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

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

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

MAY 2010

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

KENNEDY MURITHI BUS-3-2371-3/07

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

Signature:

_________________________Date: _________________________

DR. FRANCIS MAMBO LECTURER, FINANCE KENYA METHODIST UNIVERSITY

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

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

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

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

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

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

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

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

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 .

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

...................................2.........................................................37 3..............................29 2.....2 Specific objectives.........................................................................................................................2.........................................................................................................19 2....................27 2................3 Conglomerate mergers.....TABLE OF CONTENT DECLARATION.......................................................................................................................................................................1 Other measures of performance..........................xii CHAPTER ONE....................................4......................................1 Merger analysis..........36 CHAPTER THREE.............4..........................................................................................................37 3......................................................1General objective.........ii ACKNOWLEDGEMENT..........................................................................iv ABSTRACT..................................................31 2.......................0 INTRODUCTION....................38 3............................................................5 Sample Design and Size..........................................................................................................37 3..........6 Data Analysis........................................7 Limitations of the Study.............................................................2 Target Population .....5 Significance of the Study................1 1.......14 2..............................1 Horizontal mergers.....................11 CHAPTER TWO................1 Research Design..........................................................1 1....................................4..........2 Types of Mergers and Acquisitions/Corporate Restructuring.........19 2................................................................................................................................. Interpretation and Presentation...13 2..........................................2 Vertical merges......................................viii LIST OF TABLES.................................................................................................24 2...........................................10 1................................................38 3...............................1 1...........5...............................13 2.......................................................................iii DEDICATION...4............................................11 1............................10 1.......................................................................40 3.......................................................................................................10 1.................................................................................................................................................4 Merger remedies...........................................4.............................................................................................33 2......................3 Data Collection Methods and Instruments............................................................................3 Motives behind Mergers..............................................................................................................3 Information in merger review..................................6 1.2 Empirical studies of mergers.........................2...............................................................................4 Objectives of the Study.............................................................................................40 3..................0 LITERATURE REVIEW..............3 Research Questions.................1 Background of the Study....................................22 2...xi LIST OF FIGURES...........................................4...................6 Scope of the Study..............26 2................vii LIST OF OPERATIONAL TERMS.................4 Importance of Mergers in Company Performance.........................................................................................................................................4 Research Area.................41 ix ...................17 2............2 Statement of the Problem......................5 Performance Measures.............................................................v LIST OF ABBREVIATIONS.......................9 1...........18 2..........................................................................6 Market Based Valuation............................13 2.........................................28 2.0 RESEARCH METHODOLOGY..........................................................................................................................1 Nature of Corporate Restructuring...............................................................................................................10 1.........................................................................................7 Conceptual Framework...............................................................

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

............................................................48 Table 4............................................................13: Model Summary .............................................................................................................12: Whether the Respondents Would Recommend a Merger or an Acquisition Again............2: Type of company...............14: Coefficients results.....................................5: Sector of the organization........................11: Whether The Merger or Acquisition Undertaken the Firm Is A Success..52 Table 4.....................................................46 Table 4.52 Table 4.............45 Table 4.................................................................54 xi ...........................................................47 Table 4...........1: Education level ......3: Legal structure of the firm..................................................7: Reason/S Why the Organization Undertook the Merger.............9: Whether the Firm Appealed To the High Court.......4: Classification of organization in terms of ownership.......................10: The Degree of Involvement of Managers in the Acquisition or Merger Process ...............................................................53 Table 4.....................51 Table 4................................................................................................49 Table 8: Whether the Firm Was Subjected To Appeal to the Tribunal.....50 Table 4............................LIST OF TABLES Table 4.............................................44 Table 4.47 Table 4.............................50 Table 4.......6: The Sort of Merger or Acquisition That the Company Undertook.............................................................

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

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

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

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

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

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

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

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

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

What are the benefits of synergy that is achieved once companies adopt mergers and acquisitions? 9 .3 Research Questions The research questions had been decided as follows: i.Many companies in Kenya use share price as their measure of performance and by which they are judged by investors and stockholders alike. What is the significance of mergers and acquisitions in the increase in market power of companies in Kenya? ii. This study will be set to find out the effects of mergers and acquisitions. 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. 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.

