1.1 BACKGROUND TO THE STUDY
Every business has complex involvement
with people, groups and organizations in the society. Some are intended
and desired; others are unintentional and not desired. The people and
organizations with which a business is involved, according to Post et al
(1999), have interest in the decisions, actions, and practices of the
firm. Customers, suppliers, employees, owners, creditors and local
communities are among those affected by the productivity and economic
success of the business. These they added, are critical to a firm’s
success or failure.
Organizations are set up by
entrepreneurs to render services and deliver product output to satisfy
societal needs. Satisfaction of societal needs is satisfaction of the
operating, business and financial objectives of the organization. The
needs of the society, habits, ethics, attitudes and tastes change over
time, requiring changes to how the services should be rendered to the
society by the organization, the quality of such services, the value for
it; the design and quality of products from the organization to the
society, transfer of such from the firm to the society; and exchange
value for such products. Provisions of these services require the use of
labour, raw material inputs, finance to acquire them and remunerate the
firm labour force. The characteristics, quality, availability of
national education, cost of living, levels of education and social
pressures; material inputs whose qualities varies with adulteration,
counterfeiting; inflation affecting input prices, import regulations and
international trade policies. Organizations operating in a regulated
environment need to operate within the fiscal, monetary, political and
legal regulations. Policies guiding this change from time to time to
which an organization must adjust, to be policy and a law abiding
These changes pose challenges to
organizations to which it must adjust to remain in business. They may be
opportunities or threats. The organization must thus identify its
strengths and weaknesses, harness the opportunities using its strength
to cope with these challenges (Koontz et al, 1980). Sundry attempts to
cope with these challenges have in some cases being futile leading to
the demise of such organizations.
To cope, separate firms fuse together as
one entity, relying on their combined strengths. These combinations may
be in form of mergers, where two firms fuse together to form one
entity; or acquisition, where one firm takes over another. These create
synergies in the new firm, taking advantage of tax shields, gains from
operating synergies due to cost reduction and rationalization
Mergers are common in today’s global
marketplace. They are a way for companies to acquire technologies or
products, improve profits and productivity, while reducing overall
expenses. They may not allow for long adjustment periods, however, so
the best approach is to plan. The overall organizational plan should
include all areas which are bound to impact the workforce, including
staffing, communication, training, and customer relationships, just to
name a few (Mandi, 2003).
When corporations merge, there are
usually instances of redundancy. In these cases, redundancy can lead to
lay–offs, or may require shifting roles of your employees. While
lay–offs most often cannot be avoided, reducing uncertainty amongst
employees is best. Those employees that are being laid off should be
told immediately and be provided with severance packages, if possible,
and most importantly treated in a respectful manner. Remaining employees
should have clear guidelines on their role within the new organization,
and a development plan that will help them adjust to subsequent
changes. These some researchers believed influences productivity.
Merger is at its infancy stage in
Nigeria compared with other developed countries. Merger is an important
concept that contributes to the growth of a national economy through
increase in productivity and profitability. Mandi (2003) contributing in
this regard said that in the last three years, growth through merger
has been a critical part of the success of many companies operating in
the new economy. In fact, merger has been the single most important
factor in building up their market capitalization through increased
Merger has been defined as the
combination of two or more separate firms into a single firm. The firm
that results from the process could take any of the following
identities, Acquirer identity or a complete new identity (Hitt, Harrison
& Ireland, 2000). Mergers have been identified as important
features of corporate structural changes (Pandey, 2000).
1.2 STATEMENT OF THE PROBLEM
The current economic situation in
Nigeria can best be described as very turbulent with the problems
reflecting more in all the service sector of the Nigerian economy. The
nation economy is currently in recession has announced by the minister
of finance in the third quarter of the years. The dimension of the
problem is such that banks in the country are fast losing their market
share, in addition to facing continuous operating losses and liquidity
crisis leading to inability to pay depositors. Other major challenges
facing banks in the country include low turnover, low profit, low
dividend payout, declining growth rate and high operating cost.
Recently, there has been problems associated with scarce foreign
exchange in Nigeria making it very difficult for firms to survive on
their own. From the foregoing, the researcher is examining the
relationship between mergers and productivity in Nigerian firms.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
- To examine the relationship between mergers and productivity in Nigerian firms.
- To examine the relationship between acquisitions and productivity in Nigerian firms.
- To determine the effects of mergers on Nigerian firms generally
1.4 RESEARCH QUESTIONS
- What is the relationship between mergers and productivity in Nigerian firms?
- What is the relationship between acquisitions and productivity in Nigerian firms?
- What are the effects of mergers on Nigerian firms generally?
HO: There is no significant relationship between mergers and productivity in Nigerian firms
HA: There is significant relationship between mergers and productivity in Nigerian firms
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
- The findings from this study will; be an eye opener for business
managers in Nigeria and the general public on the relationship between
merger and productivity in a firm. This study will also help is
management decision making process.
- This research will be a contribution to the body of literature in
the area of the relationship between mergers and productivity in
Nigerian firms, thereby constituting the empirical literature for future
research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study is limited to the financial
sector of the Nigeria economy. It will also cover the relationship
between merger and productivity in a firm.
LIMITATION OF STUDY
Financial constraint- Insufficient fund
tends to impede the efficiency of the researcher in sourcing for the
relevant materials, literature or information and in the process of data
collection (internet, questionnaire and interview).
Time constraint- The researcher will
simultaneously engage in this study with other academic work. This
consequently will cut down on the time devoted for the research work.