger review As part of the merger review process. it can therefore be observed that results are not similar and thus there is need to carry out further research in this area. it will obtain more information from the merger participants.

with permission to proceed with the merger in other respect. Nihat.4. a competition authority will normally seek information about matters such as the following: Products. The merged firm might be required to divest assets or operations sufficient to eliminate identified anti-competitive effects. requiring dissolution of the merged entity. The quality of a merger review will depend heavily on the quality and range of information available lo the reviewing authority.4 Merger remedies The goal of merger control laws is to prevent or remove anti-competitive effects of mergers. Commercially sensitive information is also generally protected from public disclosure during a more detailed review. and its impact on competition and nature and degree of regulation in the relevant markets. Partial Divestiture A second remedy is partial divestiture. pace of technological or other change in the relevant markets. of substitute products. or if the merger has been previously consummated.Additional information is usually gathered from third parties such as competitors and customers. Three types of remedies are typically used to achieve this goal: Inhibition / Prohibition /Dissolution The first remedy involves preventing the merger in its entirety. customers. influence of potential competition (including foreign competition). financial performance. market shares.Eric and Roll (2004). suppliers. 2. 28 . Activity of competitors and competitors' market shares.

29 . Nihat et al (2004). Behavioral remedies require ongoing regulatory oversight and intervention. This can be achieved through a variety of one-time conditions and on-going requirements. It is computed as the prevailing share price times the total number of shares. It is also the total market value of all quoted companies at the stock exchange. lists the following as the other measures of performance. It keeps changing on a daily basis subject to changes in share price. The first two remedies are structural.Regulation /Conditional Approval A third remedy is regulation or modification of the behavior of the merged firm in order to prevent or reduce anti-competitive effects. 2. Market capitalization This is the total market value of a company at the bourse. Turnover This is the total number of shares traded at the stock exchange. Structural remedies are often more likely to be effective in the long run and require less ongoing government intervention. and the third remedy is behavioral. Partial divestiture or behavioral constraints are less intrusive in the operation of market than preventing a merger from proceeding or requiring dissolution of a previously completed merger. Partial divesture can reduce or eliminate anti-competitive effects while preserving some of the commercial advantages of a merger.5 Performance Measures Sharpe et al (1999).

but as a thumb rule. However NAV is fairly descriptive in the case of property companies that tend to have low earnings compared with their asset value. Net Asset Value (NAV) is of little use in investment decisions as in most cases it will usually be: well below the value calculated using earnings yield. Net Asset Value per Share (NAVPS) The NAVPS is calculated by dividing the total net assets (fixed assets plus net current assets) by the number of shares outstanding as at the end of that year. Price to Earning Ratio (P/E Ratio) Earnings of a stock divided by its price is what one gets in return. It is very dynamic and keeps changing all the time. The EPS does not reveal the quality of earnings. Simply this is the net tangible assets attributable to the ordinary shareholders divided by the number of shares in issue. Earnings Per Share (EPS) This is calculated by dividing the net profits alter tax of a company (less any dividends on preference shares that the company may have paid) for a given year or period by the number of equity shares outstanding at the end of the year. This ratio tells one how cheap or expensive a stock is in the market place compared with its peers or against other stocks in other industries. the better. 30 .Share price This is the value of a company's share at a given time. the higher the EPS.

However. 31 . For example. This ratio also gives some idea of whether you're paying too much for what would be held if the company went bankrupt immediately. If earnings move up with share prices the ratio stays the same. the P/E rises. 2. Price-To-Book Ratio (IVB Ratio) A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value (book value is simply total assets minus intangible assets and liabilities).This ratio is obtained by dividing the current market price of a share by its issuing company's annual earning per share or the market capitalization to the entire net profit (total earnings). if a stock price was Kshs70 and it got Kshs2 in earnings. historically high. A lower IVB ratio could mean that the stock is undervalued. the P/E is 35. But if stock prices gain in value and earnings remain the same or go down. the Price to Earnings ratio (P/E) highlights the connection between share prices and recent company performance.5.This ratio indicates how many years it would take one to recoup one's investment in a stock at current market price if the company's performance was to stay frozen at the current level. it could also mean that something is fundamentally wrong with the company.1 Other measures of performance By relating share prices to their actual profits.

Net Income Total Assets Note: Some people add interest expense back into net income when performing this calculation because it measures operating returns before cost of borrowing. they are typically the most difficult to quantify. ROA is displayed as a percentage.Return on Investment (ROI) The monetary benefits derived from having spent money on developing or revising a system. Calculated by dividing a company's annual earnings by its total assets. The intangibles are sometimes the most important benefits. 32 . calculated as: Net Income Shareholder's Equity The ROE is useful in comparing the profitability of a company to other firms in the same industry. but because many of them may be long term. Return on Assets – (ROA) A useful indicator of how profitable a company is relative to its total assets. Return on Equity (ROE) This is a measure of a corporation's profitability.

