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

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

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

.....4 Objectives of the Study..............................2............................4 Importance of Mergers in Company Performance........................11 CHAPTER TWO...................4.....................4..............................................................................................................3 Information in merger review..........................................4....................................19 2.ii ACKNOWLEDGEMENT........18 2...............1 Other measures of performance........13 2.....................................................40 3.........................................26 2...................................2 Vertical merges......................................................................................................................................................4............................vii LIST OF OPERATIONAL TERMS....................................19 2..........................................................................................................13 2...v LIST OF ABBREVIATIONS........xii CHAPTER ONE..............................................................................1General objective...........................................................0 INTRODUCTION........................................................10 1.......................6 Data Analysis...............................................................................xi LIST OF FIGURES....................................................................................3 Conglomerate mergers...............10 1.............................................................................................................................................7 Limitations of the Study..................31 2..........................................................................................................................................................38 3....................................1 1......................................................6 Scope of the Study.........................................................................................................................2 Types of Mergers and Acquisitions/Corporate Restructuring..............................................................................4...........37 3........................................................41 ix ..........................1 Research Design....14 2...28 2....................................9 1...............1 Background of the Study.............................................................................2 Specific objectives.............38 3........................................................................................5 Significance of the Study.............................................................................1 Horizontal mergers............................................................................................................ Interpretation and Presentation.......................................................................................................................................TABLE OF CONTENT DECLARATION...........................................................................6 1.......................13 2..36 CHAPTER THREE.......................4......1 1...............37 3.....................................5 Sample Design and Size.........................................40 3.......................2.....................................................................................................3 Research Questions....2 Statement of the Problem.................5.................................................................2 Target Population .........................................17 2.......6 Market Based Valuation..............................................27 2............................................................1 1.............37 3........................................................................................................................................iii DEDICATION......5 Performance Measures......................................11 1..............10 1........24 2.............4 Research Area..................0 RESEARCH METHODOLOGY...iv ABSTRACT...........................................................................................................................33 2..................................................2......................................................................................7 Conceptual Framework........2 Empirical studies of mergers.................................................1 Merger analysis.............................................................................22 2........10 1.....................................0 LITERATURE REVIEW........................................................3 Motives behind Mergers...................................................................4 Merger remedies...............viii LIST OF TABLES...............................................................................29 2....1 Nature of Corporate Restructuring..................................3 Data Collection Methods and Instruments...................................................................

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

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

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

others fail. few companies made mergers a key element of their growth strategy. private equity and venture capital. The change imperatives are strong.CHAPTER ONE 1. 1 . This has forced many of them to adopt many forms of restructuring activity. many companies look to achieve over 50 percent of their growth from M&As. Thomas and Weston(1992). Twenty years back. cash infusions from initial public offers and the perceived lack of organic growth opportunities due to a saturated marketplace. some M&As succeed. For large samples. The changing environments and the new forms of competition have created new opportunities and threats for business firms. 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. debt availability. Mergers were an afterthought or episodic. 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. Today. and firms must adjust to new forces of competition from all directions.0 INTRODUCTION 1.1 Background of the Study The existing capabilities of a firm influence the kind of acquisition activity that will make business and economic sense.

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

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

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

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

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

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

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

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

iv. Academicians and researchers by providing more insight into the relationship between mergers and acquisitions and company performance. To establish the extent to which mergers and acquisitions assist in the attainment of returns on investment in companies in Kenya.1General objective To establish the effects of mergers and acquisitions on financial performance of companies 1.4. To determine the benefits of synergy that is achieved once companies adopt mergers and acquisitions. ii.4.2 Specific objectives The specific objectives have been decided as follows: i. iii.1. To determine the significance of mergers and acquisitions in the increase in market share of companies in Kenya. To find out the role that mergers and acquisitions play in achieving enhanced profitability of companies in Kenya. 1.5 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. 10 .4 Objectives of the Study 1.

