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TOPIC : CORPORATE MERGER AND ACQUISITION AS A TOOL FOR BANK SURVIVAL IN THE
NEW ERA OF BANKING REFORM (Case Study of UBA)
BACKGROUND OF THE STUDY
Spearheaded by the announcement by the Central Bank
of Nigeria on July 6, 2004 about a major reform program
that would transform the banking landscape of the country,
an unprecedented process of merger and acquisition has
taken place in the Nigerian Banking Sector shrinking
the number of banks from 89 banks to 25 banks (Soludo,
2004) but later reduced further to 23 with the merger
of some banks like First Altantic Bank Plc and Inland
Bank to form Fin Bank Plc, Stanbic Bank Plc and IBTC
to form Stanbic-IBTC bank. The number of operating bank
later increased to 24 banks with the entering of Citibank
Nigeria Limited. With the recent merger and acquisition
of some of the nine rescued banks i.e the merger of
Access Bank Plc with Intercontinental Bank Plc; merger
of Ecobank Transnational Incorporated with Oceanic Bank
Plc; merger of First City Monumental Bank with Fin Bank
Plc, the number of banks operating in Nigeria will be
However, in August 2011, the CBN revoked the licenses
of three of the rescued banks for failing to show ability
to recapitalise ahead of the September 30, 2011 deadline,
effectively nationalizing Bank PHB, Afribank and Spring
Bank. The assets of these banks were transferred to
three newly created, nationalised banks: Keystone Bank,
Enterprise Bank and Mainstreet Bank. AMCON which took
over the banks also injected N680 billion to recapitalise
the banks. Unity Bank Plc, one of the bailed out banks
has already recapitalised while Wema Bank Plc, the last
of the rescued banks, has since scaled down operations
to become a regional bank with emphasis in the south
acquisitions represent the ultimate in change for a
business and it is expected to add value to the business.
No other event is more difficult, challenging, or chaotic
as a merger and acquisition (Okonkwo, 2004). It is imperative
that everyone involved in the process has a clear understanding
of how the process works. However, merger and acquisitions
do not add value in all cases. There are cases where
the synergies projected for merger and acquisition deals
are not achieved. “People” problems and
cultural issues are often cited as the top factors in
The biggest harvest of the Soludo prescription and the
greatest shocker to the Nigerian banking industry was
the announcement on 18 January, 2005 of a merger between
United Bank for Africa (UBA) and Standard Trust Bank
(STB). The amalgam of STB and UBA now called and new
UBA has a balance sheet of more than N1.4 trillion,
shareholders’ funds of more than N187 billion,
over 726 branches and customers in excess of 7.2 million
as December 2010 (UBA, 2010). Such indices would readily
qualify the bank as the largest in Nigeria.
The merger between the two banks has spark off serious
concern among big players in the market. Major players
in the banking industry are worry that the merger, given
the huge resources will lead to the emergence of a bank
that will be too big and strong by the local industry
standard to compete with. Industry analysts were of
the opinion that the issue is no longer N25 billion
capital base but how to remain a leader in the Nigerian
market and beyond. This study shall examine the role
of merger and acquisition as a tool for survival in
the post-consolidation era of Nigerian banking sector
with special focus on the New UBA (Standard Trust Bank
and United Bank for Africa merger).
OF RESEARCH PROBLEM
The recent outbreak of bank mergers in Nigeria is attracting
much attention, partly because of heightened interest
in what motivates firms to merge and how mergers affect
competition. One often held view of mergers, especially
those involving megabanks, is that firms are merging
just to get bigger. Accompanying that notion is a fear
that as merging firms grab greater market share, individual
freedoms and competition are threatened, because bigger
is perceived as greater concentration of power. In contrast
to that negative view, it is being argued in this study
that mergers are motivated by more than a desire to
become bigger. Mergers enable the banking industry to
take advantage of new opportunities created by changes
in the technological and regulatory environment. While
mergers have certainly reduced the number of banks nationwide,
concentration of power in local banking markets has
not increased. And the very force of regulatory change
that spurred bank mergers is also bringing new sources
of competition to local banking markets (especially
the management of the country’s external reserves).
Hence, mergers are playing a useful role in reshaping
the banking industry without risking a lack of competition.