In some cases an asset valuation is also made. This theoretical valuation has to be perfected with market criteria.Return on Investment Capital – (ROIC) A calculation used to determine the quality of a company. and a final value on disposition. called income valuation or discounted cash flow method. involves discounting the profits (dividends. The discount rate normally has to include a risk premium. some of the methods of stock valuation are: Fundamental criteria (Fair value) The most theoretically acceptable stock valuation method. cash flows) the stock will bring to the stockholder in the foreseeable future. They try lo give an estimate of their fair value. as the final purpose is to determine potential market prices. 33 . by using fundamental economic criteria. earnings.6 Market Based Valuation There are several methods used to value companies and their stocks. 2. The general definition for ROIC is as follows: Net Income -Dividends Total Capital Total capital includes long term debt and common and preferred shares. According to Thomas and Weston (1992).

market criteria also has to be taken into account (market-based valuation). is related to the stock behavioral category. studies made in the field of behavioral finance tend to show that deviations from the fair price are rather common. taking into account market behavioral aspects. This coefficient. a coefficient that bridges the theoretical fair value and the market price. it will provide a "termination value" rather than the "ongoing operations value" obtained from the income valuation method. in addition to fundamental economic criteria. and sometimes quite large. 34 . It links the estimated economic value (fair value) and the stock market price. A stock image is a stock valuation coefficient. On the other hand. usually between . Thus. but also to determine its potential price range. with a large volume of transactions. Valuing a stock is not only to estimate its fair value. Market criteria (Potential price) Some feel that if the stock is listed in a well organized stock market. the listed price will be close to the estimated fair value. This type of valuation is typically done if the company is expected lo cease operations.This entails analyzing the assets and liabilities of the firm.3 and 3. One of the behavioral valuation tools is the stock image. This is called the efficient market hypothesis.

and other data to determine a company's underlying value and potential for future growth. In other words. profit margins. Disregarding the intrinsic value of the products in the store. 35 . Fundamental analysis studies everything from the overall economy and industry conditions. such as past prices and volume. it is the use of real data to evaluate a stock's value. In a shopping mall. By contrast. a technical analyst would sit on a bench in the mall and watch people go into the stores. future growth. The method uses revenues. Technical analysts believe that the historical performance of stocks and markets are indications of future performance. but instead use charts to identify patterns that can suggest future activity. his or her decision would be based on the patterns or activity of people going into each store.Technical Analysis This is a method of evaluating securities by analyzing statistics generated by market activity. Technical analysis does not attempt to measure a security's intrinsic value. a fundamental analyst would go to each store. return on equity. study the product that is being sold. and then decide whether to buy it or not. to the financial condition and management of companies. earnings. Fundamental Analysis This is another method of evaluating securities by attempting to measure the intrinsic value of a particular stock.

1:-The Conceptual Framework Increase in market share (x1) Enhanced profitability of companies (x2) Diversification of risks in companies (x3) Achievement of Synergy (x4) Return on Investment (x5) Independent variables Source: Researcher 2008 Dependent variable Affects MERGERS AND ACQUISITIONS (y) 36 . Mergers and Acquisitions (y) Contribute to {Increase in market share of companies (x1)} + {Enhanced profitability of companies (x2)} + {Diversification of risks in the companies (x3)} + {Achievement of Synergy (x4)} + {Return on Investment (x5)} (y) = (x1) + (x2) +(x3) +(x4) +(x5) Figure 2.2. The independent variables will be extensively discussed in the literature review.7 Conceptual Framework The study is based on the assumption that the independent variables affect the dependent variable.

A survey research seeks to obtain information that describes existing phenomena by asking individuals about their perceptions. attitude. The study also sought to document the management’s most or least important factors that in their view. 37 . This survey was a descriptive study that collected data from the firms that submitted Merger Notifications to the Monopolies and Price Control(MPC) in the years 2001 to 2004. contributed to the success of failure in the implementations of these strategies.CHAPTER THREE 3. 3.1 Research Design The design of this research was a survey. behaviour or values . population and sample size. data collection methods and procedures as well as data analysis.0 RESEARCH METHODOLOGY The section covers the research design. The other factors that were sought and included in this study were the management’s perception in on importance of post merger acquisition activities. It also endeavored to establish the managers’ perception on whether the shareholder’s value was created or destroyed after the merger and acquisition activities were completed. This study documented the firm’s experiences in the mergers and acquisition processes.Mugenda and Mugenda(2003).

The likert scale was used to measure perception. values and behaviour and to help minimize subjectivity and make possible use quantitative analysis. foreign owned or both although no distinction has been made. 2. The firms that were listed in the MPC reports include either public. the target population for this study comprised 71 companies. were assigned. agree and strongly disagree comprising of a continuum.4. It was also appropriate to incorporate some questions relating to the firms’ profile in the first part of the questionnaire.3. attitude. The available data at the time of this study was for the years 2001 to 2004. However. agree. 38 . private. The questions were both open. It was therefore not possible to expand the size of the population beyond this period. Mugenda and Mugenda(2003).ended and close-ended.3 Data Collection Methods and Instruments Primary data was collected using structured undisguised and self-administered questionnaire. The researcher felt that the respondents had practical experiences on the full process of mergers and acquisitions which helped crystallize their opinion. values 1.2 Target Population The population of the study comprised of all merger control notifications received and processed by the Commissioner of Monopolies and Prices in the years 2001 to 2004 (see appendix I). locally. 3. In this five point continuum.3. a census survey was carried out. neither agree or disagree. The distinction between takeovers and mergers in some years were not indicated. The respondent was to check one of the offered five fixed alternative expressions such as strongly disagree. This data may have some limitations. Consequently.5.

value will be created. The shareholders of the company were convinced that once the businesses merge. The researcher followed this with telephone calls and personal visits. were involved in a merger or an acquisition process. The questionnaires were distributed through postal mail with an enclosed self-addressed return envelope to help increase the response rate. through the Chief Executive Officer (CEO). The questionnaire was developed and consisted of three parts: The first part of questions was to tap into the relevant information and the profile of the respondents. 39 .Nachmias and Nachmias(2003). It was therefore very difficult to convince the shareholders of the companies to merge or carry out an acquisition transaction if they do not foresee any benefits. It was therefore. The questions also addressed the approval process within the Competition Law. This assisted the researcher on the background information of firms that merged or acquired a target firm. determined by the favourableness or unfavourableness of the item . or there is an acquisition. The Board of Directors therefore. The second set of questions sought to establish the experiences of the firms in the merger and acquisition process and reasons for adopting these strategies. appropriate to target the CEO.These values expressed the relative weights and direction. as a respondent to this questionnaire or a senior partner in a partnership business as they were the most appropriate persons to complete the questionnaire.

