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

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

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 .

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

........................................................................4...............................................................................................................................5 Significance of the Study...............................................................................................2.28 2..................................................................................................................................................................40 3..................................................................4.............1 Background of the Study...............................................................................................................................................................................................6 Data Analysis.........4...........................................................................................................................10 1.........................................4.......................................................................................5.3 Information in merger review..............1 Research Design.............................................................1General objective..........................9 1.............................................................1 1..........................................................................0 INTRODUCTION..............................xi LIST OF FIGURES............................................2 Empirical studies of mergers.............................4 Objectives of the Study..........................................................................................................TABLE OF CONTENT DECLARATION..........................................31 2................37 3.2 Target Population .........................................1 Nature of Corporate Restructuring........................................13 2.......................................10 1.........................4 Research Area........................................................................................0 RESEARCH METHODOLOGY....................................................................viii LIST OF TABLES.........19 2.....37 3..........................4 Merger remedies....................ii ACKNOWLEDGEMENT..............37 3................................................................................................................................................................................................3 Motives behind Mergers..................3 Research Questions.7 Conceptual Framework......................................................................38 3............................33 2............................ Interpretation and Presentation.................................................................................iii DEDICATION...........................29 2.................................4.............................................24 2.........................................................................................................................................6 1.....3 Conglomerate mergers....2......................................................................................1 1......5 Sample Design and Size..27 2.....................................................13 2.........2..........iv ABSTRACT...................................................................................................................1 Merger analysis.0 LITERATURE REVIEW......................13 2.............................1 Other measures of performance.....................................38 3.......2 Statement of the Problem..................xii CHAPTER ONE...............................................2 Vertical merges..........................10 1..................................................................4 Importance of Mergers in Company Performance.....................................................................19 2..............................36 CHAPTER THREE..........................18 2..............................................................14 2......................4........................................3 Data Collection Methods and Instruments.....10 1....................................1 1.....................2 Specific objectives...................................................................................................................41 ix ..................17 2..................5 Performance Measures..............................22 2..........................40 3.........................................vii LIST OF OPERATIONAL TERMS............................2 Types of Mergers and Acquisitions/Corporate Restructuring...............................11 1.......................6 Market Based Valuation.......................................26 2.....................7 Limitations of the Study.................................................v LIST OF ABBREVIATIONS................................................................1 Horizontal mergers...........................11 CHAPTER TWO..............................................................................................................6 Scope of the Study..........................

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

..........................................9: Whether the Firm Appealed To the High Court.............................................................................47 Table 4..............................50 Table 4.......................2: Type of company...................................................52 Table 4........50 Table 4....................44 Table 4.........................................12: Whether the Respondents Would Recommend a Merger or an Acquisition Again............................4: Classification of organization in terms of ownership................................6: The Sort of Merger or Acquisition That the Company Undertook...................5: Sector of the organization.............................3: Legal structure of the firm......................49 Table 8: Whether the Firm Was Subjected To Appeal to the Tribunal..........54 xi ........51 Table 4.....13: Model Summary ............................................11: Whether The Merger or Acquisition Undertaken the Firm Is A Success..........................................................................................7: Reason/S Why the Organization Undertook the Merger..46 Table 4...................53 Table 4...............................................LIST OF TABLES Table 4.................................................................................47 Table 4.................................1: Education level ........................10: The Degree of Involvement of Managers in the Acquisition or Merger Process ..........................................................45 Table 4.......................................................48 Table 4..............................................................52 Table 4.14: Coefficients results...............

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

Thomas and Weston(1992). debt availability. For large samples. 1 . others fail. The change imperatives are strong. private equity and venture capital. cash infusions from initial public offers and the perceived lack of organic growth opportunities due to a saturated marketplace.1 Background of the Study The existing capabilities of a firm influence the kind of acquisition activity that will make business and economic sense. and firms must adjust to new forces of competition from all directions.CHAPTER ONE 1. Mergers were an afterthought or episodic. few companies made mergers a key element of their growth strategy. Today. 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. 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. some M&As succeed. This has forced many of them to adopt many forms of restructuring activity. Twenty years back. The changing environments and the new forms of competition have created new opportunities and threats for business firms. many companies look to achieve over 50 percent of their growth from M&As.

