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Ndengu-Takudzwa-Banking and Finance.Pdf BINDURA UNIVERSITY OF SCIENCE EDUCATION FACULTY OF COMMERCE DEPARTMENT OF BANKING AND FINANCE AN ANALYSIS OF MERGER AND ACQUISITION ACTIVITY IN THE ZIMBABWE FINANCIAL SERVICES SECTOR SINCE 2000 BY NDENGU TAKUDZWA B0923917 A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE BACHELOR OF BUSINESS STUDIES HONOURS DEGREE IN BANKING AND FINANCE AT BINDURA UNIVERSITY OF SCIENCE EDUCATION OCTOBER 2012 APPROVAL FORM The undersigned certify that they have supervised the student Ndengu Takudzwa’s dissertation titled: An analysis of merger and acquisition activity in the Zimbabwean financial services sector since 2000, submitted in partial fulfilment of the requirements of the Bachelor of Business Studies (Honours) Degree in Banking and Finance. …………………... ………………… SUPERVISOR DATE …………………….. …………………… CHAIRPERSON DATE …………………….. …………………… EXTERNAL EXAMINER DATE xiv RELEASE FORM NAME OF STUDENT: Ndengu Takudzwa DISSERTATION TITLE: An analysis of merger and acquisition activity in the Zimbabwean financial services sector since 2000. DEGREE TITLE: Bachelor of Business Studies (Honours) Degree in Banking and Finance. YEAR THIS DEGREE WAS GRANTED: 2013 Permission is hereby granted to the Bindura University Library to produce single copies of this dissertation and to lend or sell such copies for private, scholarly or scientific research purpose. Only the author reserves other publication rights and; neither the dissertation nor extensive extracts from it may be printed or otherwise reproduced without the author‟s written permission. SIGNED …………………………………… PERMANENT ADDRESS House No. 6996, 91 Crescent Glen View Area 8 Harare DATE October 2012 xv DEDICATIONS I dedicate this project to my parents. xvi Abstract The research primarily aimed at analysing the merger activities which have taken place in the Zimbabwe financial services sector since 2000. The research establishes the reasons behind mergers within the financial services sector of Zimbabwe as well as evaluating the problems faced by these mergers during merging process. The research established reasons why some of these mergers fail or succeed. Rather than looking predictably at the reasons for failure, it emphasizes what companies can do to unlock value from the deals. The research also highlights the role that regulatory authorities such as the Reserve Bank of Zimbabwe (RBZ) should play for the success of mergers. Theoretical literature covered aspects such as definition of a merger, types of mergers, motives for mergers, and challenges facing mergers. Empirical literature mainly aimed at the analysis of mergers in developing and developed countries. A survey research design was adopted .Qualitative data was gathered by means of questionnaires and the targeted respondents were senior officers of financial institutions. Ten questionnaires were distributed to senior officials of five selected banks and eight questionnaires were successfully completed. The research concludes that merger activities in Zimbabwe generally have been a success. It also emerged from the study that some mergers in Zimbabwe failed on their inception because they gave little or no attention to good planning, thorough analysis of financial statements, adequate diligence tests, and good corporate practices. A major recommendation from the study is that, for mergers to be successful there is need for proper planning, due diligence tests, adherence to sound corporate governance and risk management practices, good fusion of corporate culture and proper management of the post merger transaction. xvii ACKNOWLEDGEMENTS I would like to give my appreciation, thanks and respect to God who makes everything possible. I also acknowledge understanding and professional guidance of Mr Matura who was my supervisor for this project. Lastly, I would like to express my profound gratitude to my parents for their financial support during the writing of this dissertation. xviii TABLE OF CONTENTS TITLE PAGE....................................................................................................................i APPROVAL FORM ...................................................................................................................... xiv RELEASE FORM ............................................................................. Error! Bookmark not defined. DECLARATION FORM .................................................................. Error! Bookmark not defined. DEDICATION .................................................................................. Error! Bookmark not defined. ABSTRACT ...................................................................................... Error! Bookmark not defined. ACKNOWLEDGEMENT ................................................................ Error! Bookmark not defined. TABLE OF CONTENTS ............................................................................................................... xix LIST OF TABLES .......................................................................................................................... xx LIST OF FIGURES .......................................................................... Error! Bookmark not defined. LIST OF ABBREVIATIONS ........................................................... Error! Bookmark not defined. CHAPTER ONE .................................................................................................................................. 1 INTRODUCTION ................................................................................................................................ 1 1.0 Introduction ........................................................................................................................... 1 1.1 Background of the study ........................................................................................................ 1 2.2 Types of mergers .................................................................................................................... 9 2.2.2 Conglomerate mergers .................................................................................................... 9 2.2.3 Vertical mergers .............................................................................................................. 9 2.2.4 Congeneric mergers ........................................................................................................ 9 2.5.6 Technology ................................................................................................................... 16 2.5.7 Information and signalling ............................................................................................ 17 2.6 Challenges facing mergers ................................................................................................... 17 3.2.2.1 Justification of stratified sampling ..................................................................................... 31 Source: primary data ...................................................................................................................... 32 3.2.3.1 Justification ........................................................................................................................ 32 4.0 Introduction ......................................................................................................................... 37 4.1 Background of merger ......................................................................................................... 37 4.1.1 ZB Financial Holdings (2006) ............................................................................................. 37 4.1.2 First Banking Corporation (FBC) merger ........................................................................... 38 xix 4.1.3 Interfin Banking Corporation ............................................................................................ 38 Table 4.1: General Questionnaire Response Rate ..................................................................... 40 4.2:How successful are companies at mergers and aqusitions ................................................. 40 4.2 Reasons behind mergers ...................................................................................................... 42 4.3 Challenges faced by merging entities in Zimbabwe. ........................................................... 46 4.4 Reasons for merger failure .................................................................................................. 49 4.6 The role of the central bank in facilitating mergers ............................................................ 52 5.0 Introduction ......................................................................................................................... 53 5.1 Summary of findings ............................................................................................................ 53 5.3 Recommendations ............................................................................................................... 55 References ......................................................................................... Error! Bookmark not defined. Appendix: Questionnaire .................................................................. Error! Bookmark not defined. QUESTIONNAIRE .......................................................................... Error! Bookmark not defined. xx List of Tables Table 3. 1: Sample size Table 4. 1: General response rate Table 4.2: Success of mergers. xxi List of figures Figure 1: Reasons for mergers.
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