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

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

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

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

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

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

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

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

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

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

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

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

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

when an activity does not fall into an effective organization structure of the parent. contraction and efforts to improve the efficiency of operations.1 Horizontal mergers This takes place between firms that are actually or potential competitors occupying similar positions in the chain of production. With regard to split-ups and spin-offs. a firm may improve motivations and performance by creating separate operations. new technologies. proxy contents are often regarded as directed against the existing management. and new geographic markets. 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.Since the management of a firm often has effective control of the board of directors. It is clear from the above list that the strategies include expansion. Merger reviews typically focus on horizontal mergers since. by defining they reduce the number of competitors and the relevant markets. Joint ventures represent a flexible method of exploring new areas with partners whose capabilities are complementary.2. 2. Also of concerns are mergers between a firm which is active in a particular market and another which is a potential competitor. 17 . 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.

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

That would allow Time Warner – Tuner affiliate cable companies to maintain monopolies against competitors like Direct Broadcast Satellite (DBS) and new wireless cable technologies. and of horizontal merger.2. This is a combination of firms engaged in unrelated lines of business activity.3 Motives behind Mergers One of the most common motives for merges is growth.Mantel and Eudema(2000). electronic products and advertising agencies. The first is through internal growth.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. 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. There are two broad ways a firm can grow.. 2. for examples merging of different businesses like manufacturing of cement products. but prohibited discriminatory access terms at both levels to prevent anti-competitive effects . What’s more. 2. The FTC allowed the merger. 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. 19 . fertilizers products.

but also give some support for similarities across the industries. Their analysis makes use of three different perspectives. 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 faster alternative is to merge and acquire the necessary resources to achieve competitive goals. His empirical material consists of primary and secondary data collected from two merger in three industries respectively. 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. banking and information technology. 20 . 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. the reason for this being to create understanding and furthermore illuminate the complexity of the problem. The results clearly demonstrate similarities in merger motives within the industries. dynamism and valueenhancing capability of a company. During the twentieth century. manufacturing.

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

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

Mergers assist companies to increase cash. To better understand the importance of M&As in company performance. restructure capital and resolve antitrust concerns. Patrick (1994) . Synergies top the list of merger motives.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. seek tax advantages. Most of those surveyed listed synergy as a leading motivation for both domestic and cross-border mergers. 23 .surveyed the executives responsible for corporations' M&A strategy. taking advantage of market conditions. seek tax advantages. Diversification was also identified as a good reason to engage in a merger. A merger is believed to have a substantive effect on the stock market. 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. They also cite operating economics as an important merger goal. restructure capital and resolve antitrust concerns taking advantage of market conditions.

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

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

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

it will obtain more information from the merger participants. 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. during which the reviewing authority will be entitled to request further information. This process concludes with a determination by the reviewing authority whether to proceed with a more detailed investigation.3 Information in merger review As part of the merger review process. 27 .Reid (1968). 2.4. 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. The initial information filing typically triggers a waiting period. Singh and Montgomery (1987). concluded that conglomerate mergers satisfied the desires of managers for larger firms but did not increase earnings or market prices. it can therefore be observed that results are not similar and thus there is need to carry out further research in this area. It is standard practice in jurisdictions which impose merger review to require merging parties to submit advance notice of the proposed transaction. the merging firms must normally provide information to the reviewing authority. From the above empirical studies done in the field of M&A. If the competition authority decides to proceed with a further investigation.

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

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

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

if a stock price was Kshs70 and it got Kshs2 in earnings. the P/E is 35.1 Other measures of performance By relating share prices to their actual profits. the Price to Earnings ratio (P/E) highlights the connection between share prices and recent company performance. 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). If earnings move up with share prices the ratio stays the same. This ratio also gives some idea of whether you're paying too much for what would be held if the company went bankrupt immediately. the P/E rises. historically high. A lower IVB ratio could mean that the stock is undervalued. it could also mean that something is fundamentally wrong with the company. But if stock prices gain in value and earnings remain the same or go down. 2.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). For example.5. However.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. 31 . Price-To-Book Ratio (IVB Ratio) A ratio used to compare a stock's market value to its book value.

32 . 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. ROA is displayed as a percentage. 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 Investment (ROI) The monetary benefits derived from having spent money on developing or revising a system. 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. The intangibles are sometimes the most important benefits. Return on Equity (ROE) This is a measure of a corporation's profitability. but because many of them may be long term. they are typically the most difficult to quantify.