value is increased. 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. Some acquirers have developed processes that facilitate the achievement of highly impressive track records. in at least twothirds of the cases. economic effects. But studies also reveal that for the largest combinations during the period of strategic mergers (1992-98).But well conceived and effectively implemented M&A activity can yield returns to shareholders in excess of broad stock market indexes . Other recent contributions suggest that long-term positive results for mergers are found for mergers across related product lines. 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.The Economist (2000). Anslinger and Copeland (1996) found out that samples of both corporate and financial buyers were able to achieve superior performance. The returns to acquiring firms are influenced by a number of factors. As mentioned by Chakrabarli and Burton (1983). For example. It is important to note the long-term effects on performance of merger deals. on average acquiring firms earn at least the same as their cost of capital. 2 . which usually focuses on the short-term. Kraillinger (1997).

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

breaking of trade barriers. free flow of capital across countries and globalization of business as a number of economies are being deregulated and integrated with other economies. The larger firm has been able to achieve efficiencies not achieved by the separate units. Further. and less innovation. can lead to higher prices. Mergers have become popular because of the enhanced competition. Most mergers actually benefit consumers by allowing firms to operate more efficiently. That. lower quality of products. Indeed. especially during the valuation stage. But some are likely to lessen competition. Berger (1999). 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. in turn.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. some mergers create a concentrated market while others enable a single firm to raise resources. 4 . Berger (1999). a number of industries formerly fragmented into many small-scale operations have been rolled up into larger firms. Berger (1999). horizontal mergers can be used to shut down some high-cost plants to reduce industry supply and to increase efficiency in the remaining firms. With excess capacity in an industry. reduced availability of goods or services.

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

Many studies have been done in the area of M&A and results found from the studies have been inconsistent. 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. policies and actions. therefore. Many managers will today regard buying a company for access to markets. Jemison and Sitkin(1986). technology.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. for instance. It may.Mintzberg and Quinn (1991). Failure to perform is critical to a business as it is the major cause of business failure. In such a situation. products. define strategy as a pattern or a plan that integrates an organization’s major goals. resources or management talent as less risky and speedier than gaining the same objectives through internal efforts or organic growth. may in some cases require major resources which are beyond firm’s existing capability. 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. 6 . Strategy therefore. 1. a merger or an acquisition may be the only available option.

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

Lichtenberg. will be established and documented. Chesang (2002) . They were however unable to identify a positive relationship between the level of merger activity and profitability.carried out a study on Merger Restructuring and Financial Performance of Commercial Banking in Kenya. 8 . They compared the performance of merged firms using profitability measures for 5 pre merger and 5 post merger years. on 69 firms. Frank. Few studies have been done in Kenya concerning M&A and by conducting this research. Her study did not cover mergers and acquisitions in other sectors of economy. They concluded that the market value of the acquiring firms rose on average by 5. the researcher will be able to know how companies perform. an opportunity to observe similarities or otherwise on these conclusions. and Siegel (1990).6 % (significant at 10% level). this study will include an insight in the field of mergers and acquisitions as to the approval processes. Consequently. 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).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.

if any on the performance of the companies in Kenya. 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 significance of mergers and acquisitions in the increase in market power of companies in Kenya? ii. What are the benefits of synergy that is achieved once companies adopt mergers and acquisitions? 9 .3 Research Questions The research questions had been decided as follows: i. 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. 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.

4 Objectives of the Study 1. 10 . Academicians and researchers by providing more insight into the relationship between mergers and acquisitions and company performance.4. iv. ii.1.4. To find out the role that mergers and acquisitions play in achieving enhanced profitability of companies in Kenya.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. iii.2 Specific objectives The specific objectives have been decided as follows: i. To determine the significance of mergers and acquisitions in the increase in market share of companies in Kenya.1General objective To establish the effects of mergers and acquisitions on financial performance of companies 1. To determine the benefits of synergy that is achieved once companies adopt mergers and acquisitions. 1. To establish the extent to which mergers and acquisitions assist in the attainment of returns on investment in companies in Kenya.

the study will cover all the companies which have merged and the relative performance. This however. 11 . engaged the use of his personal savings and went for cost effective data collection tools and methods to cut on costs. 1. The researcher however. the researcher was compelled to take a case of only those companies that operate in Nairobi. be on Nairobi since it is the capital city and most of the head offices are located in Nairobi. yielded reliable and valid results. To the executives and managers of the companies listed at the NSE. 1. acquisition and restructuring of companies. ii.7 Limitations of the Study The major constraints of this study were: i. Financial constraints: This restricted the scope of this study because of lack of sufficient funds. however. Time factor: Due to the fact that the time allocated for this study was short.As the environment is very dynamic. the practitioners of management need to update themselves and their respective industries on the best practices required.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. 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. Emphasis was.