4 Objectives of the Study 1.4. To determine the significance of mergers and acquisitions in the increase in market share of companies in Kenya. 1. iv. To find out the role that mergers and acquisitions play in achieving enhanced profitability of companies in Kenya.2 Specific objectives The specific objectives have been decided as follows: i.4.1General objective To establish the effects of mergers and acquisitions on financial performance of companies 1. To determine the benefits of synergy that is achieved once companies adopt mergers and acquisitions.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 . Academicians and researchers by providing more insight into the relationship between mergers and acquisitions and company performance.1. To establish the extent to which mergers and acquisitions assist in the attainment of returns on investment in companies in Kenya. iii. ii.

Emphasis was. Time factor: Due to the fact that the time allocated for this study was short. be on Nairobi since it is the capital city and most of the head offices are located in Nairobi.7 Limitations of the Study The major constraints of this study were: i. 1.As the environment is very dynamic. however. 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. engaged the use of his personal savings and went for cost effective data collection tools and methods to cut on costs. yielded reliable and valid results. To the executives and managers of the companies listed at the NSE. the researcher was compelled to take a case of only those companies that operate in Nairobi.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. The researcher however. This study will also contribute to the bulk of knowledge and research at the university as it will be used as a basis of reference by students for any future study in the field of mergers. 11 . 1. acquisition and restructuring of companies. This however. the study will cover all the companies which have merged and the relative performance. ii.

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

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

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

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

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

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

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

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

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

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

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

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

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.Since the management of a firm often has effective control of the board of directors.2. Merger reviews typically focus on horizontal mergers since. Especially promising in this connection are crossborder transactions (like the Nation Media Group in the East African region) either in the form of joint venture or mergers and acquisitions to achieve new products. proxy contents are often regarded as directed against the existing management. 2. when an activity does not fall into an effective organization structure of the parent. Joint ventures represent a flexible method of exploring new areas with partners whose capabilities are complementary. contraction and efforts to improve the efficiency of operations. a firm may improve motivations and performance by creating separate operations. by defining they reduce the number of competitors and the relevant markets. and new geographic markets. 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. 17 . Also of concerns are mergers between a firm which is active in a particular market and another which is a potential competitor. It is clear from the above list that the strategies include expansion. new technologies.

a manufacturer merging with a supplier of component products. producers of CNN. producers of HBO and other video programming and Turn Corp. or a manufacture merging with a distributor of its products. An example is the acquisition of Amalgamated Banks of South Africa (ABSA).. the acquisition of a competitor could increase market concentration and increase the likelihood of collusion. The elimination of head-to-head competition between two leading firms may result in unilateral anticompetitive effects. 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. often leaving Barclays Bank as the only major bank in the area. This is called a “vertical foreclosure” or “bottleneck” problem. Owino (2005).In a horizontal merger. Vertical mergers involve firms in a buyer-seller relationship. vertical mergers can also be of concern. (a big bank in South Africa) by Barclays Bank (another big bank). and other programmes. Another example is the merger of Time Warner Inc. 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. TBS. in many areas of South Africa. The merger has reduced the number of competitors. 2.2 Vertical merges This takes place between firms at different levels in the chain of production (such as between manufactures and retailers). 18 .2.

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

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

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

Market indicators meet the demand for measures of stock market performance. overview of studies on the economic effects of M&A performed during the late fifties and sixties reveals that there is substantial ex post evidence that mergers and acquisitions have positive effects on the performance of firms. This partial ownership may cause managers to work less vigorously than otherwise or to consume perquisites (luxurious officers. 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. suggest that related acquisitions can have a positive effect on company performance if these acquisitions support innovative activities of firms. 2.4 Importance of Mergers in Company Performance Mergers & Acquisitions can be seen as instruments used by companies externally acquire capabilities developed by their partners. 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. 22 . However. Such indicators quantify movements in stock market prices and act as a standard in evaluating the returns on money invested in the stock market. The Stock Market is one of the most closely observed economic phenomenon in the world. Hoskisson and Hilt (1994). Manne (1965). As such they can have a positive economic effect on companies that are active in the M&A Market.