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

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

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

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

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

38 . 2. It was also appropriate to incorporate some questions relating to the firms’ profile in the first part of the questionnaire. The questions were both open. However.ended and close-ended.3. a census survey was carried out. The firms that were listed in the MPC reports include either public. It was therefore not possible to expand the size of the population beyond this period. This data may have some limitations. the target population for this study comprised 71 companies. agree and strongly disagree comprising of a continuum. private.3 Data Collection Methods and Instruments Primary data was collected using structured undisguised and self-administered questionnaire. neither agree or disagree.5. values and behaviour and to help minimize subjectivity and make possible use quantitative analysis. were assigned. The researcher felt that the respondents had practical experiences on the full process of mergers and acquisitions which helped crystallize their opinion. foreign owned or both although no distinction has been made.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). values 1. locally. The likert scale was used to measure perception. Mugenda and Mugenda(2003). attitude. In this five point continuum. The respondent was to check one of the offered five fixed alternative expressions such as strongly disagree. The distinction between takeovers and mergers in some years were not indicated. agree. 3.4. The available data at the time of this study was for the years 2001 to 2004.3. Consequently.

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

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. turnover of staff and creation of shareholders wealth as a result of mergers and acquisitions These are sets of questions that were designed to seek the perceptions of the managers. The 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.4 Research Area The research covered all the companies in Kenya that had undergone mergers and acquisitions between the year 2003 and 2007. The total number of respondents from the 28 companies was 2 respondents per company to yield a sample of 56 respondents. However. There are 71 companies that have merged. 3. 40 .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. post merger activities. 3. within the companies. the researcher purposively targeted two senior managers or senior partners in the partnership or merged companies and the Board of Directors through the CEO.

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

financial analyst. 60 respondents responded and returned the questionnaire comprising of 84.2. Crown Berger & Barclays Holdings. operations manager. On the respondents designation the study found that the respondents were from various designation which were. 42 . Ltd & Toyota E.2 Analysis and Interpretation 4. Bank of India & India Finance Ltd and Bank of India & India Finance Ltd among others. customer service officer. Securicor Security Services & Express Escorts. Lelkina Dairies Ltd & Brookside Dairies Ltd. A. Paramount Bank & Universal Bank.CHAPTER FOUR: 4. from the findings of the study the study found that these organization were. finance manager. Unilever & Best Foots Ltd.1 Introduction This chapter presents the analysis and interpretations of the data from the field. & Elianto (K) Ltd. director and procurement officer. From the study population of 71 respondents were targeted. 4. Barclays Trust Investment & Old Mutual As Asset Managers.1 Personal Data On the name of the organization the researcher requested the respondents to indicate their organization. SCB & Bullion Bank. accountant.5% response rate.A. clerk. Ltd. Africa Online Ltd & Net 2000 Ltd .0 DATA ANALYSIS AND INTERPRETATION 4. human resource manager. Smith Kline Beecham & Glaxo Wellcome (K) Ltd. Lonrho Motors E. Bidco(K) Ltd.

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

industrial area. On the location of the main offices of the respondent’s organization.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. the study established that this ranged between 5 to 13 outlets. the study found that most of the organization had their main offices located in Nairobi CBD area. Author (2010) 44 . On the number of outlets the organization had.1: Education level Frequency Diploma Degree Post graduates degree Total Source.Table 4. Upper hill. 35.5% of the respondents were diploma holders. Figure 4. and Westland and Kariobangi area. On the years the organization was established. the study found that this ranged between 1960 to 1993. Author (2010) The data in the above table shows the respondent education level. from the finding the study found that majority of the respondents had a university degree as shown by 52.1% of the respondents.4% of the respondent had postgraduate’s degrees and 12.