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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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16 . 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. changes in management systems to improve revenue growth and to achieve efficiency increases including cost reductions.Restructuring is the changes in product-market participation. Proxy contest is a type of merger where an outside group seeks to obtain representation on the firm’s board of directors. The outsiders are referred to as “dissidents” or “insurgents” who seek to reduce the control position of the “incumbents” or existing board of directors. financial engineering. requiring a percentage (e. 80%) of stockholders to approve a merger. Anti takeover amendments are changes in the corporate by laws to make acquisition of the company more difficult or more expensive. These include: supermajority voting provisions.g. asset redeployment. Corporate control is another type of merger. staggered terms of directors which can delay change of control for a number of years. 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.

1 Horizontal mergers This takes place between firms that are actually or potential competitors occupying similar positions in the chain of production. 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. by defining they reduce the number of competitors and the relevant markets. new technologies. when an activity does not fall into an effective organization structure of the parent.Since the management of a firm often has effective control of the board of directors. contraction and efforts to improve the efficiency of operations. Also of concerns are mergers between a firm which is active in a particular market and another which is a potential competitor. 17 . Joint ventures represent a flexible method of exploring new areas with partners whose capabilities are complementary. 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. proxy contents are often regarded as directed against the existing management. 2.2. Merger reviews typically focus on horizontal mergers since. It is clear from the above list that the strategies include expansion. a firm may improve motivations and performance by creating separate operations. and new geographic markets. With regard to split-ups and spin-offs.

often leaving Barclays Bank as the only major bank in the area. or a manufacture merging with a distributor of its products. the acquisition of a competitor could increase market concentration and increase the likelihood of collusion.2 Vertical merges This takes place between firms at different levels in the chain of production (such as between manufactures and retailers). and other programmes.2. This is called a “vertical foreclosure” or “bottleneck” problem. TBS. Vertical mergers involve firms in a buyer-seller relationship.a manufacturer merging with a supplier of component products. (a big bank in South Africa) by Barclays Bank (another big bank). Owino (2005). 18 . vertical mergers can also be of concern. The merger has reduced the number of competitors. 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. 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. 2. The elimination of head-to-head competition between two leading firms may result in unilateral anticompetitive effects. Another example is the merger of Time Warner Inc.In a horizontal merger. in many areas of South Africa. producers of CNN. An example is the acquisition of Amalgamated Banks of South Africa (ABSA).. producers of HBO and other video programming and Turn Corp.

2. and of horizontal merger. but prohibited discriminatory access terms at both levels to prevent anti-competitive effects . There are two broad ways a firm can grow..3 Motives behind Mergers One of the most common motives for merges is growth.Mantel and Eudema(2000).2. 19 . 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. 2. 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. Mixed mergers have aspects of both pure conglomerate 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. This is a combination of firms engaged in unrelated lines of business activity. What’s more. for examples merging of different businesses like manufacturing of cement products.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. The FTC allowed the merger. electronic products and advertising agencies. The first is through internal growth. fertilizers products.

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. The results clearly demonstrate similarities in merger motives within the industries. Their analysis makes use of three different perspectives. banking and information technology. dynamism and valueenhancing capability of a company. M&As have occurred in waves where times of low activity frequently have turned into periods of high activity. Growth is essential for sustaining the viability. the reason for this being to create understanding and furthermore illuminate the complexity of the problem. His empirical material consists of primary and secondary data collected from two merger in three industries respectively. During the twentieth century. 20 .The faster alternative is to merge and acquire the necessary resources to achieve competitive goals. but also give some support for similarities across the industries. manufacturing. 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.

Reduction in tax liability: Under the Kenyan tax law. A loss making company may not be in a position to earn sufficient profits in future to take advantage of the carry forward provision. this is the exceptions rather than the norm. 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. There are two types of synergy: that which is drive from cost economies and that which comes from revenue enhancement. that is. energetic gains are often hard to realize. This is the new financial math that shows that 2+2=5. Thus by combining with a profit making a company. However. 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. Cost economies are the easier of the two to achieve because they often involve eliminating duplicate cost factors such as redundant personnel and overhead. 21 . 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 combined company can utilize the carry forward losses and save tax.Synergy: another commonly cited motive for mergers is the pursuit of synergistic benefits. the merged company generally has lower per-unit costs.

