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THE EFFECT
OF MERGERS AND ACQUISITIONS ON THE GROWTH OF AN ORGANIZATION (A CASE STUDY OF
OANDO)
ABSTRACT
Merger and
acquisition has been widely acclaimed by scholars and professionals in business
as the most desirable and effective strategy to revive the difficult situations
facing Nigeria economic climate. The situation is so terrible that
organizations had to turn around and adopt strategy to survive through this
turbulent water. This research work has the objective undertaking to examines,
analyze and evaluate the effectiveness of merger and acquisitions as a strategy
for organizational survival in Nigeria and investigates whether it can result
to economic of scale and increase profitability of the combined firms. To this
end, questionnaire were administrated to Oando Nigeria Plc and some few other
organizations that merged. The data and information collected were analyzed
using simple tables, frequencies and percentages. The findings of this research
reveals that merger and acquisitions brings about improve in the productivity
of the emerged organizations. The researcher is of the opinion that, based on
the findings, the recommendations made if properly followed, it will improve
the activities of merger and acquisition for the benefit of the government,
proposing organizations and the interested public at large.
TABLE OF
CONTENTS
Cover page –
– – – – – – – – i
Title page –
– – – – – – – – – ii
Declaration
– – – – – – – – – – iii
Approval
page – – – – – – – – – iv
Dedication –
– – – – – – – – – v
Acknowledgement
– – – – – – – – vi
Abstract – –
– – – – – – – – viii
Table of
content – – – – – – – – – ix
CHAPTER ONE
– Introduction
1.0
Background of the study – – – – – – 1
1.1
Historical Background of Oando Nigeria Plc – – – 3
1.2
Statement of the general problem – – – – – 5
1.3
Objective of the study – – – – – – – 6
1.4
Significance of the study – – – – – – 8
1.5 Research
question – – – – – – – 9
1.6
Statement of hypothesis – – – – – – 10
1.7 Scope
and limitation of the study – – – – – 10
1.8
Definition of terms – – – – – – – 12
CHAPTER TWO
– Review of Related Literature
2.0
Introduction – – – – – – – – 14
2.1 Merger
and Acquisition definitions – – – – – 14
2.2 Types of
Merger – – – – – – – – 16
2.3
Strategies for business survival – – – – – 18
2.4 Motive
behind merger and acquisition – – – – 19
2.5 Reason
for merger and acquisition preference over
investment
in new business generated from scratch – – 23
2.6
Procedure for effective merger – – – – – 26
2.7 Method
of financing merger – – – – – – 28
2.8 Merger
and acquisition investment banking – – – 31
2.9 Merger
and acquisition market place difficulties – – 32
2.10 The
effect of merger and acquisition – – – – 35
2.11 Legal
issues in M & A – – – – – – – 36
2.12
Regulation of M & A in Nigeria – – – – – 37
2.13 Summary
of the review – – – – – – – 40
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.0
Introduction- – – – – – – – – 42
3.1 Area of
study – – – – – – – – 42
3.2 Research
design – – – – – – – – 43
3.3 Research
population – – – – – – – 43
3.4 Sample
and sampling technique – – – – – 44
3.5 Data
collection instruments – – – – – – 44
3.6 Data
collection method – – – – – – – 46
3.7 Validity
and reliability of the instrument – – – – 46
3.8
Administration of research instruments – – – – 47
3.9
Techniques of data analysis (mode) – – – – 47
CHAPTER FOUR
– Presentation and Analysis of Data
4.0
Introduction – – – – – – – – 49
4.1
Respondent characteristic and classification – – – 49
4.2
Presentation and Analysis of data – – – – – 50
4.3 Testing
of hypothesis – – – – – – – 58
4.4 Summary
of findings – – – – – – – 60
CHAPTER FIVE
– Summary, Conclusion and Recommendation
5.0
Introduction – – – – – – – – 62
5.1 Summary
– – – – – – – – 62
5.2
Conclusion – – – – – – – – – 65
5.3
Recommendations – – – – – – – 65
Bibliography
– – – – – – – – – 68
Appendix
CHAPTER ONE
INTRODUCTION
1.0
BACKGROUND OF THE STUDY
The increase
in oil boom in the 70’s was an era of huge and expensive prospect of doubtful
utility and viability. However, the heavy dependence on oil and imported input
rendered the Nigerian economy to be sensitive to external shocks with the
collapse of the world oil market in the mids 1981, an economic crisis emerged
in Nigeria, various control measures were put in place in order to correct the
disturbing situation between 1982 – 1985 but these measures failed to deal
effectively with the fundamental economic and financial problems confronting
the economy which was deteriorating.
