Full Project – Marketing implication of merger and acquisition in banking industry

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CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

Following the introduction of structural adjustment program in 1986, which was characterized by financial deregulation, the whole financial system or sector experience a radical return charges.

Also considered the vital and critical role or responsibility the whole banks were expected to play in the implementation of SAP bank licensing was liberalized. This liberation license led to the rapid rise in the number of bank in Nigeria.

In the era, however the reintroduction of the deregulation policy in 1994 to give investor freedom of operational practice marked the beginning of the second era of massive bank failure bank.

Banking sector structure in Nigeria consist of commercial bank, merchant bank, microfinance banks, with the central bank as the Apex bank regulating all the affairs of all banks in Nigeria. The structure of all these banks from the giant one to the smallest ones, the capital base of some bank I5 another way of differentiation.

There are some small banks that can hardly boast of the formally minimum required capital base of TWO BILLION (N2 BILLION). Most of the small banks and the private owned bank are characterized with distress of liquidated syndrome. With the view of curbing the distress, menace that is characterize in the banking sector, the central bank of Nigeria (CBN) gave all the banks 18 months’ notice or directions that as from 31* December 2005 that bank should raise their capital base to twenty five billion naira (N25 billion) or be phase out. This leaves no one in doubt that many of the existing banks can only survive through merger and acquisition.

This phenomenon made some banks which do not have an equity capital to make public offer to raise the required capital, some of the bank went into signing a memorandum of understanding (MOU) with other banks so as to merge in order to ensure compliance before the expiration of the central bank of Nigeria (CBN) mandate while the few giant bank went to acquire or take over the smallest ones. The circumstance scenario was also the case of the Access bank plc Bida branch to emphasize.

STATEMENT OF THE PROBLEM

Banking in Nigeria was characterized by inability to meet their capitalization requirement, week deposit base, inability to meet obligation (insolvency) high rate of bankruptey and mismanagement. Ownership structure is also a major factor in non-ethical practices, lack of moral discipline where by the depositor fund are being tired down in the hand of a single family.

The banking sector i.e. Access Bank Ple Bida branch Niger state has long been riddle with fund with bankers leading themselves huge sum of money and using bank and private source of fund for their own business ventures, the Nigeria economy, therefore was highly immune by financial distress with the banking sector or the top of radar. It therefore became necessary or imperative to find an alternative option or strategy to check banks failure or distress to avoid liquidation in the entire Nigeria financial system.

1.3       STATEMENT OF THE OBJECTIVE

The objective of this research study is as follows:

Education Officers

To examine the legal frame work for merger and acquisition practice in Nigeria.

To examine the operation of merger and acquisition.

To assess the level of participation among banks.

To examine the possible and probate effect of merger and acquisition in Nigeria.

1.4       RESEARCH QUESTION

The extreme large number of merger and acquisition currently paraded on the Nigeria banking sector fast becoming questionable. Despite the fact that ongoing economic and financial reforms affect the opportunity of introducing alternative way of raising capital of fund into our banking sector to improve the economy, the recent merger and acquisition that characterized the banking sector makes one to ask.

1. What impact has been felt through merger and acquisition?
2. Will merger and acquisition improve the economy?
3. What is the present level of merger and acquisition?
4. What are positive and negative effect of merger and acquisition?

Education Officers

1.5       NEED AND SIGNIFICANCE OF THE STUDY

The information of the research work can be appraised from three dimensions to the management of Access Bank Bida Branch. The appropriate way of overcoming their weakness in the course of carrying out their record keeping management.

Finally, this project work is also to provide basic knowledge for student in the academic institution that might find it worth in their field of study.

1.6       LIMITATION OF THE STUDY

The awareness and issues of merger and acquisition is still very new and unpopular to various schools of though and reacting to it perspective in different ways and dimension depending on the understanding.

The study area is limited to Access bank Bida branch only as such an emphasis is on the employees, management and shareholder.

1.7       DELIMITATION OF THE STUDY

The delimitation of these research works includes the securities, operating personnel as well as the causal staff of Access Bank Bida branch.

Education Officers:

1.8       DEFINITION OF TERM

COMPROMISE: This is a settlement reached by concession on each side.

DIVIDEND: this is the amount of profit that a company pays to people who owns share in the company

DE-INVESTMENT: the act of selling the share you have bought in a company or taking money away from where you have invested it.

INSOL VENCY: this is the weak deposit base in ability to meet maturity obligation.

INVESTMENT: This is to earn interest or bring profit.

LIQUIDATION: The present cash solvency of a firm and its ability to remain solvent in the event of adversaries.

SHAREHOLDER: this refers to a owner of share in a company or in a business.

TAKE OVER/ TAKEOVER BID: Weinberg and Bland(1979) defined a take over as an offer to acquire shares of a company whose shares are not closely held, addressed to the general body of the shareholder, with a view to obtain at least sufficient share to give the offer or voting control of the company.

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Full Project – Marketing implication of merger and acquisition in banking industry