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.Agency problems An agency problem arises when managers own only a fraction of the ownership of their firm. 2. However. company car etc) because the majority owners bear most of the cost. 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. suggest that related acquisitions can have a positive effect on company performance if these acquisitions support innovative activities of firms. 22 . 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. Hoskisson and Hilt (1994). The Stock Market is one of the most closely observed economic phenomenon in the world. As such they can have a positive economic effect on companies that are active in the M&A Market. Market indicators meet the demand for measures of stock market performance. This partial ownership may cause managers to work less vigorously than otherwise or to consume perquisites (luxurious officers. Manne (1965).

restructure capital and resolve antitrust concerns. 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.surveyed the executives responsible for corporations' M&A strategy. seek tax advantages. restructure capital and resolve antitrust concerns taking advantage of market conditions.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 . seek tax advantages. Diversification was also identified as a good reason to engage in a merger. Synergies top the list of merger motives. Mergers assist companies to increase cash. taking advantage of market conditions. They also cite operating economics as an important merger goal. Most of those surveyed listed synergy as a leading motivation for both domestic and cross-border mergers. A merger is believed to have a substantive effect on the stock market. Patrick (1994) . To better understand the importance of M&As in company performance.

) In the context of a merger review. If a market is defined broadly. 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.4. 24 . 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. Mergers are usually only prohibited or subjected to conditions if the authority concludes that the merger will substantially harm competition. market definition is often the key factor in determining whether a merger is anti-competitive. As part of their review. On the other hand. the merging firms may he considered to be competitors. Sherman (1998. Such a merger might be reviewed in order to ensure that adequate safeguards are in place to protect competing ISPs. acquisitions and some other corporate combinations require prior review and approval in some jurisdictions.Blair(1993). A more narrow market definition may result in a determination that the firms operate in different markets.1 Merger analysis Large mergers. A narrow definition could lead to a conclusion that the merged entity would have excessive market power in a smaller market. a broad market definition could lead to a conclusion that the merged entity will face sufficient competition from other firms in the market. For example. competition authorities may prohibit mergers or approve them subject to conditions.2.

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

anti-competitive effects may be permitted where one of the merging entities is in severe financial distress. For instance.how any efficiency or other welfare gains will be distributed between the producing firm and its customers. 2. 26 . observes that acquiring firms tended to be faster growing than firms in their respective industries. a merger which would have. Sometimes the merger is not the best solution.2 Empirical studies of mergers. examined 39 companies which had undertaken large and or persistent mergers in the period 1954-1965. 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. 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. In exceptional circumstances. Early literatures on mergers suggest synergistic motives as the main rationale behind merger activity. 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. Bankruptcy is painful for shareholders. but does not always have a long-term negative effect on the economy. Similarly difficult is the development of any means to ensure redistribution of efficiency gains to broader public advantage. However. Kouhm (1986). A study conducted by Jong (1976).4. This being the case a merger of these two firms is expected to lead to improved performance.

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 merging firms must normally provide information to the reviewing authority. 27 . it will obtain more information from the merger participants. during which the reviewing authority will be entitled to request further information.4. This process concludes with a determination by the reviewing authority whether to proceed with a more detailed investigation. The initial information filing typically triggers a waiting period. From the above empirical studies done in the field of M&A.Reid (1968). Singh and Montgomery (1987). If the competition authority decides to proceed with a further investigation. 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. 2. it can therefore be observed that results are not similar and thus there is need to carry out further research in this area. 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.3 Information in merger review As part of the merger review process.

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

It keeps changing on a daily basis subject to changes in share price. 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.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. and the third remedy is behavioral. The first two remedies are structural. This can be achieved through a variety of one-time conditions and on-going requirements. 2. 29 .5 Performance Measures Sharpe et al (1999). Market capitalization This is the total market value of a company at the bourse. 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. Behavioral remedies require ongoing regulatory oversight and intervention. Structural remedies are often more likely to be effective in the long run and require less ongoing government intervention. Nihat et al (2004). lists the following as the other measures of performance. Turnover This is the total number of shares traded at the stock exchange.

