Effect of Merger and Acquisition on Growth and Profitability of Money Deposit Bank – A Case Study of Access Bank Plc, Nigeria

Abstract

The study used bank’s profitability indices – profit after tax (PAT), shareholders’ fund (SHF) and total assets (TOA) data of a period spanning 2005 to 2019 for Intercontinental Bank Plc, Diamond Bank Plc and Access Bank Plc to investigate the effect of merger and acquisition on the growth and profitability of Access Bank Plc. Between 2005 and 2019, Access Bank Plc first, acquired Intercontinental Bank Plc, and later merged with Diamond Bank Plc. The performance indices of the test Banks before and after acquisition and merger were extracted from the Banks’ Annual Reports, subjected to statistical analysis for paired mean comparison, trend analysis (regression) and coefficient of determination using Microsoft Excel Statistics Toolkit. The study established the growth pattern and significant differences in banks’ performances before and after the acquisition/merger. The findings revealed that Access Bank Plc had a double benefit, the first from the acquisition of Intercontinental Bank Plc, and the second from the merger with Diamond Bank Plc. Mean PAT, SHF and TOA were N Billion 11.90, N Billion 128.50 and N Billion 644.50, respectively before acquisition of Intercontinental Bank Plc, whereas they were N Billion 50.60, N Billion 325.02 and N Billion 2242.23, after the acquisition. The merger with Diamond Bank Plc resulted in remarkable increases in the Access Bank Plc’s PAT (7.47%), SHF (18.81%) and TOA (37.12%) in a year (2018 - 2019). Consequently, Access Bank Plc became bigger with more branches, Automated Teller Machines and customers. Besides, it transformed from its traditional wholesale banking institution to a balance financial service provider.