CHAPTER SIX

6.1

Introduction

This

chapter

reports

on

the

finding

of

the

study,

conclusion

and

recommendations
Reporting on the finding of this study, reference is made to the non value
maximizing hypothesis proposed by Halpem (1973,1983)

in the literature

review chapter. Which takes the view that it is not necessarily important for
mangers of the firms who engage in mergers and acquisitions to display
positive returns for their shareholder. However there could be other
objectives why management of the bidding company will engage in mergers
and acquisitions such objective could be to maximize sales growth, to control
Conglomerate Empire, to acquire expertise, to enter new markets which are
not

possible

without

mergers

and

acquisitions

due

to

government

regulations.
Also with reference to study conducted by Dodd (1976) show that the share
price of almost all targets increases around the announcement of a merger
or an acquisition. However, the share price of acquirers rarely follows the
same trend; the average share price performance of acquirers around the
announcement of a merger or an acquisition is slightly negative, and
acquirers commonly experience a significant decrease in share price after

announcing their intention to merge with or acquire another company. This

result supports the argument in this study to the extent that the acquirers
Ecobank Transnational Incorporate did not create any significant gain for
their shareholders.
The result from the study indicate that from the pre merger, through
announcement to post merger period the share price movement fluctuated
between -0.10 and 0.10.
Below is the graph to support this finding

Interpretation of the graph

The pre merger periods (six months before the acquisition) recorded no
change in share price and occasionally saw very little

changes (increases

and decrease) in share price. These changes did not impact of the trend in
the share price movement that the study hopes to investigate
However, on the day the acquisition was approved ( 9 Dec 2011) the share
price rose to 0.10 % increase after recording zero percent change for some
time.

However, the share price recorded -0.09 % decrease following the

announcement. This is consistent with et (1993) who studied announcement

effects on the abnormal returns associated with 429 United Kingdom bidders
covering the period from 1980 to 1990 found bidder suffer significant
negative cumulative abnormal returns of -4.04% over the period of -20 to
+40 days around the announcement date. Whilst the target firms experience
positive abnormal returns which can lead to a combined return for both
companies of 3.09% in short run
The post merger period ( six months after the acquisition)

also did not

record any significant change in share price. And this is also consistent with
the findings of HU (2009). HU (2009) examines post acquisition period of
acquiring firms and finds mixed financial results with some acquiring firms
showing a worsening share price effect whilst others showing a positive
effect.
The findings from this study indicate that shareholders of Ecobank
Transnational Incorporated did not create wealth in term of share price
appreciation from the acquisition. Assessing the impact of the six months
period prior to and after the acquisitions could not reveal any significant
change in price of the share price of Ecobank Transnational Incorporated. The
conclusion is that mergers and acquisition does not create significant wealth
for shareholders.
RECOMMENDATION
The limitation of the event period for the research have influence on the
result of other research, for example does the research have very different

results with longer period in non banking and manufacturing industries this
is another question that can lead to further investigation and research .
Also there has been many studies on the effect of mergers and acquisitions
and some have had mixed results some argue that mergers and acquisition
create value whilst other argue that it does not. However, further studies can
be conducted to find out what factors contribute to share price movement.
This study however was limited to assessing the impact of mergers and
acquisition on share price six months before and after the announcement of
the merger and acquisition.