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

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

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

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

it can therefore be observed that results are not similar and thus there is need to carry out further research in this area.3 Information in merger review As part of the merger review process. during which the reviewing authority will be entitled to request further information. From the above empirical studies done in the field of M&A.4. Singh and Montgomery (1987). 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. The initial information filing typically triggers a waiting period. concluded that conglomerate mergers satisfied the desires of managers for larger firms but did not increase earnings or market prices. 27 . the merging firms must normally provide information to the reviewing authority. It is standard practice in jurisdictions which impose merger review to require merging parties to submit advance notice of the proposed transaction.Reid (1968). 2. If the competition authority decides to proceed with a further investigation. 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. This process concludes with a determination by the reviewing authority whether to proceed with a more detailed investigation.

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

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

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

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).5. But if stock prices gain in value and earnings remain the same or go down. 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 is 35. the P/E rises. If earnings move up with share prices the ratio stays the same. For example. it could also mean that something is fundamentally wrong with the company. 31 . A lower IVB ratio could mean that the stock is undervalued. the Price to Earnings ratio (P/E) highlights the connection between share prices and recent company performance. Price-To-Book Ratio (IVB Ratio) A ratio used to compare a stock's market value to its book value. 2. historically high.This ratio is obtained by dividing the current market price of a share by its issuing company's annual earning per share or the market capitalization to the entire net profit (total earnings). if a stock price was Kshs70 and it got Kshs2 in earnings. However.1 Other measures of performance By relating share prices to their actual profits.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.

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

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

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

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

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 2.7 Conceptual Framework The study is based on the assumption that the independent variables affect the dependent variable.2. The independent variables will be extensively discussed in the literature review.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 .

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

neither agree or disagree. values 1. agree. The firms that were listed in the MPC reports include either public.ended and close-ended. Mugenda and Mugenda(2003). It was therefore not possible to expand the size of the population beyond this period.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).3 Data Collection Methods and Instruments Primary data was collected using structured undisguised and self-administered questionnaire.4. values and behaviour and to help minimize subjectivity and make possible use quantitative analysis. 3. 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. The likert scale was used to measure perception. Consequently. the target population for this study comprised 71 companies. The available data at the time of this study was for the years 2001 to 2004. 2. The respondent was to check one of the offered five fixed alternative expressions such as strongly disagree. agree and strongly disagree comprising of a continuum. attitude. The distinction between takeovers and mergers in some years were not indicated. locally. The questions were both open. private. were assigned. This data may have some limitations. In this five point continuum. However.5. It was also appropriate to incorporate some questions relating to the firms’ profile in the first part of the questionnaire.3. 38 .3. a census survey was carried out.

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. It was therefore. The shareholders of the company were convinced that once the businesses merge. 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. The questionnaires were distributed through postal mail with an enclosed self-addressed return envelope to help increase the response rate. The Board of Directors therefore. determined by the favourableness or unfavourableness of the item . or there is an acquisition. as a respondent to this questionnaire or a senior partner in a partnership business as they were the most appropriate persons to complete the questionnaire. The researcher followed this with telephone calls and personal visits. value will be created. appropriate to target the CEO. 39 . were involved in a merger or an acquisition process.Nachmias and Nachmias(2003).These values expressed the relative weights and direction. 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 questions also addressed the approval process within the Competition Law. This assisted the researcher on the background information of firms that merged or acquired a target firm. 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. However. 3. the researcher purposively targeted two senior managers or senior partners in the partnership or merged companies and the Board of Directors through the CEO.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. 3. post merger activities. The total number of respondents from the 28 companies was 2 respondents per company to yield a sample of 56 respondents. 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. There are 71 companies that have merged.4 Research Area The research covered all the companies in Kenya that had undergone mergers and acquisitions between the year 2003 and 2007. 40 . within the companies.

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

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

those who had served their organization for a period of 5 to 10 years were shown by 30% of all the respondents . Author (2010) On the number of years the respondents had served their respective organization.while 40% of the respondents were females.Figure 4.2: Gender of the respondents 40% m le a fem le a 60% Source. Author (2010) The data in the above figure shows the study findings on the gender of the respondents . Figure 4. 43 .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. 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 .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 . the study found that majority of the respondents were males as shown by 60%.from the findings.

