THE EFFECT OF MERGER AND ACQUISITION ON AN ORGANISATIONAL PERFORMANCE

ABSTRACT

This research work titled “The effect of Merger and Acquisition on an organizational performance shows the achievement of companies coming together.

For merger and acquisition to be worth as described, there should be synergism, the amalgamation between two separate companies to form a single company is known as merger also acquisition is the purchase of a controlling interest on company by another company.

A merger can be between two companies with quoted share in stock exchange. It can also be between companies falling under the same schedule.

The analysis aspect of this project talks about the data and interpretation and the two essential aspect of research project It also the imperative interpretation of result. The recommendation of the project illogically treat the companies domicile in Nigeria that fall under oil companies in Nigeria. It also raised to ensure a good relationship between two companies.

The objective of the study will provide an insight and measure the degree at which organization with another organization profitably, increase in market share, cost saving (efficiency) product diversification.

CHAPTER ONE

INTRODUCTION

1.0   BACKGROUND TO THE STUDY

In all human activities, there are usually successes and failures. Businesses are therefore no exception. In periods of boom as we experienced in the mid seventies during the oil boom, many business firms and individuals strived in an era of abundance and squander mania. In such an era, employment, production and income are at there peak levels and. government expenditure rise considerably. During this period also, no one complains and businessmen do not think of means of survival and sustenance.

On the other hand, when the bay days are over and down-turns take over the dooms clays arrive and business failure becomes the other of the day as a result of adverse macroeconomic condition. Consequently, expansion is hindered for even surviving firms. This is the time when company executives, government and individual remember to think of “MERGERS AND ACQUISITIONS” as viability, belt tightening and survival.

To avoid increase in liquidation and bankruptcy of companies, to stem the tide of increasing unemployment that might result from closure of companies. “MERGER and ACQUISITION is a valuable route to pool together the strength and synergies in similar organizations to generate increasing business activities to sustain the future of our companies. “MERGER AND ACQUISITION” MW from serious financial distress and provide such business with new management and better access to new financial resources that will save organization from negative effect of performance.

Every business organization expects to make profit ultimately. Profitability justification and rational for remaining in business of course investors, that is, the owner do not only see the profit level as a economic, etc.

The issue of Merger and Acquisiton in present day business management has been a dream realized, Merger and Acquisition have played an immense role in the  external growth and internal growth of leading companies worldwide.

In United State of America, merger started between 1890 to 1904 and as continue through to the present day. Presently, about two third [2\3] of the large public corporation in the United States have merged in their history.

Merger And Acquisition must be seen as available means of saving, companies from serious financial distress and provide such business with new management and better access resources that will save an economy.

1.1   HISTORICAL BACKGROUND OF CHEVRON TEXACO NIGERIA

Texaco is a US based international oil and gas company, which as integrated operations encompassing upstream and downstream oil, chemicals and co-generation. The company originated in Texas in early part of the century and has since grown to become one of the leading multinational oil companies. Texaco, along with Chevron, owns 50% of caltex, which has extensive activities in the far East and Africa.

Texaco, through upstream and downstream activities play a role in the Africa oil industry. Texaco has a strong oil and natural gas production base in the

United States with an international spread. of producing assets ill the North Sea, south and Central America, Far East Australia and Africa. Texaco African production activities are concentrated in Angola and Nigeria, which together yield more than 20mbd of crude oil. Arigola has been the focus of’ exploration activities through various projects at Rala, Tamboril and Sulele south. Texaco has maintained its oil production levels in Nigeria and Angola during 1995. The company holds and operates a 20% working interest in a consortium that maintained Texaco’s share off-shore crude oil production at 9000 barrels a day, despite a 1994 strike by oil workers against the Nigerian government. It also recently acquired from Statoll and BP a 300/0 equity interest ill prime deepwater blocks near its current Nigerian operations. Despite the civil war in Angola, which temporarily shut-in of two fields in the southern portion of an off-store block, Texaco (200%) increase it share of production increased slightly to 7000barrels a day at the southern end of the block. Following the signing of ceasefire agreement late in 1994, Texaco has been moving a head with plans to expand production off shore Angola and resumed production from restored on-shore facilities. Refining is an important activity for Texaco, which have seven refineries ill the US, various refinery assets in Sought and Central America as refineries in Netherlands, UK and refining in the fare East. Texaco’s marketing activities include an extensive retail network in the United States as well as strong positions In Europe, South and Central America and West Africa. I n the Asia pacific region and in South Africa the company has an extensive marketing presence through caltex.

