The Effect of Mergers and Acquisition Strategies on Financial Performance of Oil Companies in Kenya

Abstract

The study set out to find the effect of mergers and acquisition on financial performance of oil industry in Kenya. This study adopted a causal research design. In this study the target population was the oil companies in Kenya with keen interest on those that had gone through mergers and acquisition. The sample size of the study was 82 respondents. Primary data was collected using questionnaires and then analysed using Statistical package for Social Sciences (SPSS) version 23. Qualitative analysis was used to analyse the views of respondents on mergers and acquisition. Also Chi-Square test was used to establish the relationship between pre and post-merger and acquisition and linear regression model enhanced the analyses of the effects of merger and acquisition on financial performance. The study found that the oil companies adopted vertical merger and acquisition strategy, horizontal mergers and acquisition strategy and conglomerate mergers and acquisition strategy. The horizontal M&A strategy was undertaken to maintain a competitive authority; vertical M&A strategy gave a wholesome relation between the firms and conglomerate M&A strategy aimed at creating huge economic power house in the oil sector. The study concluded that financial performance of oil companies has been good over the last 10 years; increasingly regulatory policy issues affect the execution of mergers and acquisitions. The study recommends that the management of oil companies should not only undertake mergers and acquisitions in order to improve operation and sustain failing businesses but also improve their competitiveness and financial standing. Oil companies should come up with a sound strategy towards asset and liability management so as to avert the problem of mismatching investments and also the quality of assets should be enhanced.