Author (2010) 44 . On the number of outlets the organization had. the study found that most of the organization had their main offices located in Nairobi CBD area.4% of the respondent had postgraduate’s degrees and 12. from the finding the study found that majority of the respondents had a university degree as shown by 52. Author (2010) The data in the above table shows the respondent education level.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. Upper hill.Table 4. On the years the organization was established. and Westland and Kariobangi area. 35. the study found that this ranged between 1960 to 1993.1% of the respondents.1: Education level Frequency Diploma Degree Post graduates degree Total Source. industrial area.5% of the respondents were diploma holders. the study established that this ranged between 5 to 13 outlets. On the location of the main offices of the respondent’s organization. Figure 4.

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

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

Author (2010) On the classification of the firms in terms of ownership. 47 .Table 4.2 100 The study also requested the respondents to indicate the sector in which their organization belonged. Author (2010) 22 8 13 43 Percent 51.2 100 Table 4.6 37.5: Sector of the organization Frequency Manufacturing Agriculture Service Total Source. from the finding of the study in the above table.2% of the respondents. those were in the service sector were shown by 37. the findings of the study in the above table shows that majority of the firms were locally owned as shown by 62.4: Classification of organization in terms of ownership Frequency Percent Locally owned Both Local/Foreign Owned Total Source.2 18.6% of the respondents indicated that their firms were in agriculture sector.8 37.2% of the respondents while 18.8% of the respondents and those that were both local and foreign owned were shown by 37.2%. the study found that majority of organization were in manufacturing sector as shown by 51. 27 16 43 62.

most of the respondents as shown by 54% reported that their companies undertook a horizontal merger.2. while a small proportion of respondents as shown by 4% reported that their firms undertook a concentric merger. 32% said vertical merger. 10% of the respondents said conglomerate merger.3 Experience of the Firm Whether the Firm Was a Merger (M) or a Takeover (T) According to the study. 48 .4. Table 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. all the respondents (100%) reported that their firms were mergers.6: The Sort of Merger or Acquisition That the Company Undertook Frequency Horizontal merger Vertical merger Concentric merger Conglomerate merger Total Source. From the study.

3 31.7 68. 66.7% said to acquire brand loyalty.0 No 21.0 66. while 41.7 40.7% said to diversify in a growth business.7 51.3% said to enter to a new geographical area.3 48. 68.7 41. According to the findings. Duration Taken To Receive an Approval from the Commissioner of Monopolies and Price According to the findings.3 58.0 The study also sought to establish the reasons why the organizations took the merger.Table 4.3% of the respondents said in order to increase market share. 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 .7: Reason/S Why the Organization Undertook the Merger Yes Increase market share Acquire state. 78. the respondents who said to acquire state.0 33.7 40. 51.7% of the respondents reported that they took a merger in order to overcome entry barrier.3 60.of -the art technology and to comply with new legislation were shown by 60% each.3 60. Author (2010) 78.of -the art technology To diversify in a growth business Overcome entry barrier Acquire brand loyalty Enter to a new geographical area Comply with new legislation Source.

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

the merging parties may also challenge a merger decision imposing a remedy and complains by the minority shareholders of the involved firms. appeal against a board decision against them.10: The Degree of Involvement of Managers in the Acquisition or Merger Process Frequency Very little Moderately A lot Total Source. From the study. An Estimate of the Merger or Acquisition Budget The study also sought to establish the estimate of the merger or acquisition budget.0 100 The respondents were also requested to indicate the degree that they involved managers in the acquisition or merger process.Reasons for Appeal From the findings. where the authority blocks a merger the parties can appeal its decision to the High Court. Duration It Took To Conclude the Appeal in the High Court According to the findings. the budget ranged between Kshs 500. 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. 000-2M. it took the firm’s 3-6 months to conclude negotiations with the other firm. Table 4. According to the study.0 74. Author (2010) 5 8 37 50 Percent 10.0 16. the reasons why firms appeal to the high court include. most of the respondents as indicated by 74% reported that they involved their managers a lot in the acquisition or merger 51 . Duration the Firm Took To Conclude the Negotiation with the Other Firm From the findings.

