MERGER AND ACQUISITION STRATEGY AND PERFORMANCE OF OIL MARKETING COMPANIES IN NAIROBI COUNTY
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Date
2024-09
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Publisher
THE CATHOLIC UNIVERSITY OF EASTERN AFRICA
Abstract
Mergers and Acquisitions as growth strategies have in the past been used in several industries across the business world. The purpose of this study was to investigate the effect of merger and acquisition strategy on the performance of oil marketing companies in Nairobi County, Kenya. Specifically the study sought to determine the effect of liquidity on the performance of oil marketing companies in Nairobi County, establish the influence of financial leverage on the performance of oil marketing companies in Nairobi County, determine the influence of capital adequacy on the performance of oil marketing companies in Nairobi County, analyze the influence of customer satisfaction on the performance of oil marketing companies in Nairobi County, and establish the size of the firm and its effect on the performance of oil marketing companies in Nairobi County. The research was anchored on the Synergy Theory, The Growth Theory and the Market Power Theory. The researcher assessed several components of the study and the impact of liquidity, capital adequacy, financial leverage, company size, and client satisfaction on the performance of the oil marketing enterprises in Nairobi County using the descriptive research design. The study used the census sampling technique as the sample size was small. The sample was derived out of a target population of 42 senior managers of oil marketing companies in Nairobi County where 37 respondents were obtained. Both qualitative and quantitative data was collected from primary and secondary sources. Primary data was collected using a questionnaire whereas secondary sources were collected from the annual financial statements of the companies. Descriptive statistical methods were used to describe the data and identify the trends while inferential statistical methods were used to analyze the hypotheses. Data collected was edited and analyzed using the SPSS 21.0 version. The findings indicated that all of the five independent variables had an effect on the performance of the OMCs. The research found out that liquidity and financial leverage had a moderate inverse relationship with performance whereas capital adequacy, customer satisfaction and size of the firm had a positive linear relationship with performance. This meant that a steady decrease in liquidity and financial leverage, performance would increase slightly. As for the capital adequacy, customer satisfaction and size of the firm variables, an increase in these variables would lead to an increase in the performance. The study recommended firms
merge in order to achieve sustained growth and profitability. By expanding reducing their liquidity and financial leverage and increasing their capital base, customer satisfaction and operational capacity, the oil marketing companies in Nairobi are set to enjoy long-term success. The study also encouraged industry regulators to facilitate a conducive environment for mergers and acquisitions by reducing barriers to entry and providing necessary support.
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Keywords
Mergers and acquisitions (M&A), Corporate strategy, Firm performance, Oil marketing companies