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This article identifies and reviews existing merger and acquisition (M&A) studies focused on African markets. In this review, the factors mentioned directly or alluded to in the existing studies that distinguish African countries as target nations from other countries traditionally considered in the M&A literature are highlighted. Also reported are the results from a series of in-depth interviews with executives intimately involved with M&As in Africa. These interviews highlight some of the idiosyncratic features of the African context that bring to the forefront boundary conditions of, and the need to expand, existing M&A research based on acquisitions in the more developed regions of North America and Western Europe. The paper concludes with a synthesis of the conclusions from the authors’ review of the literature with the insights offered from their executive interviews to chart a roadmap for future research designed to enhance our understanding of M&As in general. The African context appears particularly appropriate for extending our knowledge of institutional theory, the development of selection capabilities, learning and knowledge transfer theories, the role of cultural differences in cross-border M&A, organizational justice theory, a subset of institutional theory on institutional legacies, and social dominance theory.
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Africa Journal of Management
ISSN: 2332-2373 (Print) 2332-2381 (Online) Journal homepage: http://www.tandfonline.com/loi/rajm20
Mergers and Acquisitions in Africa: A Review and
an Emerging Research Agenda
Kimberly M. Ellis, Bruce T. Lamont, Taco H. Reus & Leon Faifman
To cite this article: Kimberly M. Ellis, Bruce T. Lamont, Taco H. Reus & Leon Faifman (2015)
Mergers and Acquisitions in Africa: A Review and an Emerging Research Agenda, Africa Journal
of Management, 1:2, 137-171, DOI: 10.1080/23322373.2015.1028274
To link to this article: http://dx.doi.org/10.1080/23322373.2015.1028274
Published online: 20 May 2015.
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MERGERS AND ACQUISITIONS IN AFRICA: A REVIEW AND
AN EMERGING RESEARCH AGENDA
Kimberly M. Ellis
a
*, Bruce T. Lamont
b
, Taco H. Reus
c
and Leon Faifman
a
a
Florida Atlantic University, Management Programs, Boca Raton, Florida, USA;
b
Florida State
University, Entrepreneurship, Strategy, and Information Systems, Tallahassee, Florida, USA;
c
Erasmus University, Strategic Management and Entrepreneurship, Rotterdam, the Netherlands
This article identifies and reviews existing merger and acquisition (M&A) studies
focused on African markets. In this review, the factors mentioned directly or alluded to
in the existing studies that distinguish African countries as target nations from other
countries traditionally considered in the M&A literature are highlighted. Also reported
are the results from a series of in-depth interviews with executives intimately involved
with M&As in Africa. These interviews highlight some of the idiosyncratic features of
the African context that bring to the forefront boundary conditions of, and the need to
expand, existing M&A research based on acquisitions in the more developed regions
of North America and Western Europe. The paper concludes with a synthesis of the
conclusions from the authorsreview of the literature with the insights offered from
their executive interviews to chart a roadmap for future research designed to enhance
our understanding of M&As in general. The African context appears particularly
appropriate for extending our knowledge of institutional theory, the development of
selection capabilities, learning and knowledge transfer theories, the role of cultural
differences in cross-border M&A, organizational justice theory, a subset of institu-
tional theory on institutional legacies, and social dominance theory.
Keywords: mergers and acquisitions; Africa; boundary conditions of theory
As globalization pressures persist and the global competitive landscape becomes
progressively more dynamic, mergers and acquisitions (M&As) continue to be a popular
growth strategy among multinational corporations (MNCs) headquartered in every region
of the world. In fact, in 2014 the total value of announced M&A transactions on a global
basis exceeded $3.5 trillion, up 47% from 2013 levels and the strongest annual level since
2007 (Thomson Reuters 2014). This recent growth in M&A activity is driven in part by
the increasing need for MNCs to expand beyond the developed markets of North America
and Europe in search of larger customer bases along with related scale economies,
improved access to raw materials or other location advantages, as well as greater
opportunities to exploit current competitive advantages and develop new ones. As such,
more than 25% of the 2014 global M&A activity comprised cross-border deals in
emerging markets with multinational acquirers from Europe leading the way (Clifford
Chance 2015; Thomson Reuters 2014). While China and Latin America continue to
account for a large portion of inbound M&A investments in emerging markets, annual
growth in Africa as a target region has shown a strong surge over the last 1015 years
*Corresponding author. Email: kellis15@fau.edu
Africa Journal of Management, 2015
Vol. 1, No. 2, 137171, http://dx.doi.org/10.1080/23322373.2015.1028274
©2015 Africa Academy of Management
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(Clifford Chance 2015; Mergermarket, 2012; Thomson Reuters 2014). In fact, Africas
share of global M&A activity has doubled since 1999 with almost $35 billion in
announced deals in 2014 (Portelli & Narula 2006; Thomson Reuters 2014). This upward
M&A trajectory on the African continent is expected to continue throughout the decade
(Mergermarket 2012; Clifford Chance 2015).
