IMPACT OF MERGER AND ACQUISITION STRATEGIES ON EMPLOYEES’ BEHAVIOUR (A CASE STUDY OF FCMB PLC.)

ABSTRACT

This project investigated the "Impact of Merger and Acquisition of Strategies on Employees Behaviour" using FCMB Plc as case study.

The study attempt to provide orderly framework for analyzing the effect of merger and acquisition on the profitability and survival of bank in Nigeria.

The study used primary data, which was collected through the administration of questionnaire. Data collected were tested vide the Chi-Square statistical technique. Specific findings from the study shows that employees behaviour is an essential part of merger and acquisition and that human resources issues should be given adequate emphasis throughout the process of consolidation. The study recommends that central bank of Nigeria should work towards the establishment of an asset management company as an important element of distress resolution. And that rehabilitation and effective management of Mint to meet the security and printing need of Nigeria, including the banking system which constitute over ninety percent of the mint's business.

 

TABLE OF CONTENTS

 

Chapter One: Introduction

1.1      Background to the Study            

1.2      Statement of the Problem

1.3      Purpose of Study               

1.4      Research Questions          

1.5      Research Hypothesis        

1.6      Significance of the Study

1.7      Scope of Delimitation       

1.8      Definition of Terms

 

Chapter Two: Literature Review

2.1      Meaning of Merger and Acquisition    

2.2      Types of Merger and Acquisition

2.3      Legal framework               

2.4      Mergers and Acquisition the challenges         

2.5      Human Resources in the Nigerian Banking Industry

2.6      Challenges induce by banks Consolidation to Nigerian Deposit

Insurance Commission.               

2.7      Future Plans            

2.8      Portfolio Analysis and Its Implication for Strategic Planning In

Mergers and Acquisition

 

Chapter Three: Research Methodology

3.1      Research Design                

3.2      Area of Study

3.3      Population of Study          

3.4      Sample and Sampling Techniques

3.5      Instrument for Data Collection

3.6      Method of Data Analysis 

 

Chapter Four: Data Analysis, Interpretation and Presentation

4.1      Introduction

4.2      Bio- Data of Respondents

4.3      Response to the Problem Area 

4.4      Test of Hypothesis

 

Chapter Five: Summary, Conclusion and Recommendation

5.1      Summary     

5.2      Conclusion  

5.3      Implication of Finding      

5.4      Recommendation                         

5.5      Limitation of the Study    

 

 

 

 

CHAPTER ONE

INTRODUCTION

 

1.1            BACKGROUND TO THE STUDY

A review of developments in the Nigerian banking and financed system indicates that the banking sector has undergone remarkable changes over the years, in terms of the number of institutions, ownership structure, as well as the scale of operations driven largely by the consolidation of the financial sector in line with the global trend. As at the end of March 2004, insured banks stood at 89 with various sizes and degrees of soundness. The Central Bank of Nigeria (CBN) rating of all the banks classified 62 banks as sound/satisfactory of the banks did not render any returns during this period. The sector generally enjoyed a stable operating environment until July 6th 2004, when the announcement of the CBN which introduced a major policy initiative effective the sector.

