ABSTRACT

Prior to the consolidation exercise in 2005, the banking industry was filled with a large number of weak, small banks that had low capital bases and were not performing their duties as the main financial intermediaries in the economy. The consolidation exercise which was spearheaded by the CBN governor, Charles Soludo raised the recapitalization of deposit money banks to a minimum of N25 billion naira by December 31, 2005 with mergers and acquisitions (M&As) as one of the strategies the banks could adopt to meet this requirement. By the end of the consolidation exercise, the number of banks had reduced from 89 to 25 while the capital base and reliability of the banks that survived increased. This study was carried out to find out the challenges faced by the banks during and after the exercise, the performance of these banks in the post- consolidation period and if mergers and acquisitions has in anyway affected the banks and if so, in what ways. The Pearson product moment correlation technique and T-test was used in the analysis and we found that mergers and Acquisitions affect banks performance positively. The study examined the perceived impact of merger and acquisition on the performance of banks in Nigeria using the selected banks, the researcher adopted a five year audited financial reports of united bank for Africa (UBA) plc. And standard trust bank (STB) was used for comparing the performance of merged banks, while diamond bank plc. And lion bank was used for acquisition using a five year period for both pre-acquisition and post acquisition period. After the statistical analysis, the researcher concluded that the result of post-merger and post-acquisition were greater than those of pre-merger and post-acquisition. The findings of the research are that merger and acquisition have enhances the profitability, shareholders' fund as well as return on capital employed of consolidated banks in Nigeria. Thus, the researcher concluded that merger and acquisition should be adopted as strategic tools for performance improvement in Nigeria banking sector. The study examined the challenges as well as benefits of merger and acquisition and further suggests that in order to guard against possible abuse of the concept of merger and acquisition, the central bank and other regulatory authorities should checkmate the merger and acquisitions of banks in Nigeria and should provide enabling environment that will encourage more mergers and acquisitions in Nigeria which will in turn help build a strong capital base of banks in Nigeria as well as encourage both local and foreign investors.