West Africa, Texaco markets more than 20mbd through networks In Nigeria, Ivory Coast, Cameroon and Togo. In October 2000 chevron and Texaco agreed to merge their operations to become Chevron Texaco.

Prior to when Chevron and Texaco merge, Texaco Nigeria plc is a company that was established in 1969 in Nigeria and is involved in oil exploration and distribution and it is also listed in Nigeria stock exchange and Texaco incorporation was Incorporated in 1926 as Texas corporation. It is headquartered in White Plains, New York. It has its Nigeria office located at 8 McCarthy Street Lagos. It is also of the world’s largest integrated oil companies operating iii more than 150 countries worldwide.

In over forty years of operating in Nigeria Chevron Nigeria limited (CNL) has established its self as a leader in oil and gas exploration and production In 1963, the company discovers Nigerians Successful off-shore fieldworker -located in the Western Niger-delta. It again blast the trail in gas utilization when in 1997 it commissions the Escravos Gas protect- Nigeria’s first major gas utilization scheme. Chevron Nigeria limited is the operator of the NNPC/Chevron joint venture in which The NNPC holds 60% with Chevron retaining the balance of 40%. Chevron Corporation headquartered in Sa-n Francisco California. Its Nigerian office is located at Chevron drive Lekki-Peninsula Lagos. It is operating a nearly a 100 countries worldwide

1.2   STATEMENT OF THE PROBLEMS

The adoptions of merger and acquisition in tackling the organizational problems have become a debatable issue in modern time. Many organization are not willing to adopt Merger and Acquisition as a solution to the dwindling organizational performance due to some the following reasons;

§     Initial hostility and bad blood due to the modalities of merger

§     Position of new corporate culture

§     Inability to accept changes by the existing work force and staff union

§     Fraudulent representation and lack of deliberate acculturative and staff orientation

These among many problems are what this research intends to examine.

1.3   OBJECTIVES OF THE STUDY

The objective of the study will provide an insight and measure the degree at which organizations has achieved the key rationale of it MERGER with another organization profitably, increase in market share, cost saving (efficiency) product diversification.

To discuss in details the preamble, process and format that Merger and Acquisition takes, and to explain various definitions of Merger And Acquisition, its forms and when they take place.

To discuss in details preliminary statement, processes and format that Merger and Acquisition takes and also to know how, if they are able to effect organizational performance and if their effect is beneficial.

To discuss why Merger and Acquisition don’t work, problems and why Merger and Acquisition is embarked upon despite all problems inherent and it prerequisites.

1.4   SIGNIFICANCE OF THE STUDY

As a result of economic recession in Nigeria that led to the closure of many companies makes it important for the benefit of Merger and Acquisition to be examined from a national perspective rather from individual forms.

Furthermore, in view of the fact that most of the firms with derived finance and management attributes need for Merger And. Acquisition are foreign owned. Care has to taken so that the games of the indigenization exercise are not lost.

It can be recalled that the deregulation of the economy by the present government has been making production activities very difficult for the oil sector in terns of the price input both foreign and domestic, hence adversely affected the prices of the Merging companies.

Finally, in the light this, it has become imperative to find out the extent of the effect which Merger and Acquisition has on the performance of Chevron and Texaco. And the economic viability of Merger and Acquisition as growth or survival options for business concern in Nigeria.

1.5   SCOPE AND LIMITATION OF THE STUDY

The scope of the study will look at the composition and structure of Merger and Acquisition with particular reference to Chevron Texaco Company in Nigeria, it will be limited to a few years back and this is done so as to guide against over flogging of the subject concern.

As for the limitation of the study, the problem of financial constraint on the part of the researcher limits the souring of materials. There is also the uncooperative attitude of some of the library attendants and lack of adequate and appropriate texts. Also harassment and uncooperative nature of the workers of the companies use as case study. Despite these constraints, the study will stand the test of time in its constraints and determined consultation with the appropriate texts, journals, magazines etc.

1.6   LITERATURE REVIEW

They are the ideas and opinion of some authors and experts on the subject matter under consideration. It also intends to review the effect of Merger and Acquisition on an organizational performance. It intends to review and evaluate performance of the two companies before and after Merge. Furthermore it also intends to review various forms of Amalgamation of companies, and also to review some of the reasons why Merger and Acquisition don’t work or simply wobble along.

1.7   RESEARCH METHODOLOGY

In this study, we shall employ both quantitative techniques and descriptive method of analysis. The use of correlation analysis will be employed. The secondary data will be collected from the annual report and statement of accounts of the merged companies. Other source of data includes newspapers, journals, textbooks and magazines etc.