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. However NAV is fairly descriptive in the case of property companies that tend to have low earnings compared with their asset value. 30 . 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. but as a thumb rule. 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. The EPS does not reveal the quality of earnings.Share price This is the value of a company's share at a given time. Simply this is the net tangible assets attributable to the ordinary shareholders divided by the number of shares in issue. the higher the EPS. 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. 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.

A lower IVB ratio could mean that the stock is undervalued. This ratio also gives some idea of whether you're paying too much for what would be held if the company went bankrupt immediately. it could also mean that something is fundamentally wrong with the company. 2. if a stock price was Kshs70 and it got Kshs2 in earnings. 31 . Price-To-Book Ratio (IVB Ratio) A ratio used to compare a stock's market value to its book value.5.1 Other measures of performance By relating share prices to their actual profits. historically high. the P/E rises. the Price to Earnings ratio (P/E) highlights the connection between share prices and recent company performance. However. If earnings move up with share prices the ratio stays the same. the P/E is 35. But if stock prices gain in value and earnings remain the same or go down. For example.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). 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 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.

they are typically the most difficult to quantify. 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. 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.Return on Investment (ROI) The monetary benefits derived from having spent money on developing or revising a system. but because many of them may be long term. ROA is displayed as a percentage. The intangibles are sometimes the most important benefits. Calculated by dividing a company's annual earnings by its total assets. 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. 32 .

6 Market Based Valuation There are several methods used to value companies and their stocks. The discount rate normally has to include a risk premium. They try lo give an estimate of their fair value. According to Thomas and Weston (1992). 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. cash flows) the stock will bring to the stockholder in the foreseeable future. by using fundamental economic criteria. 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. called income valuation or discounted cash flow method. earnings. In some cases an asset valuation is also made. and a final value on disposition. involves discounting the profits (dividends. as the final purpose is to determine potential market prices. 33 . some of the methods of stock valuation are: Fundamental criteria (Fair value) The most theoretically acceptable stock valuation method.

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

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

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 2.2.1:-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 . 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.

attitude.Mugenda and Mugenda(2003).1 Research Design The design of this research was a survey. The study also sought to document the management’s most or least important factors that in their view.CHAPTER THREE 3. contributed to the success of failure in the implementations of these strategies. 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. The other factors that were sought and included in this study were the management’s perception in on importance of post merger acquisition activities. 3. 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. 37 . This study documented the firm’s experiences in the mergers and acquisition processes.0 RESEARCH METHODOLOGY The section covers the research design. population and sample size. A survey research seeks to obtain information that describes existing phenomena by asking individuals about their perceptions. behaviour or values . data collection methods and procedures as well as data analysis.

ended and close-ended. locally.5.3. 38 .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). 2. It was also appropriate to incorporate some questions relating to the firms’ profile in the first part of the questionnaire. values and behaviour and to help minimize subjectivity and make possible use quantitative analysis.4. The questions were both open. attitude.3 Data Collection Methods and Instruments Primary data was collected using structured undisguised and self-administered questionnaire. Consequently. 3. values 1. the target population for this study comprised 71 companies. private. were assigned. The likert scale was used to measure perception. The respondent was to check one of the offered five fixed alternative expressions such as strongly disagree. a census survey was carried out. However. The researcher felt that the respondents had practical experiences on the full process of mergers and acquisitions which helped crystallize their opinion.3. It was therefore not possible to expand the size of the population beyond this period. In this five point continuum. The firms that were listed in the MPC reports include either public. Mugenda and Mugenda(2003). The distinction between takeovers and mergers in some years were not indicated. neither agree or disagree. The available data at the time of this study was for the years 2001 to 2004. agree and strongly disagree comprising of a continuum. agree. This data may have some limitations. foreign owned or both although no distinction has been made.

The questionnaires were distributed through postal mail with an enclosed self-addressed return envelope to help increase the response rate. 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.These values expressed the relative weights and direction. The shareholders of the company were convinced that once the businesses merge. 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. The Board of Directors therefore. It was therefore. were involved in a merger or an acquisition process.Nachmias and Nachmias(2003). This assisted the researcher on the background information of firms that merged or acquired a target firm. appropriate to target the CEO. or there is an acquisition. value will be created. determined by the favourableness or unfavourableness of the item . The questions also addressed the approval process within the Competition Law. 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. through the Chief Executive Officer (CEO). 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. 39 . The researcher followed this with telephone calls and personal visits.

