The literature on how M&A impacts value pre- and post-merger or acquisition, is checkered. There is evidence to support the view that M&A in most cases tend not to deliver on the value proposition that was originally intended. The scholarly thought appears to converge on this fact.
For instance, Barnoh & Adu-Twumwaah (2015), citing Brealy and Myers (2010), argues that “many mergers that seem to make economic sense fail because managers cannot handle the complex task of integrating two firms with different production processes, accounting methods, and corporate cultures” p.79.
In their work on M&A in Ghana’s banking industry, the authors (Barnoh & Adu-Twumwaah, 2015, p.87) reviews the Ecobank-TTB acquisition and UT Bank-BPI merger and concludes thus:
“…in a merger and acquisition, if the acquiring firm does not pay key attention to these important variables[valuation and financing method], the acquisition or merger would not succeed. Ecobank and UT Bank’s acquisition and merger have succeeded because the acquirers paid key attention to these variables.”
The challenge for those in charge of managing this GN-Premium-Sahel transaction is manifold, key among which is valuation and integration. The question of which framework should guide transaction design, whether a synergistic theory or aided compliance theory, is a matter for discussion at the board level. What is clear, or has increasingly become so, apparently, is the compelling business case that undergirds this transaction.
What does each player bring to the table?
If properly structured and managed, all parties to this deal would realize enormous value arising out of sheer complementarity. The reason is simple; all three parties bring something to the table. GN brings to the table a unique supply chain that is linked to cross-border subsidiaries and related parties.
Premium Bank brings to the table a sizeable balance sheet and a hunger for growth as evidenced by its aggressive spend on Property, Plant and Equipment within the last two years. Sahel Sahara, on the other hand, provides a unique know-how in credit risk management within the agriculture and manufacturing space.
Data from BSIC annual report (FY 2015) shows a relatively substantial portion of its loans and advances portfolio (GH¢229,095,715) been allocated to Agriculture (GH¢4,632,195) and Manufacturing (GH¢29,028,926). It would be interesting to see how this would impact the credit policy of the combined entity.
Figure 1-3 provides a snap view of the relative strength and contribution of the parties in this proposed merger.
Any Potential Impact on Financial Inclusion?
Source: Nkunimdini Asante /