THE ROLE OF MERGER AND ACQUISITION ON ORGANIZATIONAL SURVIVAL IN NIGERIA (A CASE STUDY OF OANDO NIG. PLC AND AGIP NIG. PLC, KADUNA ZONAL OFFICES)
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THE ROLE OF
MERGER AND ACQUISITION ON ORGANIZATIONAL SURVIVAL IN NIGERIA
(A CASE STUDY OF OANDO NIG. PLC AND AGIP NIG. PLC, KADUNA
ABSTRACT
Merger
and acquisition has been widely acclaimed by scholars and professionals in
business as the most desirable and effective strategy to revive the difficult
situations facing Nigeria
TABLE OF CONTENTS
TABLE OF CONTENTS
Cover
page - - - - - - - - - i
Title
page - - - - - - - - - - ii
Declaration - - - - - - - - - - iii
Approval
page - - - - - - - - - iv
Dedication - - - - - - - - - - v
Acknowledgement - - - - - - - - vi
Abstract - - - - - - - - - - viii
Table
of content - - - - - - - - - ix
CHAPTER ONE - Introduction
1.0 Background of the study - - - - - - 1
1.1 Historical Background of Oando Nigeria Plc - - - 3
1.2 Statement of the general problem - - - - - 5
1.3 Objective of the study - - - - - - - 6
1.4 Significance of the study - - - - - - 8
1.5 Research question - - - - - - - 9
1.6 Statement of hypothesis - - - - - - 10
1.7 Scope and limitation of the study - - - - - 10
1.8 Definition of terms - - - - - - - 12
CHAPTER TWO - Review of Related
Literature
2.0 Introduction - - - - - - - - 14
2.1 Merger and Acquisition definitions - - - - - 14
2.2 Types of Merger - - - - - - - - 16
2.3 Strategies for business survival - - - - - 18
2.4 Motive behind merger and acquisition - - - - 19
2.5 Reason for merger and acquisition preference
over
investment in new business generated
from scratch - - 23
2.6 Procedure for effective merger - - - - - 26
2.7 Method of financing merger - - - - - - 28
2.8 Merger and acquisition investment banking - - - 31
2.9 Merger and acquisition market place
difficulties - - 32
2.10 The effect of merger and acquisition - - - - 35
2.11 Legal issues in M & A - - - - - - - 36
2.12 Regulation of M & A in Nigeria
2.13 Summary of the review - - - - - - - 40
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction- - - - - - - - - 42
3.1 Area of study - - - - - - - - 42
3.2 Research design - - - - - - - - 43
3.3 Research population - - - - - - - 43
3.4 Sample and sampling technique - - - - - 44
3.5 Data collection instruments - - - - - - 44
3.6 Data collection method - - - - - - - 46
3.7 Validity and reliability of the instrument - - - - 46
3.8 Administration of research instruments - - - - 47
3.9 Techniques of data analysis (mode) - - - - 47
CHAPTER FOUR - Presentation and Analysis
of Data
4.0 Introduction - - - - - - - - 49
4.1 Respondent characteristic and classification - - - 49
4.2 Presentation and Analysis of data - - - - - 50
4.3 Testing of hypothesis - - - - - - - 58
4.4 Summary of findings - - - - - - - 60
CHAPTER FIVE - Summary, Conclusion and
Recommendation
5.0 Introduction - - - - - - - - 62
5.1 Summary - - - - - - - - 62
5.2 Conclusion - - - - - - - - - 65
5.3 Recommendations - - - - - - - 65
Bibliography - - - - - - - - - 68
Appendix
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND
OF THE STUDY
The
increase in oil boom in the 70’s was an era of huge and expensive prospect of
doubtful utility and viability. However, the heavy dependence on oil and
imported input rendered the Nigerian economy to be sensitive to external shocks
with the collapse of the world oil market in the mids 1981, an economic crisis
emerged in Nigeria, various control measures were put in place in order to
correct the disturbing situation between 1982 – 1985 but these measures failed
to deal effectively with the fundamental economic and financial problems
confronting the economy which was deteriorating.
The
nation began to face a situation of persistence and deteriorating balance of
payment problem, the external debt continually rise, the emotion of
international credit worthiness and the acute shortage of raw materials and
consumer goods, as agriculture suffered and severely, neglected, the country
(Nigeria) was at the point of collapsing.