The foregoing not withstanding, the market share based on the industries total asset distribution, shows that the sector was highly concentrated with the top ten banks accounting for more than 50% percent of the total asset. Many of the 89 banks are small in size and unable to effectively compete with the bigger ones. Many of the small banks are closely held and are played by various problem and constraint which includes: Low capital base, weak corporate governance as manifested in meddlesome interference in management function, poor risk management, unethical and unprofessional practice, Mal-adaption of the banking industry as bank were not addressing the core needs of the environment low confidence in the Nigerian banking system, unethical competition leading to some banks covertly de-marketing the competitors, late or non- publication of annual account that obviates the impact of market discipline in ensuring banking soundness, over-dependence on public sector deposits, neglect of some and medium scale enterprises by the system, insolvency as evidence by negative capital adequacy ratio and shareholders funds that had completely eroded by operating loss, over-trading, high incidence of non-performing loans, weak management, inaccurate report and non­compliance with regulatory requirements, gross insider abuse, credits, neglect of small and medium class savers, ethnic misconduct, falsification use, returns by the banks to the central bank, unprofessional use of female staff in some banks in the name of "Marketing", high lending rate. From the foregoing analysis, the Nigerian banking system faces enormous challenge which if not addressed urgently could snowbell into a crisis in the near future. In view of the identified problem of the Nigerian banks, the Central Bank of Nigeria (CBN) which serves as government agency and the government as the custodian of the masses. Discovered the unethical behavioural disposition of Nigerian banking industries, from time past, the regulatory and supervisory authorities had found it difficult in trying to get bank to always comply with regulatory guidelines. Some banks were even suspected to be investing huge resources in exploiting every available loophole in the regulatory guidelines. That bank which religiously towed the path of honour appeared to be fighting a loosing battle. It seems to be a case of "if you could not beat them, you join them", there is a need to take an imperative step to eradicate the draconian situation in the banking industry. This, however, led to the decision made by the CBN through it governor, on the 6th of July, 2004, at the special meeting of the bankers committee, the governor, Professor Charles Chukwuna Soludo rolls out new capital base among other things which finalized at N25 billion at minimum capital base with full compliance before the end of December 2005. this led some of the bank to the banks to go into Initial Public Offer (IPO), Private Placement etc. with the minimum capitalization of N25 billion banks are continually flooding the capital market to raise additional capital funds either to meet up with the minimum requirement or to position themselves for Merger and Acquisition which is currently taking place within the banking industry in Nigeria, are here to stay and should change the face of the banking sector beyond recognition. The consolidation deadline on 31St December, 2005 ultimately became a reality.

Before then, doubting " thomases" were still believing that, it could be extended. They were caught unaware, on the other hand, very serious institution believed from the on set that the level of capitalization required was apparently a Herculean task. It was achievable and hence, they stared working towards the realization of the set target. The deadline did not catch such institution napping. In fact, a few of the 89 bank which were already capitalized up to or even beyond the required benchment of N25 billion did not choose to rest on their oars but out to further strengthen themselves through acquisition (bought over) of smaller banks, injection of flesh via the capital market etc. while others were consummated i.e. Merger, those banks which couldn't scale through the hurdles went into extinction. They were handed over to the NDIC (Deposit Insurance Corporation).

Furthermore, the issue of consolidation of banks is an integral part of NEEDS i.e. National Economic Empowerment Development and Strategy. Introduced by the last regime. It should be noted that Merger and Acquisition apex regulatory body is (SEC) i.e. Security and Exchange Commission. This authority sees to the conditionality for merger and acquisition of firms/companies in Nigeria.

However, there is a needs to thoroughly study the requirement for mergers and acquisition. The efficacy of this study is to exams the challenges of mergers and acquisition to human resources management in the Nigerian banking industry.

 

1.2      STATEMENT OF THE PROBLEM

The banking industry in Nigeria went through structural changes which has pose a challenges to employee behaviour. The implementation of the policy have induced a shake-out in the industry, which has infused a new set of challenges to human resources in the banking sector. Some of which include: Delayering, outsourcing, job-cutting, from junior to senior staff, downsizing, rightsizing, precipitate retirement, reduced morale and loss of bargaining power, contravening work schedule, reduction in rank of staff i.e. from the chief executive officer to the managing director.

This has created room for apathy and disparity. Also the emerging bank came across the problem of different orientation and inactive of merging workers to dealt with and remuneration package disparity that need to be integrated into the direction of new banks. It should be noted that the difference that are occurring should not be neglected, that if over look could to crisis in the industry. This will make the essence of merger and acquisition to be a wasted effort.