However. 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. 3. There are 71 companies that have merged. 40 . The total number of respondents from the 28 companies was 2 respondents per company to yield a sample of 56 respondents. 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. post merger activities.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. 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.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. within the companies.

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

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

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 . 43 .Figure 4.26% 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 .from the findings. Figure 4.those who had served their organization for a period of 5 to 10 years were shown by 30% of all the respondents .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. Author (2010) On the number of years the respondents had served their respective organization. the study found that majority of the respondents were males as shown by 60%. Author (2010) The data in the above figure shows the study findings on the gender of the respondents .2: Gender of the respondents 40% m le a fem le a 60% Source.

the study established that this ranged between 5 to 13 outlets. industrial area.1: Education level Frequency Diploma Degree Post graduates degree Total Source. On the number of outlets the organization had. the study found that this ranged between 1960 to 1993. and Westland and Kariobangi area. On the location of the main offices of the respondent’s organization. Author (2010) The data in the above table shows the respondent education level. On the years the organization was established. the study found that most of the organization had their main offices located in Nairobi CBD area.1% of the respondents. from the finding the study found that majority of the respondents had a university degree as shown by 52. Author (2010) 44 . Figure 4. Upper hill.Table 4.5% of the respondents were diploma holders.4% of the respondent had postgraduate’s degrees and 12. 35.4: 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.

SCB . A. Author (2010) The data in the above table shows the type of company. Elianto (K) Ltd. Barclays Holdings. Smith Kline Beecham . Universal Bank. 30 % of the respondents indicated that their companies were publicly owned and 16% of the respondents indicate that their company were privately owned.A. Brookside Dairies Ltd. Express Escorts. Toyota E. Glaxo Wellcome (K) Ltd. Lelkina Dairies Ltd . Ltd . 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. 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. Bullion Bank. Lonrho Motors E.2.2 Firm’s Profile On the name of the firm before merger the study revealed that the names were.2: Type of company Frequency Privately owned Part private/part public Publicly owned Total Source. Ltd. Africa Online Ltd . Old Mutual As Asset Managers. Bank of 45 8 27 15 50 Percent 16 54 30 100 . Bidco(K) Ltd. the study revealed that majority of the companies as shown by 52% of the respondents were locally owned.On the ownership composition of the company. Barclays Trust Investment . 4. Best Foots Ltd. Net 2000 Ltd . Crown Berger ltd . Table 4. Unilever . Paramount Bank. Securicor Security Services ltd.

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

5: Sector of the organization Frequency Manufacturing Agriculture Service Total Source. 27 16 43 62. those were in the service sector were shown by 37.2% of the respondents.2% of the respondents while 18.2 100 The study also requested the respondents to indicate the sector in which their organization belonged. Author (2010) 22 8 13 43 Percent 51.8% of the respondents and those that were both local and foreign owned were shown by 37. from the finding of the study in the above table.6% of the respondents indicated that their firms were in agriculture sector.Table 4.2 18. 47 .2%. the study found that majority of organization were in manufacturing sector as shown by 51. 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.2 100 Table 4. the findings of the study in the above table shows that majority of the firms were locally owned as shown by 62.8 37.6 37.

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

3 58.3 60.7 41.7% said to acquire brand loyalty.7 51.3 48.7 68.3 31.7: Reason/S Why the Organization Undertook the Merger Yes Increase market share Acquire state.7% said to diversify in a growth business.3 60.7 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 . 66. 68.3% 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. 78.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. Duration Taken To Receive an Approval from the Commissioner of Monopolies and Price According to the findings.0 No 21.0 66.7 40.Table 4. According to the findings. the respondents who said to acquire state. Author (2010) 78. while 41.0 The study also sought to establish the reasons why the organizations took the merger.0 33.3% said to enter to a new geographical area. 51.7% of the respondents reported that they took a merger in order to overcome entry barrier.