Considering
the above circumstances, there is need for national economic reform which the
federal government eventually came up with Structural Adjustment Programme
(SAP) in 1988 as a strategy to end the deformation of the nation economy and
achieve a turn around in the fortunes.
The
current global economic depression facing the world has been described by the
world economic and financial experts as the longest and deepest depression in
the post war period. Major industrial developed countries share in this
performance characterized by declining growth rate, high inflationary pressure,
increase in number of unemployment and this trend had serious adverse effect on
the economic of developing countries of which Nigeria
The
present development is quite affecting a substantial number of Nigeria
contemporary business most of them are on the path of decline, leading to
folding up of some companies and many others laying off their staff and
equipment as a result of operational hardship with lack of ability to expand
and decline in sales volume as well as profit.
With
the present difficult situation in the Nigeria
1.1 HISTORICAL
BACKGROUND OF OANDO NIGERIA PLC
Oando
Plc commence its business operation as a petroleum marketing company in Nigeria
in 1956 under the name “ESSO West Africa Incorporated” a subsidiary of Export
Corporation of the USA. In 1969, the company was incorporated under Nigeria
On 1st March, 1991
the company became a public limited company and was known as Unipetrol Nigeria
Plc in the same year, 60% of the company’s shares was sold to the Nigeria Nigeria
In 2000,
under the 2nd phase of the Federal Government of Nigeria’s
privatization programme, ocean and soil services limited became a core investor
by acquiring 305 of the Federal Government’s 40% equity stock in the company,
the remaining 10% was sold to the Nigeria
In
August 2002, the company acquired Agip Petrol’s 60% stake of Agip Nigeria Plc,
the sale of the 60% interest of Agip Petrol International was the result of an
international bid conducted by Agip petrol international B.V with the
assistance of an international adviser during which Agip Petroleum International
selected to them Unipetrol Nigeria Plc following the acquisition of Agip
Nigeria Plc the company was again i.e. branded to Oando Plc in 2003 and emerged
as Nigeria
1.2 STATEMENT
OF THE GENERAL PROBLEM
Due
to the present economic situation of the country (Nigeria), report indicated
that many Nigeria businesses and corporate organizations have closed up while
many more may soon close up, even those that have survived, it has been a
mergical survival and they are operating far below installed and optimum
productive capacities leaving none in doubt that the situation is bad enough,
the following problems are notice.
·
There is need to note the fact that many of
this organization that are depressed situation can either still be acquired or
merged with more prosperous and strong enterprise. In other word, an
alternative to this ugly economic woe in
the country should have been for companies to come together and continue
through merger or acquisition.
·
There is overextension which tend to make the
organization fuzzy and unmanageable. There is manager’s hubris, overconfidence
about synergies form merger and acquisition which results in overpayment for
the target company.
·
There is negative reactions from company’s
employees, bankers, suppliers, customers and other which make the process by
which a company is bought or sold prove difficult, slow and expensive. Thus,
they are not sold as often as they might or should be.
·
Multiple listing service concept has not been
applicable to merger and acquisition due to the need for confidentiality.
·
There is lack of proper method, apparatus and
techniques for efficiently executing merger and acquisition transactions
without compromising the confidentiality of thee parties involved without
unauthorized release of information.
·
Lack of good recording keeping of incomes
from business undertakings, mostly attributed to illiteracy and in other cases,
a deliberate attempt to evade tax is also a problem.
1.3 OBJECTIVE
OF THE STUDY
No
business is embarked upon without a set of objectives to be accomplished.
Merger and acquisition are common features of modern commercial sense. Hence,
the intended objectives of conducting this study are as follows:
·
To examine the economic reasons behind above
phenomenon and in particular to look into how organization in both private and
public sectors of Nigeria
·
To analyze the economic and social economic
of scale associated with operations, costs of company related to theories and
revenue stream. Thus, increasing profit, market share etc by absorbing a major
competitor and increasing its power to set prices.
·
To determine the effectiveness of merger and
acquisition as a strategy for organizational survival in Nigeria
·
Designed to smooth the earning results of a
company which over the long term smoothes the stock price of a company, giving
conservative investors more confidence in investing in the company.
·
To analyse the social, political, economic
and fiscal problems encountered by business organization with regards to the
policy of merger and acquisition in Nigeria
·
To develop ways or means by which some of the
problems which are encountered in the realization of the proceeds from the use
of the proceeds improved.
·
Te study attempt to investigate its strategic
functions for improvement in productivity and profitability of Oando Nigeria
Plc.