The regression model was as follows: 52 .0 100 The respondents were therefore asked whether they would you recommend a merger or an acquisition again.11: Whether The Merger or Acquisition Undertaken the Firm Is A Success Frequency Yes No Total Source. the majority of respondents as shown by 72% said that they would recommend a merger or an acquisition again. 4. the majority of the respondents as indicated by 94% termed the merger or acquisition undertaken by their firm a success. 16% reported that they moderately involved the. while 28% of the respondents felt that they would not recommend a merger or an acquisition again.process. while 10% of the respondents said that they involved them to a very little extent.0 28. Author (2010) 47 3 50 Percent 94 6 100 From the findings in the above table. Author (2010) 36 14 50 Percent 72.12: Whether the Respondents Would Recommend a Merger or an Acquisition Again Frequency Yes No Total Source. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success Table 4.2. Table 4. From the study.4 Regression Analysis A multivariate regression model was applied to determine the relative importance of each of the five variables with respect to establish the effects of mergers and acquisitions on financial performance of companies.

Error R Adjusted of the Model R Square R Square Estimate 1 . market share. profitability of the company. Achievement of Synergy and Return on Investment.223 Source.938 a Predictors: (Constant).090 . Achievement of Synergy and Return on Investment at a confidence level of 95%. the value of adjusted R2 is 0.009 F df Change 1 . Adjusted R2 is called the coefficient of determination and tells us how merger and acquisition varied with the market share. diversification of risk .009 1 df 2 1 Sig. profitability of the company. From data in the table above. F Change . Achievement of Synergy and Return on Investment. Author (2010) R Square Change .13: Model Summary Change Statistics Std. there was a variation of 88. profitability of the company.1% of merger and acquisition with market share. 53 .881. This implies that.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 4.087(a) . diversification of risk.881 4. diversification of risk.

087 .312 Sig.771 .978 . it was also established that a unit increase in market share 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.further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0. merger and acquisition of companies would be 0. This infers that there exist positive relationships between merger and Unstandardized Coefficients B Std. profitability of the company.833. The established regression equation was Y = 0. market share.923 .097 .216 X2 + 0. profitability of the company.358 X3 + 0. From the data in the above table. Author (2010) a Predictors: (Constant).319 Standardized Coefficients t Beta 1.574 . diversification of risk.314X5 From the above regression model.216.833 1.358 . holding the predictors factors constants.097 .090 .314.418 0.090 .311 0.967 .097 . Error 0. diversification of risk .317 . 54 . a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0.771.156 0. also a unit increase in diversification of risk would cause an increase in merger and acquisition by a factor of 0.097 . Achievement of Synergy and Return on Investment.216 . also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0.938 .771 X1 + 0.094 .061 0.094 .839 .Table 4.018 0.358.091 . Achievement of Synergy and Return on Investment.14: Coefficients results Model 1 (Constant) market share profitability diversification of risk Achievement of Synergy Return on Investment Source.833 + 0.574.314 .574 X4 + 0.

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

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

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

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

majority of respondents as shown by 72% said that they would recommend a merger or an acquisition again. achievement of synergy and return on investment.771.further unit increase in achievement of synergy would cause an increase in merger and acquisition by a factor of 0. Y = 0.the study found that the majority of the respondents as indicated by 93. The study also established a regression equation which was. while 28 % of the respondents felt that they would not recommend a merger or an acquisition again. merger and acquisition of companies would be 0.On the general assessment of merger .574 X4 + 0.216 X2 + 0.833 + 0.314. while a small proportion of respondents as indicated by 6% reported that the merger or acquisition undertaken by their firm was not a success. holding the predictors factors constants. On whether the respondents would recommend a merger or an acquisition again. diversification of risk.3% termed the merger or acquisition undertaken by their firm a success. also a unit increase in diversification of risk would cause an increase in merger and acquisition by a factor of 0.358. This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. also a unit increase in return on investment would lead to increase in merger and acquisition by a factors of 0.216.574. 59 .771 X1 + 0. profitability of the company.833.358 X3 + 0.314X5 From the above regression model. a unit increase in profitability would cause an increase in merger and acquisition by a factor of 0. it was also established that a unit increase in market share would cause an increase in merger and acquisition by a factor of 0.