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

0 16. According to the study. Duration the Firm Took To Conclude the Negotiation with the Other Firm From the findings. where the authority blocks a merger the parties can appeal its decision to the High Court.0 100 The respondents were also requested to indicate the degree that they involved managers in the acquisition or merger process. appeal against a board decision against them. the reasons why firms appeal to the high court include. 000-2M.Reasons for Appeal From the findings.0 74. it took the firm’s 3-6 months to conclude negotiations with the other firm. An Estimate of the Merger or Acquisition Budget The study also sought to establish the estimate of the merger or acquisition budget. Duration It Took To Conclude the Appeal in the High Court According to the findings.10: The Degree of Involvement of Managers in the Acquisition or Merger Process Frequency Very little Moderately A lot Total Source. the merging parties may also challenge a merger decision imposing a remedy and complains by the minority shareholders of the involved firms. 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. Author (2010) 5 8 37 50 Percent 10. Table 4. From the study. most of the respondents as indicated by 74% reported that they involved their managers a lot in the acquisition or merger 51 . the budget ranged between Kshs 500.

the majority of the respondents as indicated by 94% termed the merger or acquisition undertaken by their firm a success. Author (2010) 47 3 50 Percent 94 6 100 From the findings in the above table. while 28% of the respondents felt that they would not 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. 16% reported that they moderately involved the.0 28.2. Author (2010) 36 14 50 Percent 72. 4. From the study.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 respondents as shown by 72% said that they would recommend a merger or an acquisition again. while 10% of the respondents said that they involved them to a very little extent.12: Whether the Respondents Would Recommend a Merger or an Acquisition Again Frequency Yes No Total Source. 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 4.0 100 The respondents were therefore asked whether they would you recommend a merger or an acquisition again.process. The regression model was as follows: 52 .

1% of merger and acquisition with market share.938 a Predictors: (Constant). market share.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. From data in the table above. Author (2010) R Square Change . profitability of the company.881 4.087(a) . Adjusted R2 is called the coefficient of determination and tells us how merger and acquisition varied with the market share.009 1 df 2 1 Sig.881. diversification of risk. Achievement of Synergy and Return on Investment. diversification of risk . This implies that.009 F df Change 1 . Achievement of Synergy and Return on Investment. F Change . profitability of the company. diversification of risk. there was a variation of 88. profitability of the company.223 Source. Achievement of Synergy and Return on Investment at a confidence level of 95%.13: Model Summary Change Statistics Std. Error R Adjusted of the Model R Square R Square Estimate 1 . the value of adjusted R2 is 0.090 . 53 .

319 Standardized Coefficients t Beta 1.938 . holding the predictors factors constants.311 0. This infers that there exist positive relationships between merger and Unstandardized Coefficients B Std. From the data in the above table.574. profitability of the company. also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0.358 X3 + 0.967 . The established regression equation was Y = 0.839 . profitability of the company.216 .216.Table 4.091 .097 .094 . Author (2010) a Predictors: (Constant).090 . it was also established that a unit increase in market share would cause an increase in merger and acquisition by a factor of 0.216 X2 + 0.156 0.771 X1 + 0. a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0.097 .061 0.771.314X5 From the above regression model. 54 .771 . also a unit increase in diversification of risk would cause an increase in merger and acquisition by a factor of 0.358 .358.097 . merger and acquisition of companies would be 0. diversification of risk . there is a positive relationship merger and acquisition and the predictor factors which are market share. market share.090 .087 .018 0.314.833.094 .978 . Achievement of Synergy and Return on Investment.418 0.923 .314 .312 Sig. Achievement of Synergy and Return on Investment.833 1.317 .574 .574 X4 + 0. diversification of risk.833 + 0. Error 0.097 .further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0.14: Coefficients results Model 1 (Constant) market share profitability diversification of risk Achievement of Synergy Return on Investment Source.

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

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

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

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

314X5 From the above regression model. The study also established a regression equation which was.3% termed the merger or acquisition undertaken by their firm a success. also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0. while 28 % of the respondents felt that they would not recommend a merger or an acquisition again. 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. achievement of synergy and return on investment. majority of respondents as shown by 72% said that they would recommend a merger or an acquisition again.574 X4 + 0.358 X3 + 0.216 X2 + 0.the study found that the majority of the respondents as indicated by 93.833.further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0. profitability of the company.574.216. Y = 0. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success.833 + 0. a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0.On the general assessment of merger .314. it was also established that a unit increase in market share would cause an increase in merger and acquisition by a factor of 0.771 X1 + 0. This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. On whether the respondents would recommend a merger or an acquisition again. diversification of risk.771.358. 59 . holding the predictors factors constants.