After merger and acquisition, the major casualties are always the human behavioural work pattern which has a resultant effect on individual and groups at work place. This is because staffs of the effected banks will be jittery about job security, which invariantly affect their productivity. This include:

1.   The issues of job losses from top executive to junior staff.

2.   Job security

3.   The need for re-orientation of the new staff

4.   How effective and efficient merger and acquisition

5.   Job design and non- unionization in the banking sector 6. Casualization among junior staffs.

 

1.3      PURPOSE OF STUDY

The aim of this study is to scrutinize the challenges for employee behaviour in the emerging mergers and acquisitions of banking sector. It also has the aim of:

1.    To examine how effective on individual performance.

2.    To suggest, how mergers and acquisitions of these banks can be integrated to organization set goals.

3.    To examine how mergers ands acquisition affect group performance.

4.    The effect of mergers and acquisitions on the profitability and survival of a bank.

5.    To examine the effect of technology on human resources.

 

1.4      RESEARCH QUESTION

Research question is regarded as the main instrument in survey research. In this regard the main questions for this study are as follows:

  1. Does the application of merger and acquisition in the sector brought higher earning and stability?
  2. Does the merger and acquisition strategies brings about effectiveness and efficiency realized after consolidation?
  3. Does merger an acquisition results in high employees performance? 9. Does emerging Mega- banks have structured changes?
  4. Does merger affect employee job position?
  5. Does liquidity of distress bank bring about negative influence in the banking industry?

 

1.5      RESEARCH HYPOTHESIS

The following are the possible research hypothesis to be tested:

H0:     Merger and Acquisition does not affect the competencies of human resources (employees)

H1:     Mergers and Acquisitions do affect the competence of human resources (employees)

H0:     There are no direct by off jobs in Mergers and Acquisitions.

H1:     There are direct lay-off job in Mergers and Acquisitions.

 

1.6      SIGNIFICANCE OF THE STUDY

The implication or challenges to employee behaviour in merging and acquired banks has become very pronounced with the emergence of mega-banks, because one reason for merger is the need for banks to foster expansion and achieve growth and greater profit which would otherwise be hard and be almost impossible to attain as separate entities or would take more resources and longer time to accomplish of each entity goes on separative ways.

Banks have the challenges of subjecting their staffs to necessary training and skills development for them to cope with the demand of current trend of activities in today's banks. (Tina Weber, ECOTEL RESEARCH INSTITUTE) that involves:

  1. High productivity and standardization.
  2. Increased in capital base
  3. Eradication of lack of transparency

The quality of the workforce just has to improved, the study will generate relevant data on which solution to problem of merger and acquisition as it affect human resources management.

 

1.7      SCOPE OF DELIMITATION

The study will be carried out on the some staffs in some organizations which includes top managers, middle managers and junior staffs, However, the delimitation of the study will be financial constraint, time constraint, and the objectiveness of on the part of the respondent in retrieving information.

 

1.8      DEFINITION OF TERMS

Mergers: According to the companies and allied matters degree (1990) section 590 define mergers as "Any amalgamation of the undertaking or any part of the undertaking or interest of two or more companies or the undertakings or part of the undertakings of one or more companies and one or more bodies corporate.

Acquisition: According to G. Omotayo Gbede (2005) defines acquisition " as the buying over of a company by the payment of cash to its shareholders by another company with the target company still continuing its existence but as a subsidiary of the buying company which becomes the acquired company's holders company.

Challenges: These are conditionality or factors that aid in bringing out the potentials to tackle difficulties or problem in an environment.

Delayering: Is the cutting down of the layer or levels of authority between the lower level employees and the highest ranked employee. Downsizing: is the reasonable reduction in the size of activity engaged in the firm and consequently cutting in the size of employees employed by the company.

Outsourcing: Is the act of sub-contracting less relevant aspect of the business organization to other organization and focusing on the core business of the firm.

Employees Behaviour: Is the effective and efficient acquisition, retention and utilization of the people or human resource at work towards satisfying the workforce and the attainment of the organizational objectives.

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