The third part of questions sought to investigate the respondent's perception of mergers and acquisitions as regards the factors contributing to the success or failure of M&A. 3.5 Sample Design and Size The researcher used purposive sampling where he took 40% of these companies for the study to obtain a sample of 28 companies. turnover of staff and creation of shareholders wealth as a result of mergers and acquisitions These are sets of questions that were designed to seek the perceptions of the managers. The total number of respondents from the 28 companies was 2 respondents per company to yield a sample of 56 respondents. the researcher purposively targeted two senior managers or senior partners in the partnership or merged companies and the Board of Directors through the CEO. 3.4 Research Area The research covered all the companies in Kenya that had undergone mergers and acquisitions between the year 2003 and 2007. 40 . There are 71 companies that have merged. The study area was confined to Nairobi since it is the capital city and most of the head offices of the companies under consideration are located in Nairobi. within the companies. However. post merger activities.

Interpretation was done to allow for findings and recommendations. 41 .3. pie chats and graphs.6 Data Analysis. frequencies. Data analysis involved descriptive statistics such as percentages. measure of central tendency such as means. mode and median by use of Statistical Package for Social Sciences (SPSS). The output was in form of tables. Interpretation and Presentation The returned questionnaires were checked for consistency and the correct ones were coded.

Barclays Trust Investment & Old Mutual As Asset Managers. Unilever & Best Foots Ltd. Securicor Security Services & Express Escorts.1 Introduction This chapter presents the analysis and interpretations of the data from the field. finance manager. Smith Kline Beecham & Glaxo Wellcome (K) Ltd. 60 respondents responded and returned the questionnaire comprising of 84. Lelkina Dairies Ltd & Brookside Dairies Ltd. Bidco(K) Ltd. Ltd & Toyota E. Bank of India & India Finance Ltd and Bank of India & India Finance Ltd among others. SCB & Bullion Bank. On the respondents designation the study found that the respondents were from various designation which were. customer service officer.2. financial analyst. from the findings of the study the study found that these organization were. operations manager. Lonrho Motors E. From the study population of 71 respondents were targeted. Ltd. human resource manager. & Elianto (K) Ltd.0 DATA ANALYSIS AND INTERPRETATION 4. 4.2 Analysis and Interpretation 4. A. Crown Berger & Barclays Holdings. director and procurement officer. accountant.1 Personal Data On the name of the organization the researcher requested the respondents to indicate their organization. clerk.A.5% response rate.CHAPTER FOUR: 4. 42 . Paramount Bank & Universal Bank. Africa Online Ltd & Net 2000 Ltd .

from the findings. 43 .Figure 4.3: Number of years of service 35 30 25 20 15 10 5 0 0 to 5 5 to 10 10 to 15 a bove 15 yea rs percent Source.while 40% of the respondents were females. from the findings of the study in the above table the study found that 36% of the respondent had served their organization for period of 10 to 15 years . the study found that majority of the respondents were males as shown by 60%.26% of the respondent had served their organization for a period of more than 15 years and 8% of the respondents had served their organization for a period of 0 to 5 years .those who had served their organization for a period of 5 to 10 years were shown by 30% of all the respondents . Author (2010) The data in the above figure shows the study findings on the gender of the respondents . Figure 4. Author (2010) On the number of years the respondents had served their respective organization.2: Gender of the respondents 40% m le a fem le a 60% Source.

1: Education level Frequency Diploma Degree Post graduates degree Total Source. the study found that most of the organization had their main offices located in Nairobi CBD area. Author (2010) The data in the above table shows the respondent education level. from the finding the study found that majority of the respondents had a university degree as shown by 52.4% of the respondent had postgraduate’s degrees and 12.1% of the respondents. the study found that this ranged between 1960 to 1993. Author (2010) 44 . Figure 4.Table 4. and Westland and Kariobangi area. the study established that this ranged between 5 to 13 outlets. industrial area.4: Ownership composition of company 60 50 40 30 20 10 0 loca l foreig n pa loca rt l/ pa foreig rt n Percent 12 52 36 100 6 26 18 50 percent Source. 35. On the years the organization was established. On the number of outlets the organization had. On the location of the main offices of the respondent’s organization. Upper hill.5% of the respondents were diploma holders.

2. Crown Berger ltd . Best Foots Ltd. Net 2000 Ltd .On the ownership composition of the company. those that were partly local and partly foreign were shown by 36% of the respondent while those that were foreign were shown by 12% of the respondents.A. 4. Ltd. Ltd . Africa Online Ltd . Securicor Security Services ltd.2: Type of company Frequency Privately owned Part private/part public Publicly owned Total Source. 30 % of the respondents indicated that their companies were publicly owned and 16% of the respondents indicate that their company were privately owned. Lelkina Dairies Ltd . Universal Bank. Old Mutual As Asset Managers. Barclays Trust Investment . the study revealed that majority of the companies as shown by 52% of the respondents were locally owned. Glaxo Wellcome (K) Ltd. Brookside Dairies Ltd.2 Firm’s Profile On the name of the firm before merger the study revealed that the names were. Author (2010) The data in the above table shows the type of company. Bidco(K) Ltd. Paramount Bank. Lonrho Motors E. Bank of 45 8 27 15 50 Percent 16 54 30 100 . Bullion Bank. Table 4. Elianto (K) Ltd. from the findings in the above table the study found that majority of the companies were partly private and partly public as shown by 54% of the respondents. A. Unilever . Toyota E. Barclays Holdings. SCB . Smith Kline Beecham . Express Escorts.