216 X2 + 0. acquire states of art and technology. acquire brand loyalty and overcome entry barriers . conclusion the researcher recommends that small companies should adopt merger and acquisition as this will help them in entering into new geographical areas. achievement of synergy and return on investment. The study also concludes that mergers and acquisitions assisted in the attainment of returns on investment in companies.4Recommendation From the above discussion.771 X1 + 0. 60 . comply with new legislation. the study also concludes that the benefits of synergy that is achieved through adoption of merger and acquisition were. The study recommends an in-depth study to investigate the challenges affecting merger and acquisition of companies.358 X3 + 0. The study concludes that as result of merger the company acquired larger market share thus increased profitability. 5. diversification of risk.5. diversify their business growth. comply with new legislation.314X5 This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. increased market share. profitability of the company. diversify business growth. Y = 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. acquire brand loyalty and overcome entry barriers. acquire brand loyalty . overcome entry barriers. acquiring state of technology.574 X4 + 0. complying with new regulation . acquire states of art and technology. increase their profitability and return on investment.833 + 0. The study also established a regression equation for the study was.

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

Kindly indicate whether your company is: Privately owned ( ) Part private/part public ( ) 66 . g) When the organization was established …………………………… h) How many outlets does the organization have ……………………….. 2... Please indicate. a) Name of organization …………………………………….……….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. 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 ……………………………………………. b) What is your Designation …………………………………………….

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

please complete (6) below. M( ) T( ) 68 . (6) How would you classify your organization in terms of ownership? (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. (a) (b) (c) Locally Owned ( ) Foreign Owned ( ) Both Local/Foreign Owned ( ) (7) The sector your organization is operating in (Tick appropriately). 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).

(a) How long did you take to receive an approval from the Commissioner of Monopolies and Price'? Months 69 ................(2) What sort of merger or acquisition did your company undertake? (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................... (f) Any other (specify)…...... 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. Approval Process within the framework of Kenya competition law..........

.. reasons for appeal................... 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)....... (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........... 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).... (c) If ye.... 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)....... No If yes............

(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 .General Assessment (a)Would you term the merger or acquisition undertaken by your firm a success? (Please tick where appropriate). 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 .

000.00 Data Analysis 2.00 Source: Researcher (2008) 73 .000.) Stationary & Other Consumables 3. 1 2 3 4 5 6 7 ITEM DESCRIPTION ESTIMATED REMARKS COST (KSHS.000.ITEM NO.00 Field Visits for Self 6.000.00 Overheads & Incidental Expenses 12.000.000.00 TOTAL 103.00 Subsistence Allowances 10.000.000.00 Report Writing 30.00 Field Visits for Research Assistants 40.

A. & 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. Ltd. A.2004 Name of Institution Sector Affected 1 2 3 4 5 6 7 g 9 Bidco(K) 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.SOURCE MPC ANNUAL REPORTS 2001 .

Mwaridi. 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 . 27 ABN-AMRO Bank & City Bank Ltd. 33 BASF & High Chem E. 28 Fidelity Bank & Southern Credit Ltd Manufacturing Manufacturing Legal Consultancy Asset Financial Financial Automotive Financial Financial 29 Nampak S. Africa/Carnaud Metal Box & Crown Cork Manufacturing Ltd.A. A. Hotel 31 Aventis Crop Science & Agro Chemical Business of Agricultural Chemicals Bayer E. Ltd 34 Primarosa. ltd 32 Co-op Bank & Co-op Merchant Bank Ltd.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. 30 Masai Mara Sopa Ltd & Tunu Ltd.

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. 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. 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.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. 48 1CL( K) Limited & Sameer ICT Ltd 49 Resort (K) Ltd & MS Family Town 2002 Ltd.

Telecommunication (Ken Cell) 64 Kemia International Ltd & Poly Synthetics Eastern Africa Manufacturing Ltd. 65 Sameer Telecom Ltd & Kenya Telecom BV 66 Shell and BP Malinda and Oil Com. 67 Homegrown Kenya Ltd & Kijabe Ltd(“Kijabe”) 68 Dawa Pharmaceutical Ltd & Medisel (K) Ltd. 69 Fresh Del Monte Produce Inc.58 Muva & Ass. 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. & Kenyan Telcom B.V. & 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 .

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