The nation
began to face a situation of persistence and deteriorating balance of payment
problem, the external debt continually rise, the emotion of international
credit worthiness and the acute shortage of raw materials and consumer goods,
as agriculture suffered and severely, neglected, the country (Nigeria) was at
the point of collapsing.
Considering
the above circumstances, there is need for national economic reform which the
federal government eventually came up with Structural Adjustment Programme
(SAP) in 1988 as a strategy to end the deformation of the nation economy and
achieve a turn around in the fortunes.
The current
global economic depression facing the world has been described by the world
economic and financial experts as the longest and deepest depression in the
post war period. Major industrial developed countries share in this performance
characterized by declining growth rate, high inflationary pressure, increase in
number of unemployment and this trend had serious adverse effect on the
economic of developing countries of which Nigeria is included.
The present
development is quite affecting a substantial number of Nigeria contemporary
business most of them are on the path of decline, leading to folding up of some
companies and many others laying off their staff and equipment as a result of
operational hardship with lack of ability to expand and decline in sales volume
as well as profit.
With the
present difficult situation in the Nigeria businss environment. There is need
for businesses to be re-structured for survival in response to changes that is
occurring in the economic environment either a company decide whether to
acquire, merge or sell part or whole of its existing business thus, given birth
to a stronger, bigger and more profitable outfit that is capable of surviving
amidst strong competition.
1.1
HISTORICAL BACKGROUND OF OANDO NIGERIA PLC
Oando Plc
commence its business operation as a petroleum marketing company in Nigeria in
1956 under the name “ESSO West Africa Incorporated” a subsidiary of Export
Corporation of the USA. In 1969, the company was incorporated under Nigeria
laws as “ESSO standard Nigeria Limited. In 1976, the Nigeria Government brought
ESSO interest and thus, became the 100% owner of the company. The company was
then rename “Unipetrol Nigeria Limited”.
On 1st
March, 1991 the company became a public limited company and was known as
Unipetrol Nigeria Plc in the same year, 60% of the company’s shares was sold to
the Nigeria public under the first phase the then privatization exercise and
the company was quoted on the Nigeria stock exchange in February 1992.
In 2000,
under the 2nd phase of the Federal Government of Nigeria’s privatization programme,
ocean and soil services limited became a core investor by acquiring 305 of the
Federal Government’s 40% equity stock in the company, the remaining 10% was
sold to the Nigeria public. The investment in the then Unipetrol Nigeria Plc by
Ocean Oil Services Limited was with support of its International Technical
Partners Compania Espanola De Petroleos (CESPSA) who are currently 2nd largest
oil group in Spain and ranks among the top 10 oil group in Europe. CEPSA is a
fully Integrated Petroleum Company involved in exploration and production,
petrochemicals natural gas, trading, refining, distributing and marketing.
In August
2002, the company acquired Agip Petrol’s 60% stake of Agip Nigeria Plc, the
sale of the 60% interest of Agip Petrol International was the result of an
international bid conducted by Agip petrol international B.V with the
assistance of an international adviser during which Agip Petroleum
International selected to them Unipetrol Nigeria Plc following the acquisition
of Agip Nigeria Plc the company was again i.e. branded to Oando Plc in 2003 and
emerged as Nigeria 2nd largest company in the downstream sector of the oil
industry with 15.64% market share.
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