India . 46 . Author (2010) 9 27 14 50 Percent 18 54 28 100 On the legal structure of the firm. Unilever Ltd. SCB & Bullion Bank. Ltd.3: Legal structure of the firm Frequency Partnership Part private/part public Publicly owned Total Source. Bank of India Ltd. the study found that date of incorporation ranged from 30th June 1968 to 23rd September 1990. the study found that these names were. Brookside Dairies Ltd. Old Mutual Trust Investment. On whether the respondent company had completed the merger or acquisition to its conclusion. Africa Online Ltd. Toyota E. Smith Kline Beecham & Glaxo Wellcome (K) Ltd. Bidco (K) Ltd. Securicor Security Services. Table 4. A.28% of the respondents indicated that their firms were publicly owned and those companies that their legal structure was partnership was shown by 18%. On the date of incorporation of the company. the study revealed that all the companies had completed merger and acquisition to its conclusions. Paramount Bank. the study established that majority of the firms were partly private and partly public as shown by 54% of the respondent. India Finance Ltd and Bank of India and India Finance Ltd. On the name of the company after merger and take over. Crown Berger.

2% of the respondents while 18.6% of the respondents indicated that their firms were in agriculture sector. the study found that majority of organization were in manufacturing sector as shown by 51.2 18.6 37.8% of the respondents and those that were both local and foreign owned were shown by 37. the findings of the study in the above table shows that majority of the firms were locally owned as shown by 62. Author (2010) On the classification of the firms in terms of ownership.4: Classification of organization in terms of ownership Frequency Percent Locally owned Both Local/Foreign Owned Total Source.2% of the respondents.2%.2 100 The study also requested the respondents to indicate the sector in which their organization belonged.5: Sector of the organization Frequency Manufacturing Agriculture Service Total Source. Author (2010) 22 8 13 43 Percent 51.8 37. 27 16 43 62.Table 4. those were in the service sector were shown by 37. from the finding of the study in the above table. 47 .2 100 Table 4.

From the study. 48 .4. 10% of the respondents said conglomerate merger.2. Table 4.3 Experience of the Firm Whether the Firm Was a Merger (M) or a Takeover (T) According to the study.6: The Sort of Merger or Acquisition That the Company Undertook Frequency Horizontal merger Vertical merger Concentric merger Conglomerate merger Total Source. most of the respondents as shown by 54% reported that their companies undertook a horizontal merger. while a small proportion of respondents as shown by 4% reported that their firms undertook a concentric merger. all the respondents (100%) reported that their firms were mergers. 32% said vertical merger. Author (2010) 27 16 2 5 50 Percent 54 32 4 10 100 The study also required the respondents to indicate the sort of merger or acquisition that their companies undertook.

7 41.7 40.7 51.7: Reason/S Why the Organization Undertook the Merger Yes Increase market share Acquire state. 78.3 60.3 60. while 41. 68. 51.3% said to enter to a new geographical area.0 The study also sought to establish the reasons why the organizations took the merger. 66.3 58.3% of the respondents said in order to increase market share.of -the art technology and to comply with new legislation were shown by 60% each.0 33.7% said to diversify in a growth business. According to the findings.7% said to acquire brand loyalty.7 40. the study found that it took the firms a minimum of 3 months and a maximum of 13 months to receive an approval from the commissioner of monopolies and price 49 .0 66. Duration Taken To Receive an Approval from the Commissioner of Monopolies and Price According to the findings. Author (2010) 78. the respondents who said to acquire state.3 48.0 No 21.3 31.7% of the respondents reported that they took a merger in order to overcome entry barrier.7 68.of -the art technology To diversify in a growth business Overcome entry barrier Acquire brand loyalty Enter to a new geographical area Comply with new legislation Source.Table 4.

the majority of respondents (76%) reported that their firms were subjected to appeal to the tribunal. Author (2010) 31 19 50 Percent 62 38 100 According to the findings in the above table. 50 . while 38% reported that their firms did not appeal to the high court. Author (2010) 38 12 50 Percent 76 24 100 The respondents were also asked whether their firms were subjected to appeal to the tribunal. From the results. while 24% said that their firms were not subjected to appeal to the tribunal.9: Whether the Firm Appealed To the High Court Frequency Yes No Total Source. most of the respondents as shown by 62% said that their firms appealed to the high court. Duration It Take For the Appeal to Be Concluded By the Tribunal On the duration it took the firms for the appeal to be concluded by the tribunal.Table 8: Whether the Firm Was Subjected To Appeal to the Tribunal Frequency Yes No Total Source. Table 4. the study established that it took a minimum of 5 and a maximum of 12 months.

