AN INVESTIGATION OF MERGER AND ACQUISITION AND ITS EFFECTS ON AN ORGANISATIONAL PERFORMANCE
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- NGN 5000
BACKGROUND TO THE STUDY
There are typically triumphs and failures in all human endeavors. As a result, businesses are no exception. Many corporate enterprises and people struggled in an era of abundance and waste mania, such as we saw in the mid-seventies during the oil boom. In such a period, employment, output, and income are at all-time highs, while government spending soars. No one complains at this time, and merchants do not consider means of existence and nourishment (Brown, 2009).
When the good times pass and the bad times return, the doomsday clays appear, and company failure becomes the order of the day as a result of a bad macroeconomic situation. As a result, even surviving businesses find it difficult to expand. This is the time of year when business leaders, government officials, and individuals remember to think of "mergers and acquisitions" as a means of ensuring viability, tightening belts, and surviving (Karl, 2010).
To avert an increase in company liquidations and bankruptcies, as well as to stop the flow of rising unemployment that may come from company closures. "Mergers and acquisitions are a good way to pool the power and synergies of comparable organizations in order to produce more business activity and ensure our firms' long-term viability." As stated by Okonkwo, "merger and acquisition" will save MW from significant financial trouble and offer such businesses with new management and improved access to new financial resources, saving the firm from bad performance effects (2009).
Every company hopes to generate a profit in the long run. Investors, that is, the owner, do not only regard the profit level as an economic, etc., but also as a reason and logic for being in business.
The topic of mergers and acquisitions in modern company management has become a reality. Mergers and acquisitions have played a significant part in the external and internal growth of major firms throughout the world (Nkem, 2009).
Mergers began in the United States of America between 1890 and 1904 and have continued until this day. Approximately two-thirds [23%] of big public corporations in the United States have merged at some point in their existence.
Mergers and acquisitions must be viewed as a viable option for salvaging enterprises in significant financial crisis by providing new management and improved access to resources that will save an economy.
1.1 HISTORICAL BACKGROUND OF CHEVRON TEXACO NIGERIA
Texaco is a multinational oil and gas business located in the United States with integrated activities in upstream and downstream oil, chemicals, and co-generation. The corporation began operations in Texas in the early twentieth century and has since grown to become one of the world's largest oil companies. Caltex, which has large operations in the Far East and Africa, is 50 percent owned by Texaco and Chevron.
Texaco contributes to the African oil sector through upstream and downstream efforts. Texaco has a substantial oil and natural gas production base in the United States, as well as foreign holdings in the North Sea, South and Central America, Australia's Far East, and Africa. The majority of Texaco's African output is located in Angola and Nigeria, which together produce more than 20 million barrels per day of crude oil. Through several initiatives at Rala, Tamboril, and Sulele south, Arigola has been the focus of exploratory activity. Texaco's oil output in Nigeria and Angola remained stable in 1995. Texaco owns and runs a 20% working interest in a consortium that kept Texaco's share of off-shore crude oil output at 9000 barrels per day despite an oil workers' protest against the Nigerian government in 1994. It also just bought a 300/0 equity stake in ill key deepwater blocks near its present Nigerian operations from Statoll and BP. Texaco (200 percent) raised their share of production at the southern end of the block to 7000 barrels per day, despite the civil war in Angola, which temporarily shut down two fields in the southern half of the block. Texaco has been pressing forward with plans to boost production off the coast of Angola and resume production at repaired on-shore facilities since the conclusion of a ceasefire deal late in 1994. Texaco has seven refineries in the United States, as well as refinery assets in South and Central America, as well as refineries in the Netherlands and the United Kingdom, and refining in the Far East. A large retail network in the United States, as well as significant positions in Europe, South and Central America, and West Africa, are among Texaco's marketing initiatives. Through caltex, the corporation has a large marketing presence in the Asia-Pacific area and in South Africa.
Texaco markets more than 20 million barrels per day in West Africa through its networks in Nigeria, Ivory Coast, Cameroon, and Togo. Chevron and Texaco decided to combine their activities in October 2000 to form Chevron Texaco.
Prior to the merger of Chevron and Texaco, Texaco Nigeria plc was founded in Nigeria in 1969 and is engaged in oil exploration and distribution. It is also listed on the Nigeria stock exchange, while Texaco was founded in 1926 as a Texas concern. White Plains, New York, is the company's headquarters. Its Nigerian headquarters are located at 8 McCarthy Street in Lagos. It is also one of the largest integrated oil businesses in the world, with operations in more than 150 countries.
Chevron Nigeria Limited (CNL) has established itself as a leader in oil and gas exploration and production in Nigeria after more than four decades of operations. The business discovers Nigerians who are successful off-shore fieldworkers in the Western Niger-delta in 1963. When it commissions the Escravos Gas Protect, Nigeria's first large gas utilization program, in 1997, it blazes a new route in gas usage. Chevron Nigeria Limited is the operator of the NNPC/Chevron joint venture, in which the NNPC owns 60% and Chevron owns the remaining 40%. Chevron Corporation is a multinational oil company located in San Francisco, California. Chevron Drive Lekki-Peninsula Lagos is the location of the company's Nigerian office. It operates in approximately a hundred countries throughout the world.
1.2 STATEMENT OF THE PROBLEMS
In today's world, the use of mergers and acquisitions to solve organizational difficulties has become a contentious topic. Many businesses are hesitant to use mergers and acquisitions as a remedy to their deteriorating performance for the following reasons:
(a) Initial animosity and bad blood as a result of merger modalities (b) Position of new corporate culture
(a) Initial animosity and bad blood as a result of merger modalities (b) Position of new corporate culture
(c) Inability of current work force and staff union to accept changes
(d) Fraudulent representation and absence of purposeful acculturative and staff orientation
These are only a few of the issues that this study will look into..
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 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?
1.7 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 = H A
1.8 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.
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