Strategic Decisions : M & A

1893 WordsApr 12, 20178 Pages
CHAPTER ONE 1.0 INTRODUCTION 1.1. Background of the study Mergers and acquisitions have become popular in Kenya for firms who wish to gain a competitive advantage in their various industries such as banking, insurance, oil, gas, electricity among others (Kemal, 2011). M&A are occurring worldwide because they improve competition firms get a greater market share and there is reduction business risk. M&A are types of strategic decisions made by top most management which affect the long-term performance of the business and relate directly to its aims and objectives. Such decisions carry higher levels of risk and if effectively implemented, they can reward highly. M&A are corporate strategies used by firms to promote future growth and create…show more content…
Global companies like P&G, J&J, IBM, GE, Pfizer, Cisco, Tata & Sons, Mahindra & Mahindra, Haier, Lenovo, HSBC among others, have all adopted M&A strategy. Some authors say that organizations rely on three mechanisms to achieve growth: organic growth, alliances, and mergers and acquisitions (Rosinski, 2011). Other authors have proposed five ways of international expansion, in increasing order of cultural risk: (1) the greenfield start, (2) the international strategic alliance, (3) the joint venture with a foreign partner, (4) the foreign acquisition, and (5) the cross-national merger (Hofstede et al., 2010). It has been noted that most cross-border mergers take place among firms in developed countries and that firms with high levels of intangible assets or research and development (R&D) intensity are natural candidates for cross-border mergers (Sonenshine and Reynolds, 2014). This is because, the combined firm needs to spread the high fixed cost of R&D expenditures and knowledge asset attainment over large foreign markets. The African M&A market has been trending upwards over the past few years, although it is quite small compared to other M&A markets worldwide. The attractiveness of the African continent for M&A deals is mainly due to the high economic growth in energy, mining and utilities sectors. 1.2. Commercial Banks in Kenya The Banking industry in Kenya is governed by the Companies Act, the Banking Act, the
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