10: The Degree of Involvement of Managers in the Acquisition or Merger Process Frequency Very little Moderately A lot Total Source. most of the respondents as indicated by 74% reported that they involved their managers a lot in the acquisition or merger 51 . it took the firms that appealed to the high court a minimum of 2 and a maximum of 14 months to conclude the appeal in the high court. According to the study. where the authority blocks a merger the parties can appeal its decision to the High Court. 000-2M. it took the firm’s 3-6 months to conclude negotiations with the other firm. appeal against a board decision against them. Author (2010) 5 8 37 50 Percent 10. Duration the Firm Took To Conclude the Negotiation with the Other Firm From the findings. the budget ranged between Kshs 500.0 16.0 74.Reasons for Appeal From the findings. From the study. the reasons why firms appeal to the high court include. An Estimate of the Merger or Acquisition Budget The study also sought to establish the estimate of the merger or acquisition budget. the merging parties may also challenge a merger decision imposing a remedy and complains by the minority shareholders of the involved firms.0 100 The respondents were also requested to indicate the degree that they involved managers in the acquisition or merger process. Table 4. Duration It Took To Conclude the Appeal in the High Court According to the findings.

Author (2010) 36 14 50 Percent 72. the majority of respondents as shown by 72% said that they would recommend a merger or an acquisition again.process. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success Table 4. 4. while 28% of the respondents felt that they would not recommend a merger or an acquisition again. From the study.2.0 100 The respondents were therefore asked whether they would you recommend a merger or an acquisition again.11: Whether The Merger or Acquisition Undertaken the Firm Is A Success Frequency Yes No Total Source. Table 4. while 10% of the respondents said that they involved them to a very little extent.0 28. Author (2010) 47 3 50 Percent 94 6 100 From the findings in the above table. 16% reported that they moderately involved the.12: Whether the Respondents Would Recommend a Merger or an Acquisition Again Frequency Yes No Total Source.4 Regression Analysis A multivariate regression model was applied to determine the relative importance of each of the five variables with respect to establish the effects of mergers and acquisitions on financial performance of companies. the majority of the respondents as indicated by 94% termed the merger or acquisition undertaken by their firm a success. The regression model was as follows: 52 .

223 Source.009 1 df 2 1 Sig. profitability of the company. diversification of risk .881. there was a variation of 88. profitability of the company.y = β0+ β1X1 + β2X2 + β3X3 + β4X4 + β5X5ẹ Where: y = merger and acquisition β0 = Constant Term β1= Beta coefficients X1= market share X2= profitability of the company X3= diversification of risk X4= Achievement of Synergy X5= Return on Investment Table 4. This implies that. F Change .009 F df Change 1 .13: Model Summary Change Statistics Std. diversification of risk. Error R Adjusted of the Model R Square R Square Estimate 1 . Adjusted R2 is called the coefficient of determination and tells us how merger and acquisition varied with the market share.1% of merger and acquisition with market share. From data in the table above. profitability of the company. Author (2010) R Square Change . Achievement of Synergy and Return on Investment.090 . Achievement of Synergy and Return on Investment. 53 . the value of adjusted R2 is 0.881 4. Achievement of Synergy and Return on Investment at a confidence level of 95%. diversification of risk. market share.938 a Predictors: (Constant).087(a) .

it was also established that a unit increase in market share would cause an increase in merger and acquisition by a factor of 0.574.833 + 0. profitability of the company.771 X1 + 0.094 .097 .574 . a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0. This infers that there exist positive relationships between merger and Unstandardized Coefficients B Std.771.further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0.314 . diversification of risk. profitability of the company. there is a positive relationship merger and acquisition and the predictor factors which are market share.314. also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0.097 . merger and acquisition of companies would be 0. also a unit increase in diversification of risk would cause an increase in merger and acquisition by a factor of 0.358. Error 0.Table 4. Achievement of Synergy and Return on Investment.097 .923 . The established regression equation was Y = 0. diversification of risk .216 X2 + 0.833. 54 .319 Standardized Coefficients t Beta 1.091 .314X5 From the above regression model.216.311 0. From the data in the above table.216 .967 .090 .312 Sig. holding the predictors factors constants. Author (2010) a Predictors: (Constant).156 0.090 .418 0.358 .094 .978 .938 .771 .839 .317 .358 X3 + 0.574 X4 + 0.087 . Achievement of Synergy and Return on Investment.833 1.018 0.061 0. market share.14: Coefficients results Model 1 (Constant) market share profitability diversification of risk Achievement of Synergy Return on Investment Source.097 .

55 . diversification of risk. profitability of the company.acquisition and predictor factors which are market share. achievement of synergy and return on investment.

5. Unilever Ltd. Unilever . Glaxo Wellcome (K) Ltd. On the date of incorporation of the company. SCB & Bullion Bank. Securicor Security Services. Old Mutual Trust Investment. the study found that these names were. the study revealed that all the companies had completed merger and acquisition to its conclusions. Crown Berger ltd . Barclays Trust Investment . Net 2000 Ltd .2 Discussion The study established that the name of the firm before merger were. Brookside Dairies Ltd. Ltd . On the name of the company after merger and take over. Lonrho Motors E. The study had sought to establish the effects of mergers and acquisitions on financial performance of companies. 56 . A. Bidco (K) Ltd. Lelkina Dairies Ltd . Crown Berger. Securicor Security Services ltd. Paramount Bank. Ltd. Smith Kline Beecham & Glaxo Wellcome (K) Ltd. Africa Online Ltd. conclusions and also recommendations based on the objectives of the study. Ltd. Paramount Bank. Best Foots Ltd. Toyota E. Brookside Dairies Ltd. Universal Bank. Bank of India Ltd. Barclays Holdings. Express Escorts. Bidco(K) Ltd.CHAPTER FIVE: 5. On whether the respondent company had completed the merger or acquisition to its conclusion. Elianto (K) Ltd.0 DISCUSSION CONCLUSION AND RECOMMENDATION 5. the study found that date of incorporation ranged from 30th June 1968 to 23rd September 1990. Africa Online Ltd . Toyota E. SCB . India Finance Ltd and Bank of India and India Finance Ltd.A. Bullion Bank. Old Mutual As Asset Managers. Smith Kline Beecham .1 Introduction This chapter presents the discussion of the findings from chapter four. Bank of India . A.