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

India Finance Ltd and Bank of India and India Finance Ltd. Africa Online Ltd. On the date of incorporation of the company. A. the study established that majority of the firms were partly private and partly public as shown by 54% of the respondent. Bank of India Ltd. On the name of the company after merger and take over. Unilever Ltd. Bidco (K) Ltd. the study found that date of incorporation ranged from 30th June 1968 to 23rd September 1990.28% of the respondents indicated that their firms were publicly owned and those companies that their legal structure was partnership was shown by 18%. Table 4. Brookside Dairies Ltd. Paramount Bank.3: Legal structure of the firm Frequency Partnership Part private/part public Publicly owned Total Source. Crown Berger. 46 . the study found that these names were. Toyota E. Securicor Security Services. Old Mutual Trust Investment. Smith Kline Beecham & Glaxo Wellcome (K) Ltd. Ltd. Author (2010) 9 27 14 50 Percent 18 54 28 100 On the legal structure of the firm. the study revealed that all the companies had completed merger and acquisition to its conclusions.India . SCB & Bullion Bank. On whether the respondent company had completed the merger or acquisition to its conclusion.

8% of the respondents and those that were both local and foreign owned were shown by 37. 47 . the findings of the study in the above table shows that majority of the firms were locally owned as shown by 62.8 37.2 100 The study also requested the respondents to indicate the sector in which their organization belonged.5: Sector of the organization Frequency Manufacturing Agriculture Service Total Source.Table 4.6 37.2%. the study found that majority of organization were in manufacturing sector as shown by 51. Author (2010) 22 8 13 43 Percent 51.2% of the respondents while 18.6% of the respondents indicated that their firms were in agriculture sector.2 100 Table 4. 27 16 43 62.2% of the respondents.4: Classification of organization in terms of ownership Frequency Percent Locally owned Both Local/Foreign Owned Total Source. Author (2010) On the classification of the firms in terms of ownership. those were in the service sector were shown by 37. from the finding of the study in the above table.2 18.

3 Experience of the Firm Whether the Firm Was a Merger (M) or a Takeover (T) According to the study.2.4. 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. 32% said vertical merger. 48 . From the study. most of the respondents as shown by 54% reported that their companies undertook a horizontal merger. all the respondents (100%) reported that their firms were mergers. while a small proportion of respondents as shown by 4% reported that their firms undertook a concentric merger. 10% of the respondents said conglomerate merger.6: The Sort of Merger or Acquisition That the Company Undertook Frequency Horizontal merger Vertical merger Concentric merger Conglomerate merger Total Source. Table 4.

7: Reason/S Why the Organization Undertook the Merger Yes Increase market share Acquire state. 51.Table 4. Duration Taken To Receive an Approval from the Commissioner of Monopolies and Price According to the findings.3 60. According to the findings.7% said to diversify in a growth business.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.3 60. 66.7 40.3% said to enter to a new geographical area.0 No 21.of -the art technology and to comply with new legislation were shown by 60% each. 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 .3 31. while 41.7 40. 78.0 The study also sought to establish the reasons why the organizations took the merger.7 41.7 51. 68.3 48.0 33.7% of the respondents reported that they took a merger in order to overcome entry barrier.0 66. Author (2010) 78.3% of the respondents said in order to increase market share.7% said to acquire brand loyalty.3 58. the respondents who said to acquire state.7 68.

Author (2010) 31 19 50 Percent 62 38 100 According to the findings in the above table. while 24% said that their firms were not subjected to appeal to the tribunal.9: Whether the Firm Appealed To the High Court Frequency Yes No Total Source.Table 8: Whether the Firm Was Subjected To Appeal to the Tribunal Frequency Yes No Total Source. 50 . while 38% reported that their firms did not appeal to the high court. the study established that it took a minimum of 5 and a maximum of 12 months. most of the respondents as shown by 62% said that their firms appealed to the high court. Duration It Take For the Appeal to Be Concluded By the Tribunal On the duration it took the firms for the appeal to be concluded by the tribunal. From the results. the majority of respondents (76%) reported that their firms were subjected to appeal to the tribunal. Table 4. 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 indicated by 74% reported that they involved their managers a lot in the acquisition or merger 51 .0 74. the merging parties may also challenge a merger decision imposing a remedy and complains by the minority shareholders of the involved firms. An Estimate of the Merger or Acquisition Budget The study also sought to establish the estimate of the merger or acquisition budget.0 16. Duration the Firm Took To Conclude the Negotiation with the Other Firm From the findings. it took the firm’s 3-6 months to conclude negotiations with the other firm. 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.Reasons for Appeal From the findings.0 100 The respondents were also requested to indicate the degree that they involved managers in the acquisition or merger process. Duration It Took To Conclude the Appeal in the High Court According to the findings. From the study. appeal against a board decision against them. Table 4. where the authority blocks a merger the parties can appeal its decision to the High Court. According to the study. the budget ranged between Kshs 500. 000-2M. Author (2010) 5 8 37 50 Percent 10.10: The Degree of Involvement of Managers in the Acquisition or Merger Process Frequency Very little Moderately A lot Total Source. the reasons why firms appeal to the high court include.

