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EFFECT OF MERGER AND ACQUISITION ON ORGANIZATION EFFECTIVENESS AND PROFITABILITY (A CASE STUDY OF SEVEN-UP BOTTLING COMPANY PLC)
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BACKGROUND OF THE STUDY
All over the world Nigeria inclusive, the issue of business merger and acquisition has been taken into awareness with the recent on-going development where central bank of Nigeria advised bank during the 269th Bankers Committee Forum (2004) to seriously consider merger and acquisition as options to building competitive edge needed to play in globalizing financial market.
When the Central bank of Nigeria (CBN) announced what is now known as the N25billion recapitalization or consolidation of the banking industry, there have been strands of merger and acquisition before 2004.
Existence of infant industries constitutes an essential ingredient in the lubrication and development of large firms of an economy. This gives adverse to merger. A merger occurs when a firms assumes all the assets and all the liabilities of another firm, the acquiring firm retaining its identity while the shareholder is generally required to prove a merger. A merger is just one type acquisition. An acquisition company is several other ways, which includes purchasing some or all of the outstanding shares of stock.
Nigeria has since 2004 develop strands for merger and acquisition with the hopes of realizing an economic gain for such a transaction to be justified. This has shown increased interest by larger firms acquiring smaller ones in order to promote and finance its economic of scale, complement resources, garnering tax advantage and eliminating inefficiencies.
In general, mergers and acquisitions are performed in the hopes of realizing an economic gain for such a transaction to be justified. The two firms involved must be worth more together than they were apart. Some of the potential advantages of, mergers and acquisitions include achieving economic of scale, combining, complementing resources, garnering tax advantages and eliminating inefficiencies. Other reasons for considering growth through mergers and acquisitions include obtaining proprietary rights to products or services, increasing market power by purchasing competitions, shoring up weaknesses in key business area, penetrating new geographic regions or providing managers with new opportunities for career growth and advancement.
1.1 STATEMENT OF THE PROBLEM
The recent outbreak of firm merger and acquisitions in Nigeria is attracting much attention; partly because of heightened interest which motivates firm to merge and how merger and acquisition affect performance or efficiency.
The performance of merger and acquisition is unsatisfactory and majority of these merger and acquisition have failed woefully in the accomplishment of predetermined objectives for their establishment.
Merger was the opportune to provide a research on development organization fit for 21st century and increase the number of licensing agreement. It also expand more and aid sales during geographical explanation which has become one major problem with very strong competition in this industry from Phizer, Zeneca which was making good environment availability of existing substitute product in the pharmaceutical industry, government policies was one of the majority problems faced by GlaxoSmithKline after merge, several studies have thus the merger and acquisition failed in Nigeria as a result of gross mismanagement and misappropriate of funds, excessive corruption and unfavorable government policies, bribery and embezzlement among others,
These are the problems are which the research is centered:
? If merging of an organization is perfectly monitored, it could lead to large scale of production.
? Merger will allow new companies to dominate all the rights and power of combine cooperation.
1.2 OBJECTIVES OF THE STUDY
The general objective of the study is to examine the effect of merger and acquisition on organization?s effectiveness and profitability while specific objectives are stated below:
i. To examine whether the practice of merger in our country is affected by the economic growth.
ii. To have a clear understanding on how merger can be used to increase our standard of living.
iii. To determine whether merger can be used as a yardstick for measuring corporate goals and growth.
iv. To examine the financial and legal aspect of merger and acquisition.
v. To examine whether merger and acquisition is a means of improving management competency.
The following research questions will serve as a guide to find solutions to the problems being identified.
i. Is merger an essential tool for the growth of an economy?
ii. Does merger and acquisition contribute to individual standard of living?
iii. Is merger a tool for growth and survival of an organization?
iv. Can merger efficiently measure the financial and legal aspect of a company?
v. That merger and acquisition is a means of achieving management competency?
The purpose of this study is to inspire the effect of larger acquisition on companies and to get speculations; the following hypothesis is formulated accordingly. The hypothesis should be tested and determined in two ways.
Null Hypothesis (Ho),
Alternative Hypothesis (Hi),
Ho: There is no significant effect that employees tend to perform supportively during their pre- and post-merger acquisition period?
Hi: There is significant effect that employees tend to perform supportively during their pre- and post-merger acquisition period?
Ho: There is no significant effect of merger and acquisition on the economy?
H2i: There is significant effect of merger and acquisition on the economy?
Ho: There is no significant effect that merger and acquisition bring individual employee prestige and ego?
H3i: There is significant effect that merger and acquisition bring individual employee prestige and ego?
SIGNIFICANCE OF THE STUDY
This research exercise will be of benefits to companies already merged and those who wish to merge.
It will also be of benefit to the policy makers, shareholders and customers; when the merger is consistent with their corporate growth and increases profitability.
1.4 SCOPE OF THE STUDY
This research will revolve around the concept of merger and acquisition on organization effectiveness and profitability and would be limited to GlaxoSmithKline Nigeria Plc.
The research work will elaborate on the present knowledge of the various leaders of the organization and model involved. It will also give due on the type of merger to be adopted.
LIMITATIONS TO THE STUDY
Actually the research work would have been extended to many business enterprises possible within and outside the country but the researcher could not do as a result of the following:
? The restriction to this research are time factor to complete this project of this nature, therefore the study will be limited to Oyo state and Lagos state respectively.
? To cover as many business organizations in this project require a lot of finance instead the researcher chooses Glaxo Smith Kline Nigeria Plc.
DEFINITIONS OF TERMS
A number of concepts that are very crucial to the current study are discussed below.
I. ACQUISITION: Usually refers to the purchase of a smaller firm by a larger one or is the purchase of one business or company by another company of other business entity.
II. COMMUNICATION: This is a process in which a thought is being initiated by a person (sender/encoder), transform into a set symbol (message), send through a medium to another person (receiver/decoder) in which the receiver will decode the message, interpret it and send a respond which will serve as a feedback to the sender.
III. MANAGEMENT: It can be defined as a concept of planning, organizing, staffing, directing, controlling, communicating, budgeting, decision making, problem solving and human relations control and other available resources of the organization.
IV. MANAGERS: Managers are those who undertake the task and functions of managing at any level of enterprise.
V. MERGER: Merger can be defined as the amalgamation between two or more companies. Merger can also be defined as a combination of two or more corporation where in the dominate unit absorbs the passive ones, the former continuing operation usually under the same name.
VI. ORGANIZATION: Max-Weber sees organization as a specific goal which is either closed or limits the admission of outsider by the ruler and order which is enforced by specific people authorized to do so
VII. PROFITABILITY: It simply means that makes or which is likely to make money.
VIII. PRODUCTIVITY: This is efficiency in industry measures by companying the product produced with the time taken.
IX. SYNERGY: The extent of growth that arises in firm or organization as a result of increased in assets and capital.
1.5 HISTORICAL BACKGROUND OF SEVEN- UP BOTTLING COMPANY PLC
Seven-up bottling company started business in Nigeria in 1960 as a limited liability company. The seven-up bottling company Plc is one of the largest independent manufacturer and distributor of well-known and widely consumed brands of soft drinks in Nigeria from nine manufacturing plants.
A Lebanese Mohammed El-KHALIL who came to Nigeria n 1962 founded the company. Mohammed is the father of the company?s current chairman FAYSAL EL-KHALIL. The company metamorphosed from a very successful transport business (EL-KHALIL Transport) in a bid to diversify the then largest transport company in West-Africa. On October 1st 1960, the exact day out great country Nigeria won her imdependents, Nigerians