Primary and secondary method of data collection is to be employed in this research. The interview method of gathering data will be extensively employed for the purpose of this research work. This is because the Merger and Acquisition between the two companies had already taken place. The secondary information will be extracted from publications, journals and documents etc, which will help in the completion of this research work.

The correlation co-efficient analysis is the analytical technique to be employed in testing the hypothesis. This technique help in measuring the strength of a linear relation between two or more variables that is, the unit change in a variable associated with the change in another variable.

1.8   SOURCES OF DATA

The data to be used for this research work comes from two sources:

PRIMARY SOURCES OF DATA: The primary source of data consists of interview and questionnaire.

SECONDARY SOURCES OF DATA: The secondary sources of data on the other hand will consist of publications, journals, annual reports, text books, news papers and information from websites.

1.9   RESEARCH QUESTIONS

1. Does Merger and acquisition have positive impact on an organizational performance?

2. Does Merger and Acquisition have negative impact on an organizational performance?

3. Is it necessary for an organization to merge?

4. How important is merger and Acquisition

5. Is Merger and Acquisition the best solution to organizational failures?

6. Why does Merger and Acquisition don’t work in. some organizations?

1.10 RESEARCH HYPOTHESES

This is the aspect that deals with testing of the hypothesis, chamber’s dictionary define a hypothesis testing as a tentative assumption for evaluation, basis of discussion for measuring of academic performance hypothesis testing could also be likened to a premise ready for an examination, the correlation analysis will be used for hypothesis in this research study. The form of application will be fully discussed in the fourth chapter. The research question asked is:

1. Merger and Acquisition does not have any impact or changes in an organizational performance = H0.

2. The impact of Merger and Acquisition will have a positive effect in an organizational performance = H­A

1.11 DATA ANALYSIS AND TECHNIQUES

The following quantitative and qualitative method of data analysis shall be employed in this research work; Correlation analysis, Chi Square (X2), Jury of expert opinion method.

1.12 PLAN OF THE STUDY

The complete plan of the study is organize as follows:

Chapter One embodies the introduction, Historical background of Chevron Texaco Nigeria, objectives, of the study, Research methodology, Hypothesis Testing, Scope and Limitations of the study, Definition of terms.

Chapter two contains the literature review, under which the researcher will review theories and previous studies (various views) on the impact of Merger and Acquisition on an organizational economic development, types of merger. Why Merger and Acquisition don’t work or simply wobble along. Considering internal perspective to mention but few.

Chapter three will provides the subjection theoretical position of the impact of Merger and Acquisition.

Chapter four is mainly on the presentation and analysis of data collected.

Chapter five provides the summary, conclusion and recommendation of the study.

1.13 DEFINITION OF TERMS

MERGER: Merger is the combination of two or more companies in which only one firm survives as a legal entity.

ABSORPTION: An absorption is a combination of two or more companies into an existing companies. All companies except one loose their identity in a merger through absorption.

CONSOLIDATION: A consolidation is a combination of two or more companies into a new company. In this form of merger, all companies are legally dissolved and a new entity is created.

ACQUISITION: An acquisition may be defined as an act of acquiring effective control by one company over asset and. management of another company without any combination of companies. Thus, in an acquisition two or more companies may remain independent, separate legal entity, but there may be change in control of companies.

TAKEOVER: A takeover may also be defined as obtaining of control over management of the company by another. An acquisition or take over does not necessarily entail full legal control. A company can have effective control over another company by holding minority ownership.

HOLDING COMPANY: A company can obtain the statue of a holding company by acquiring shares of other companies. A holding company is a company that holds more than half of the nominal value of the equity capital of another company called a subsidiary company, or controls the composition of its Board of Directors.

SYNERGY: Economies realized in a Merger where the performance of the confined firm exceeds that of its previously separated parts.

ECONOMIES OF SCALE: The benefit of size in which the average unit cost falls as volume increases.

TENDER OFFER: An offer to buy current shareholders stock at a specified price, often with the objective of gaining control of the company. The offer is often made by another company and usually for more than the present market price.

WHITE KNIGHT: A Friendly acquirer, at the invitation of target company, purchase shares from the hostile bidder(s) or launches a friendly counter bid in other to frustrate the initial unfriendly bidder(s).

STRATEGIC ALLIANCE: An agreement between two or more independent firms to cooperate in other to achieve some specific commercial objective.