Author (2010) 47 3 50 Percent 94 6 100 From the findings in the above table. the majority of respondents as shown by 72% said that they would recommend a merger or an acquisition again.0 28.4 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.0 100 The respondents were therefore asked whether they would you recommend a merger or an acquisition again. while 10% of the respondents said that they involved them to a very little extent. Table 4.12: Whether the Respondents Would Recommend a Merger or an Acquisition Again Frequency Yes No Total Source.process.2. Author (2010) 36 14 50 Percent 72. From the study. the majority of the respondents as indicated by 94% termed the merger or acquisition undertaken by their firm a success. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success Table 4. 4. while 28% of the respondents felt that they would not recommend a merger or an acquisition again. The regression model was as follows: 52 . 16% reported that they moderately involved the.11: Whether The Merger or Acquisition Undertaken the Firm Is A Success Frequency Yes No Total Source.

13: Model Summary Change Statistics Std.223 Source. From data in the table above.1% of merger and acquisition with market share. profitability of the company. Adjusted R2 is called the coefficient of determination and tells us how merger and acquisition varied with the market share. This implies that.090 .881 4. Achievement of Synergy and Return on Investment at a confidence level of 95%.087(a) . diversification of risk. 53 . Author (2010) R Square Change . market share. diversification of risk. Achievement of Synergy and Return on Investment. diversification of risk . Achievement of Synergy and Return on Investment. Error R Adjusted of the Model R Square R Square Estimate 1 .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 4.938 a Predictors: (Constant). profitability of the company. F Change . profitability of the company.009 F df Change 1 .881. the value of adjusted R2 is 0. there was a variation of 88.009 1 df 2 1 Sig.

097 .094 .Table 4. it was also established that a unit increase in market share would cause an increase in merger and acquisition by a factor of 0.087 .978 . Achievement of Synergy and Return on Investment.574. The established regression equation was Y = 0.311 0.090 .097 .358 .771 .317 . From the data in the above table.094 .091 .833 1.923 . also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0. merger and acquisition of companies would be 0. diversification of risk.314.018 0.938 .061 0.314X5 From the above regression model. 54 .314 . market share. profitability of the company. This infers that there exist positive relationships between merger and Unstandardized Coefficients B Std.14: Coefficients results Model 1 (Constant) market share profitability diversification of risk Achievement of Synergy Return on Investment Source. Author (2010) a Predictors: (Constant).097 .216.319 Standardized Coefficients t Beta 1. diversification of risk .771 X1 + 0.574 X4 + 0.358.833 + 0. a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0. there is a positive relationship merger and acquisition and the predictor factors which are market share.967 .358 X3 + 0. Error 0.771.418 0.574 .further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0.216 . also a unit increase in diversification of risk would cause an increase in merger and acquisition by a factor of 0.833.312 Sig. Achievement of Synergy and Return on Investment.216 X2 + 0.097 . holding the predictors factors constants.839 .156 0.090 . profitability of the company.

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

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

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

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

majority of respondents as shown by 72% said that they would 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. diversification of risk.833. Y = 0. The study also established a regression equation which was.further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0.314X5 From the above regression model. also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0.574 X4 + 0.771 X1 + 0. On whether the respondents would recommend a merger or an acquisition again. a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0.574.the study found that the majority of the respondents as indicated by 93.358 X3 + 0.3% termed the merger or acquisition undertaken by their firm a success. holding the predictors factors constants. This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. 59 . while 28 % of the respondents felt that they would not recommend a merger or an acquisition again.358.314.833 + 0.771.216 X2 + 0.On the general assessment of merger . achievement of synergy and return on investment. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success. profitability of the company. 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.