According to the findings. while 42% of the respondents reported that they took a merger in order to overcome entry barrier.3% of the respondent. The study also establishes the reasons for organizations to take the merger. The study also found that majority of the firms was locally owned as shown by 62% of the respondents and those that were both local and foreign owned were shown by 38% of the respondents.4% of the respondents indicated that their firms were publicly owned and those companies that their legal structure was partnership was shown . while a small proportion of respondents as shown by 6% reported that their firms undertook a concentric merger.On the legal structure of the firm. The study also established that the sort of merger or acquisition that their companies undertook were horizontal merger as shown by 54% . the respondents who said to acquire state. It was also revealed by the study that all firms their firms were mergers.of -the art technology and to comply with new legislation were shown by 60% each. those were in the service sector were shown by 38% of the respondents while 18% of the respondents indicated that their firms were in agriculture sector. The study found that majority of organization were in manufacturing sector as shown by 54%. 68% said to enter to a new geographical area. 78% of the respondents said in order to increase market share. On whether their 57 .28. 52% said to acquire brand loyalty. vertical merger as shown by 32% 10% of were conglomerate. the study established that majority of the firms were partly private and partly public as shown by 53. The study found that it took the firms a minimum of 3 months and a maximum of 13 months to receive an approval from the commissioner of monopolies and price. 66% said to diversify in a growth business.

On the duration it took the firms that appealed to the high court a minimum of 2 and a maximum of 14 months to conclude the appeal in the high court. On indicate the degree that they involved managers in the acquisition or merger process. while 10% of the respondents said that they involved them to a very little extent. the budget ranged between Kshs 500. the study found that majority of the respondent as shown by 62% said that their firms appealed to the high court. while 38% reported that their firms did not appeal to the high court. It was revealed that most of the respondents as indicated by 74% reported that they involved their managers a lot in the acquisition or merger process. The study found that the majority of respondents 76% reported that their firms were subjected to appeal to the tribunal. The study also established the estimate of the merger or acquisition budget. According to the study. 000-2M. the study established that it took a minimum of 5 and a maximum of 12 months. 58 .firms were subjected to appeal to the tribunal. On whether the firms appealed to high court. On the duration it took the firms for the appeal to be concluded by the tribunal. It was also revealed that it took the firm’s 3-6 months to conclude negotiations with the other firm. 16% reported that they moderately involved the. where the authority blocks a merger the parties can appeal its decision to the High Court. appeal against a board decision against them. while 24% said that their firms were not subjected to appeal to the tribunal. The reasons why firms appeal to the high court include. the merging parties may also challenge a merger decision imposing a remedy and complains by the minority shareholders of the involved firms.

holding the predictors factors constants. majority of respondents as shown by 72% said that they would recommend a merger or an acquisition again.358 X3 + 0. also a unit increase in diversification of risk would cause an increase in merger and acquisition by a factor of 0.314X5 From the above regression model.the study found that the majority of the respondents as indicated by 93.574 X4 + 0.216 X2 + 0.771 X1 + 0.On the general assessment of merger . also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0.further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0.574. a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0.833.771. merger and acquisition of companies would be 0.358.216. while 28 % of the respondents felt that they would not recommend a merger or an acquisition again. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success. Y = 0. On whether the respondents would recommend a merger or an acquisition again. achievement of synergy and return on investment. it was also established that a unit increase in market share would cause an increase in merger and acquisition by a factor of 0. profitability of the company. diversification of risk.833 + 0. This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share.3% termed the merger or acquisition undertaken by their firm a success.314. 59 . The study also established a regression equation which was.

acquire brand loyalty and overcome entry barriers.4Recommendation From the above discussion. 60 . diversify their business growth. achievement of synergy and return on investment. the study also concludes that the benefits of synergy that is achieved through adoption of merger and acquisition were. The study also concludes that mergers and acquisitions assisted in the attainment of returns on investment in companies.358 X3 + 0. Y = 0. acquire brand loyalty . conclusion the researcher recommends that small companies should adopt merger and acquisition as this will help them in entering into new geographical areas. 5.771 X1 + 0. increase their profitability and return on investment. comply with new legislation.5.833 + 0.3Conclusion From the above discussion the study concludes that mergers and acquisitions increase the market share of companies the firms entered into new geographical areas. complying with new regulation . The study concludes that as result of merger the company acquired larger market share thus increased profitability. overcome entry barriers. increased market share. acquire states of art and technology.216 X2 + 0. The study also established a regression equation for the study was. acquire brand loyalty and overcome entry barriers . diversification of risk.574 X4 + 0. profitability of the company. acquire states of art and technology. The study recommends an in-depth study to investigate the challenges affecting merger and acquisition of companies. comply with new legislation. diversify business growth.314X5 This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. acquiring state of technology.