This study seeks to investigate empirically, the potency
of merger and acquisition as a survival strategy in
post-consolidation by attempting to the answer the research
questions stated in 1.4 below.
OBJECTIVES OF THE STUDY
The purpose of this paper is to examine the overall
motive for Banks mergers and acquisitions in the Nigerian
The study will also focus on the following micro objectives:
1. To critically evaluate the structural and brand implications
of the merger and acquisition option in the post consolidation
2. To identify the motives behind corporate meagre and
3. An examination of merger and acquisition as a survival
4. To examine the impact of merger and acquisition on
the level of competitiveness in the Nigerian Banking
5. To identify those that will benefit and lose in the
merger and acquisition process.
The study would examine the following questions:
1. What are the implications of bank merger and acquisition?
2. What are the motives behind bank merger and acquisition?
3. Is merger and acquisition a survival strategy?
4. How would bank merger and acquisition affect competition
in the Nigerian banking sector?
5. What are the benefits and short-comings of merger
The research hypothesis to be tested in the course of
this study is stated below as:
Ho : That merger and acquisition is not a survival strategy
in Nigerian banking sector.
H1 : That merger and acquisition is a survival strategy
in Nigerian banking sector.
METHODOLOGY AND SOURCES OF DATA
Survey research method shall be used to gather information
from respondents concerning their opinions on the role
of merger and acquisition as a survival strategy in
post consolidation era in Nigerian banking sector. The
questionnaire to be used shall be carefully administered
and a total of fifty (50) respondents in the banking
sector would be selected for the purpose of this analysis.
The sampling shall be done randomly such that the respondents
shall cut across different departments of United Bank
for Africa (The New UBA) at the branches in Lagos State.
This could to some extent give a basis for generalisation.
The data, which would be collected from the questionnaire,
will be presented and analysed using frequency tables
and simple percentage method. This will make the analysis
of the data more concise and simple.
OF THE STUDY
No matter which approach is selected by banks within
the Nigerian financial sector, the current consolidation
will have a number of effects and implications. These
effects and implications can be broken into 2 broad
categories: 1. Brand implications; 2. Structural implications.
This research work intends to critically evaluate these
It is unprofessional to carry on the task of merger
and acquisition without considering the motives behind
it. So, the significance of this project work relates
to the evaluation of merger and acquisition as a survival
option in the post-consolidation era in the Nigerian
banking sector and identifying its possible effects
on the level of competition in the sector.
It would also be an invaluable tool to students, researchers
and other individuals that want to know more about the
role of merger and acquisition as a business strategy.
OF THE STUDY
Although, about twenty-five banks emerged after the
recapitalisation exercise, nineteen of them were products
of merged banks. However, the merger between Standard
Trust Bank and United Bank for Africa was the least
expected and many are of the opinion that the merger
was not to meet the December 31 deadline of the apex,
but fuelled by the need to survive and be a major player
in the post-consolidation era in Nigerian banking sector.
In carrying out this research work, attention would
be focused on the Nigerian Banking Industry with special
reference to the merger between United bank for Africa
(UBA) and Standard Trust Bank (STB).
OF THE STUDY
This research work shall commence by providing a background
of the subject matter justifying the need for the study
in chapter one. This would be followed by literature
review and traditional views on merger and acquisition
in chapter. The research method shall then be outlined
in chapter three before results are presented and discussed
in chapter four. In chapter five, concluding comments
shall reflect on limitations of the study and identify
implications of the findings.
Okonkwo, C. O. (2004) “Legal Framework for Mergers
and Acquisitions”. A Paper Presented at The Retreat
on Mergers and Acquisitions in the Nigerian Banking
Industry organised by Central Bank of Nigeria and West
African Institute for Financial and Economic Management
Soludo, C. C. (2004) Consolidating the Nigerian Banking
Industry to meet the development challenges of the 21st
Century. Being an address delivered to the special meeting
of the bankers’ committee, held on July 6, at
the CBN headquarter, Abuja.
United Bank for Africa Plc (2010) Annual Report and
Statement of Accounts.
and Sample of the Questionnaire included
and acquisition, bank merger and acquisition, what is
merger and acquisition, bank recapitalisation, consolidation,
nigerian banking sector, banking sector reforms
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