diversification of risk. acquire states of art and technology. The study also established a regression equation for the study was. acquire brand loyalty and overcome entry barriers.574 X4 + 0.5. achievement of synergy and return on investment. diversify business growth. increase their profitability and return on investment.4Recommendation From the above discussion. overcome entry barriers. acquiring state of technology. increased market share. profitability of the company. conclusion the researcher recommends that small companies should adopt merger and acquisition as this will help them in entering into new geographical areas. 5. acquire brand loyalty .216 X2 + 0. The study also concludes that mergers and acquisitions assisted in the attainment of returns on investment in companies.358 X3 + 0.833 + 0. the study also concludes that the benefits of synergy that is achieved through adoption of merger and acquisition were. comply with new legislation. 60 .771 X1 + 0. The study concludes that as result of merger the company acquired larger market share thus increased profitability. complying with new regulation . The study recommends an in-depth study to investigate the challenges affecting merger and acquisition of companies.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. diversify their business growth. acquire brand loyalty and overcome entry barriers .314X5 This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. acquire states of art and technology. Y = 0. comply with new legislation.

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2007)”....“An Investigation into Effects of Mergers and Acquisitions on Financial Performance of Companies in Kenya (2003 . NAIROBI Dear Respondent..O Box . The information sought from you will be treated with utmost confidence... The research topic is: .APPENDICES Appendix I: Introduction Letter Kennedy Murithi P... Thank you.. Yours sincerely. and results of this study will be available for your use/reference. 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...

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

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

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

......................................(2) What sort of merger or acquisition did your company undertake? (Tick appropriately)... (a) How long did you take to receive an approval from the Commissioner of Monopolies and Price'? Months 69 ..................... (f) Any other (specify)…..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..... Approval Process within the framework of Kenya competition law. Horizontal Merger Vertical Merger Concentric Merger Conglomerate Merger (3) Please state reason/s why your organization undertook the merger (Tick where appropriate) (a) Increase market share (b) Acquire state................

........ reasons for appeal....... 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).. 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)....(b) Was your firm subjected to appeal to the Tribunal? Yes No (Tick appropriately).............. (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.......... No If yes..... (c) If ye... Not at all Very little Moderately A lot Intensively 1 70 ..............

(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 .

00 Source: Researcher (2008) 73 .00 TOTAL 103.ITEM NO.000.00 Data Analysis 2.00 Subsistence Allowances 10.000.) Stationary & Other Consumables 3.000.00 Field Visits for Self 6.00 Report Writing 30.000.00 Overheads & Incidental Expenses 12.000.00 Field Visits for Research Assistants 40.000. 1 2 3 4 5 6 7 ITEM DESCRIPTION ESTIMATED REMARKS COST (KSHS.000.000.

APPENDIX V: MERGER CONTROL NOTIFICATIONS.2004 Name of Institution Sector Affected 1 2 3 4 5 6 7 g 9 Bidco(K) Ltd. Ltd.A. Ltd & Toyota E.SOURCE MPC ANNUAL REPORTS 2001 . Building & Construction Motor Industry Dairy Hotel Agriculture Telecommunications Hotel Banking Legal Consultancy Manufacturing (Brewing) Agriculture Financial (Banking) Lonrho Motors E. A. 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 . & 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.

ltd 32 Co-op Bank & Co-op Merchant Bank Ltd. Africa/Carnaud Metal Box & Crown Cork Manufacturing Ltd. A. 33 BASF & High Chem E.A. Ltd 34 Primarosa. 28 Fidelity Bank & Southern Credit Ltd Manufacturing Manufacturing Legal Consultancy Asset Financial Financial Automotive Financial Financial 29 Nampak S. 27 ABN-AMRO Bank & City Bank Ltd. 30 Masai Mara Sopa Ltd & Tunu Ltd. Stone Athi & King'orani 35 Hotel Span & Spire Properties 36 Kenya Commercial Bank & Savings and Loans Banking Agriculture (Agro-Chemical) Agriculture Hotel Industry Financial Services 75 .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. Mwaridi. Hotel 31 Aventis Crop Science & Agro Chemical Business of Agricultural Chemicals Bayer E.

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

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

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