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... Kennedy Murithi 65 .2007)”.APPENDICES Appendix I: Introduction Letter Kennedy Murithi P. Yours sincerely. The research topic is: .. NAIROBI Dear Respondent. Thank you....O Box . REQUEST TO FILL THE QUESTIONNAIRE FOR RESEARCH PURPOSE This is to request you to kindly fill in the attached questionnaire for research purpose. The information sought from you will be treated with utmost confidence..“An Investigation into Effects of Mergers and Acquisitions on Financial Performance of Companies in Kenya (2003 ... and results of this study will be available for your use/reference...

g) When the organization was established …………………………… h) How many outlets does the organization have ………………………. b) What is your Designation ……………………………………………. Kindly indicate whether your company is: Privately owned ( ) Part private/part public ( ) 66 . Please indicate.Appendix II : Questionnaire PART ONE – PERSONANAL DATA 1. Indicate the answer that best represents the ownership composition of your company (Tick where appropriate) Local ( ) Part Local/ Part Foreign ( ) Foreign ( ) Governmental ( ) 3..……….. 2.. c) State your Gender (Tick where appropriate) Male ( ) Female ( ) d) Number of Years served (Tick where appropriate) 0-5( ) 5-10 ( ) 10-15 ( ) Over 15 years ( ) e) Educational Level (Tick where appropriate) Diploma ( ) Degree ( ) Post Graduate Degree ( ) f) Location of the main office ……………………………………………. a) Name of organization …………………………………….

.. (2) Date of incorporation of your firm.................................... (4) Did your company complete the merger or acquisition to its conclusion? (Tick appropriately) Yes No If No............................ then proceed and complete the remaining part of this questionnaire.......................................Publicly owned ( ) Parastatal ( ) PART TWO – FIRM’S PROFILE (1) Name of the firms before the merger or take over...... ............ ...................................................................... 67 ......................... If yes.......... .................. …………………………………………………………………………… (3) Name of the firm after the merger or take over............................................................................................... please state the reason/s ........................................................................................................... ........................................................................................................................................................................

Manufacturing Agriculture Service PART THREE – EXPERIENCE OF THE FIRM (1) Could you say if your firm was a Merger (M) or a Takeover (T)? (Tick appropriately).(5) State the legal structure of your firm(Tick appropriately) (i) (ii) (iii) Partnership ( ) Privately owned company ( Publicly owned company ( ) ) If your firm is (i) or (ii) above. please complete (6) below. M( ) T( ) 68 . (a) (b) (c) Locally Owned ( ) Foreign Owned ( ) Both Local/Foreign Owned ( ) (7) The sector your organization is operating in (Tick appropriately). (6) How would you classify your organization in terms of ownership? (Tick appropriately).

.......of -the art technology (c) To diversify in a growth business (d) Overcome entry barrier (e) Acquire brand loyalty (f) Enter to a new geographical area (g) Comply with new legislation.(2) What sort of merger or acquisition did your company undertake? (Tick appropriately).................................... (f) Any other (specify)…......... Approval Process within the framework of Kenya competition law...... (a) How long did you take to receive an approval from the Commissioner of Monopolies and Price'? Months 69 ........... Horizontal Merger Vertical Merger Concentric Merger Conglomerate Merger (3) Please state reason/s why your organization undertook the merger (Tick where appropriate) (a) Increase market share (b) Acquire state................

.. reasons for appeal... how long did it take for the appeal to be concluded by the tribunal? Months (d) Yes Did you appeal to the High Court? (Tick appropriately)......... Not at all Very little Moderately A lot Intensively 1 70 .(b) Was your firm subjected to appeal to the Tribunal? Yes No (Tick appropriately).................................. No If yes..... Kshs (c)To what degree did you involve your managers in the acquisition or merger process? (Please indicate by a tick on the table overleaf using the following scale)..... (c) If ye....... (e) For how long did it take to conclude the appeal in the High Court? Months Negotiation with the target firm (a) How long did your firm take to conclude the negotiation with the other firm? Months (b) Give an estimate of the Merger or Acquisition budget.

General Assessment (a)Would you term the merger or acquisition undertaken by your firm a success? (Please tick where appropriate). (a)How did you manage the takeover process? ( Tick as appropriate) Agreeing with major shareholder Buying stock in the market Obtaining proxies from the shareholders (b)State how your firm managed the resistance from other shareholders or management --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- THANK YOU FOR YOUR COOPERATION 71 . Yes No (b)Would you recommend a merger or an acquisition again? ( Tick where appropriate) Yes No This area is only for those firms which have gone through a takeover.

Appendix III: Time Plan DURATION PHASE 1) 2) 3) 4) Total duration 4 ½ Months ACTIVITY Proposal writing and presentation for supervision Instrumentation a) Pilot taking b) Administration of questionnaires Data analysis Write up and presentation to the department for Examination (WEEKS) 3 Weeks 2 Weeks 2 weeks 2 weeks 3 weeks 3 weeks Appendix IV: Budget Estimate 72 .

1 2 3 4 5 6 7 ITEM DESCRIPTION ESTIMATED REMARKS COST (KSHS.00 Report Writing 30.000.000.00 Data Analysis 2.000.00 Field Visits for Self 6.ITEM NO.00 Overheads & Incidental Expenses 12.000.000.000.000.00 Source: Researcher (2008) 73 .) Stationary & Other Consumables 3.00 TOTAL 103.000.00 Field Visits for Research Assistants 40.00 Subsistence Allowances 10.

