An investigation into the impact of mergers and aquisitions on the aquiring firm : a study of CBZ Holdings (2004 - 2012)

Abstract

Commercial banks have engaged in strategic mergers and acquisitions (“M&As”) for expansion purposes both domestically and internationally. M&As initiated by banks post the 2004 banking crisis period have changed the landscape of the Zimbabwean commercial banking sector. Commercial banks have been involved in strategic combinations mainly with the financial services sector companies. This mostly led to the formation of bank holding companies, bearing the name of the initiating bank. The study investigates the impact of the M&As undertaken on the acquiring company value. The research was a case study of CBZ Holdings Limited (“CBZH”) for the period 2004-2012. CBZ Bank Limited (“CBZB”), the commercial banking subsidiary, existed prior to the formation of CBZH. CBZH acquired Datvest, Beverly Building Society, increased shareholding in Optimal Insurance, merged the bank with the building society and acquired the visa point of sale acquiring business from Standard Chartered Bank from 2005 to 2012. The impact of M&As on the acquiring firm is a subject that has been researched extensively globally. The literature is divided over whether M&A enhances shareholder value or not. The majority of studies suggest not, though literature reviewed suggest that chances are better in emerging markets than advanced economies. Both quantitative and qualitative research methodologies were used in the study. Questionnaires, face to face interviews, financial ratio analysis and the deposit market share analysis were used to evaluate the impact of M&As on CBZH. The employees, executive management and shareholders results showed a positive return on the company value. Findings from the ratio and market share analysis show a positive impact on the shareholder value. The price earnings ratio, however show CBZH being outperformed by Barcalys Bank of Zimbabwe. In conclusion, M&As undertaken by CBZH had an incremental impact on the company financial value, whilst the market perception underperformed. The research proposition is therefore largely accepted. We recommend that future studies on the case study seek factors that result in the counter being a sleeper and the extent to which the takeover of most of the Government accounts by CBZS in 2009 contributed CBZH profitability.