The study also concludes that mergers and acquisitions assisted in the attainment of returns on investment in companies. acquire brand loyalty . diversification of risk. complying with new regulation . diversify business growth.358 X3 + 0. conclusion the researcher recommends that small companies should adopt merger and acquisition as this will help them in entering into new geographical areas. The study concludes that as result of merger the company acquired larger market share thus increased profitability. overcome entry barriers. 60 .771 X1 + 0. acquiring state of technology. acquire brand loyalty and overcome entry barriers. acquire states of art and technology. The study also established a regression equation for the study was.216 X2 + 0. acquire brand loyalty and overcome entry barriers .574 X4 + 0.833 + 0.314X5 This infers that there exist positive relationships between merger and acquisition and predictor factors which are market share. increase their profitability and return on investment. 5.4Recommendation From the above discussion.5. the study also concludes that the benefits of synergy that is achieved through adoption of merger and acquisition were. profitability of the company. Y = 0. acquire states of art and technology.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. comply with new legislation. comply with new legislation. diversify their business growth. The study recommends an in-depth study to investigate the challenges affecting merger and acquisition of companies. increased market share. achievement of synergy and return on investment.

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NAIROBI Dear Respondent. Thank you......“An Investigation into Effects of Mergers and Acquisitions on Financial Performance of Companies in Kenya (2003 .. and results of this study will be available for your use/reference.... Yours sincerely.APPENDICES Appendix I: Introduction Letter Kennedy Murithi P. The information sought from you will be treated with utmost confidence.O Box . The research topic is: .2007)”.. 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. g) When the organization was established …………………………… h) How many outlets does the organization have ……………………….Appendix II : Questionnaire PART ONE – PERSONANAL DATA 1. a) Name of organization ……………………………………...………. Kindly indicate whether your company is: Privately owned ( ) Part private/part public ( ) 66 . c) State your Gender (Tick where appropriate) Male ( ) Female ( ) d) Number of Years served (Tick where appropriate) 0-5( ) 5-10 ( ) 10-15 ( ) Over 15 years ( ) e) Educational Level (Tick where appropriate) Diploma ( ) Degree ( ) Post Graduate Degree ( ) f) Location of the main office ……………………………………………. b) What is your Designation ……………………………………………. Please indicate.. Indicate the answer that best represents the ownership composition of your company (Tick where appropriate) Local ( ) Part Local/ Part Foreign ( ) Foreign ( ) Governmental ( ) 3.

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

(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. (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). please complete (6) below. M( ) T( ) 68 . (a) (b) (c) Locally Owned ( ) Foreign Owned ( ) Both Local/Foreign Owned ( ) (7) The sector your organization is operating in (Tick appropriately).

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

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

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. (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).

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 Overheads & Incidental Expenses 12.000.000.000.000.00 Report Writing 30.00 Field Visits for Self 6.00 Field Visits for Research Assistants 40.000.00 TOTAL 103.) Stationary & Other Consumables 3.000.000.00 Data Analysis 2.ITEM NO. 1 2 3 4 5 6 7 ITEM DESCRIPTION ESTIMATED REMARKS COST (KSHS.000.00 Source: Researcher (2008) 73 .00 Subsistence Allowances 10.

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

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

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. 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. 48 1CL( K) Limited & Sameer ICT Ltd 49 Resort (K) Ltd & MS Family Town 2002 Ltd. Ltd & Etcoville Investments Ltd Horticulture 54 Pan African General Insurance Ltd & Apollo Insurance Insurance Company Ltd 55 Crown Berger & Devas Ltd & Aziz Tanners 56 Gfccnlands Dairy & Westlands Dairy Ltd 57 Alexander Forbes & Hyman Robertson (K) Ltd Manufacturing Dairy Insurance 76 . 40 Kenol Kobil (K) Ltd & Mid Oil Africa 41 CROWN Security Services Banking Sector IT (Internet Service Provision) Petroleum Manufacturing Pharmaceutical Berger (K) Ltd & Unibuilt (K) Ltd 42 SJ Johnson Wax & Bayer East Africa 43 Brac Budget Rent A Car International & Avis Europe Plc Transport 44 Eustoma K. 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. 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. & 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. 69 Fresh Del Monte Produce Inc. 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.V. 65 Sameer Telecom Ltd & Kenya Telecom BV 66 Shell and BP Malinda and Oil Com. & Kenyan Telcom B. Security 63 MTN International Mauritius Ltd.

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