SOURCE MPC ANNUAL REPORTS 2001 .A. A. Ltd. 10 Lelkina Dairies Ltd & Brookside Dairies Ltd 11 Lonrho Hotel Africa & Starwood Hotel 12 Lonrho Motors & Lima Farm Machinery 13 Africa Online Ltd & Net 2000 Ltd 14 Maasai Mara Sopa Lodge & Safari Retreat 15 SCB & Bullion Bank 16 Kapila Anjarwalla & Khama 17 EABL & UDV Ltd 18 Kaitet Tea Estate & Eastern Produce Kenya Ltd 19 Paramount Bank & Universal Bank 74 .APPENDIX V: MERGER CONTROL NOTIFICATIONS.2004 Name of Institution Sector Affected 1 2 3 4 5 6 7 g 9 Bidco(K) Ltd. & Elianto (K) Ltd Crown Berger & Barclays Holdings Johnson & Johnson Ltd & Direct Sales and Distribution Raymond Woollen Mills & Heritage Woollen Mills Securicor Security Services & Express Escorts Elf Oil (K) Ltd & Total (K) Ltd Smith Kline Beecham & Glaxo Wellcome (K) Ltd Crescent Construction Receivership Cooking Fat and Edible Oils Paints Baby Care Products Textiles Private Security Petroleum Pharmaceuticals/ Healthcare products Ltd & Cabro Works Ltd. Building & Construction Motor Industry Dairy Hotel Agriculture Telecommunications Hotel Banking Legal Consultancy Manufacturing (Brewing) Agriculture Financial (Banking) Lonrho Motors E. Ltd & Toyota E.

20 Kakuzi Ltd & Socfinaf Ltd 21 Unilever & Best Foots Ltd 22 Kenya Breweries & Castle Brewing 23 Iseme Kamau & Maema Advocates 24 Barclays Trust Investment & Old Mutual As Managers 25 Bank of India & India Finance Ltd 26 Stewart Scott Motors & Mitsubishi Motors Ltd. Stone Athi & King'orani 35 Hotel Span & Spire Properties 36 Kenya Commercial Bank & Savings and Loans Banking Agriculture (Agro-Chemical) Agriculture Hotel Industry Financial Services 75 . 33 BASF & High Chem E. Ltd 34 Primarosa.A. Mwaridi. Africa/Carnaud Metal Box & Crown Cork Manufacturing Ltd. A. Hotel 31 Aventis Crop Science & Agro Chemical Business of Agricultural Chemicals Bayer E. 30 Masai Mara Sopa Ltd & Tunu Ltd. 28 Fidelity Bank & Southern Credit Ltd Manufacturing Manufacturing Legal Consultancy Asset Financial Financial Automotive Financial Financial 29 Nampak S. 27 ABN-AMRO Bank & City Bank Ltd. ltd 32 Co-op Bank & Co-op Merchant Bank Ltd.

37 Securicor Services & Falcon & Karen Langata Guards 38 Trust Finance Ltd & Trust Bank Ltd 39 Africa Online & Three Mice Interactive Media Ltd. Bank of Insurance India and Pension Trust Services 53 Flower Wings K. 50 Nairobi Bottlers & Anspar Beverages Ltd Food Information Technology Hotel Industry Soft Drink Horticulture 51 Beta Healthcare International & Shellys Pharmaceutical Pharmaceutical Ltd 52 Alexander Forbes Financial Services E. 48 1CL( K) Limited & Sameer ICT Ltd 49 Resort (K) Ltd & MS Family Town 2002 Ltd. Ltd & Etcoville Investments Ltd Horticulture 54 Pan African General Insurance Ltd & Apollo Insurance Insurance Company Ltd 55 Crown Berger & Devas Ltd & Aziz Tanners 56 Gfccnlands Dairy & Westlands Dairy Ltd 57 Alexander Forbes & Hyman Robertson (K) Ltd Manufacturing Dairy Insurance 76 . 40 Kenol Kobil (K) Ltd & Mid Oil Africa 41 CROWN Security Services Banking Sector IT (Internet Service Provision) Petroleum Manufacturing Pharmaceutical Berger (K) Ltd & Unibuilt (K) Ltd 42 SJ Johnson Wax & Bayer East Africa 43 Brac Budget Rent A Car International & Avis Europe Plc Transport 44 Eustoma K. Ltd & Penta Tancom Ltd Penta flowers 45 East African Packaging 46 Canadian Overseas Packaging industry — Manufacturing 2003 47 Manu Spices and Millers Ltd & Spice World (K) Lid. A Ltd.

65 Sameer Telecom Ltd & Kenya Telecom BV 66 Shell and BP Malinda and Oil Com. 69 Fresh Del Monte Produce Inc.58 Muva & Ass. Telecommunication (Ken Cell) 64 Kemia International Ltd & Poly Synthetics Eastern Africa Manufacturing Ltd. & Kenyan Telcom B. & Del Monte Kenya Ltd 70 Coast Silos (K) Ltd and Kenya Ports Authority 71 ALICO & CFC Group Telecommunication Petroleum Horticulture Pharmaceutical Horticulture Transport Insurance 77 . Security 63 MTN International Mauritius Ltd. & Koimburi Tucker Associates 59 Group 4 FALCK and Securicor Plc 60 Trans-Century Ltd & Cable Holdings Ltd Accountancy Security Services Manufacturing 61 Bank of Africa Kenya Ltd & Credit A)'ricole Indosuez Banking Service Kenyan Branch 62 MSKK Guards Security Group & EARS Group Ltd. 67 Homegrown Kenya Ltd & Kijabe Ltd(“Kijabe”) 68 Dawa Pharmaceutical Ltd & Medisel (K) Ltd.V.

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