·
It is also hope that the recommendation made
if well studied and applied, could help business organization particularly
Oando Nigeria Plc, in attaining her financial goals efficiently.
1.4 SIGNIFICANCE
OF THE STUDY
The
researcher hope that at the completion of this study, it will contribute
immensely to the existing literature on business organization and Oando Nigeria
Plc in particular towards advancement of knowledge in thee area of business
merging, other corporate bodies in Nigeria will also find the findings and
recommendations useful especially those that are hit by the present economic
woe and are considering closing down a the only option.
Government
and its agencies that arte establish to regulate and approve merger and
acquisition proposal will also find this research work very beneficial
especially in enhancing their operations.
This
research work also intends to serve as a good reference material for learning
among students of various institution of higher learning, and other researchers
in the area of merger and acquisition in field of business administration and
management which is the bane of economic development of the country.
1.5 RESEARCH
QUESTION
For
this research work to be successful certain question has to be answer in
request to the contributions of merger and acquisition to organizational
survival in Nigeria
i.
What is the impact of merger and acquisition
to Nigeria economy?
ii.
How can private and public organizations
survived under the merger and acquisition?
iii.
Would merger and acquisition provide social
economic of scale?
iv.
Does merger and acquisition solve the
depressed situation of economic woe in Nigeria?
v.
Can merger and acquisition add significant
value of the firm’s shares?
1.6 STATEMENT
OF HYPOTHESIS
“According
to Egejule and Ogwo (1990). Hypothesis is a tentative and testable explanation usually
in a declarative form of the relationship between variables either specific or
general.
Ho That
merger and acquisition does not bring about improvement in market performance.
Hi That
merger and acquisition bring about improvement in market performance.
Ho That
merger and acquisition does not lead to increase in profitability of the
combined firms.
H2 Tat
merger and acquisition lead to increase in profitability of the combined firms.
1.7 SCOPE
AND LIMITATION OF THE STUDY
To
understand a research project of this nature, the scope is normally defined
with respect to geographical and time dimension. This research work is
concerned with the he general effect of merger and acquisition as strategy for
organizational survival with respect to Oando in Nigeria Plc. 2007 -2008.
It
is a common knowledge that empirical studies in business organization yielded
results which have to be taken with the proverbial “pinch of salt” as a result
of poor data base. In this regards, the difficulties experiences is ranging
from.
·
Some of the organizations that consummated
merger and acquisition are not willing to release such information saying that
such information are classified document.
·
The research is limited to the nature of te
topic itself, it is so broad.
·
The research is constraints of
non-availability of all relevant data and non-possibility of studying all
consummated mergers and acquisition in Nigeria
·
Financial constraint, due to nature and age,
the researcher faced with the high cost of transport to move from one place to
another where data and relevant information related to this topic could be
obtained.
·
Finally, the reluctant and incorporate
attitude of respondents to questions is yet another. Limiting factor to this
research work.
Despite
the above mentioned limitations and many other unmentioned, the information
were confidential and the study has been systematically carried out devoid of
any bias and in line with the earlier stated objectives.
1.8 DEFINITION
OF TERMS
1. Merger and Acquisition (M & A): A merger is an arrangement by which all
the assets and resources of two or more companies are brought together under
the control of one company which is owned jointly by stockholders of the
original companies.
Acquisition
is the whole transfer and control of assets, liabilities, employees, management
technical relationship and expert etc of one corporation to another.
2. Economic of Scale: This refers to the fact that the
combined company can often reduce duplicate operational costs relative to
theoretically, the same revenue strum, thus increasing profit.
3. Synergy: This refers to better use of
complementary resources. (i.e. 2 + 2=5).
4. Risk Diversification: This is the
situation where a company which is in a strong position within its own market
either in terms of cash flows or market share, decides to extends its influence
by acquiring another company usually in a different line of business, result to
a wider product range.
5. WOE: A long trouble confronting
business environment..
6. Cross Selling: A company buying a stock
broker could then sell its products to the broker’s customers, while the broker
can sign up the company’s customers for brokerage accounts.
7. Manager’s Hbris: This refers to
manager’s overconfidence about expected synergies from M & A which results
in overpayment for the target company.
8. Anti-Trust Cycle: Is a regulatory
device that analyze the impact of merger on market and to control monopolistic
situation and other trade restriction activities that lead to adverse
implication for an economy.
9. (NEPD):National Economic Policy and
Development
10. CAMA: Company and Allied Matter Act.
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