The unique nature of the African context and initial exploratory findings, including
our own interviews with executives involved in M&As in Africa, suggest we currently
face critical research gaps in our understanding of M&A decision-making, integration
management, and post-deal outcomes within this specific region. Research on M&A
activity and its performance effects in emerging African markets has been scarce (e.g.
Gomes, Angwin, Peter, & Mellahi 2012; Triki & Chun 2011). The few studies that do
exist tend to focus primarily on domestic deals within selected industries, particularly
banking and financial services, and deals occurring in the larger markets of Africa, such
as South Africa and Nigeria. In particular, many studies focused on the effects of M&As
that were triggered by the Nigerian governments capitalization policies designed to
reform its banking industry (e.g. Akinbuli & Kelilume 2013; Maude & Okpanachi 2012).
While this research is important in understanding factors influencing M&A performance
mainly for African-based acquirers in select sectors, very little is known about the
performance effects of M&A activity across multiple industries, in a broader range of
African countries, and for acquirers headquartered outside of the African continent.
Our aim is to make three primary contributions to the M&A literature. First, we
identify and review existing M&A studies focused on African markets. In doing so, we
discuss several major trends and limitations in the extant research on M&As in Africa. In
this review, we highlight the factors mentioned directly or alluded to in the existing
studies that distinguish African countries as target nations from other countries
traditionally considered in the M&A literature. Second, we conducted a series of in-
depth interviews with executives intimately involved with M&As in Africa. These
interviews highlight some of the idiosyncratic features of the African context that bring to
the forefront boundary conditions of, and the need to expand, existing M&A research
based on acquisitions in the more developed regions of North America and Western
Europe. And third, we synthesize the conclusions from our review of the literature with
the insights offered from our executive interviews to chart a roadmap for future research
designed to enhance our understanding of M&As of African firms in general. To provide
background and more detail on the phenomenon of interest, we begin with a brief
overview of some of the trends in M&A activity in Africa.
TRENDS IN M&A ACTIVITY IN AFRICA
During the 10-year period from January 1, 2003 to December 31, 2012, the total number
of deals involving African target firms increased from 242 to 367 and the total deal value
grew from 15.0 billion to 17.9 billion on an overall basis.
1
Figure 1 summarizes the
annual M&A activity in Africa for this period.
2
Consistent with trends in M&A activity
on a global scale, activity in Africa peaked in the 20072008 time period (highest in
terms of deal value in 2007 at $47.3 billion and number of deals in 2008 at 451
transactions). However, unlike the overall market, M&A activity in Africa defied the
global economic downturn in 2010 by nearing its record levels of 2007 in terms of deal
value (Mergermarket 2012; Thomson Reuters 2012).
138 Africa Journal of Management
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Other trends are noteworthy, several of which we will build upon in other sections of
the paper. First, South Africa is the target nation in almost 50% of the M&As in Africa.
This is expected given it is the leading economic power on the continent (Ernst & Young
2012), and offers business environments and financial markets viewed favorably by
foreign MNCs (Mergermarket 2012; Triki & Chun 2011). As Table 1 shows, Egypt is
second followed by Nigeria, Morocco, and Mauritius. Egypt, Morocco, and Mauritius
pursued aggressive economic reforms and posted solid GDP growth in the mid-to-late
2000s increasing the interest of foreign firms. Nigeria has the largest population in Africa
and an abundance of natural resources.
Second, South African firms remain the most active acquirers on the African
continent. As indicated in Table 2, they initiated almost 37% of the deals in Africa from
2003 to 2012. This can be attributed to South African firmsunderstanding of business
practices along with the investment culture in other African countries, and the availability
of funding from both its equity and credit markets (Ernst & Young 2012; Mergermarket
2012). Despite challenges associated with uncertain political and regulatory environments
(Clifford Chance 2013; Triki & Chun 2011), and perhaps due in part to their historical
linkages to the continent (Curwen & Whalley 2011), acquiring firms from the developed
markets of France, the United Kingdom, and the United States account for 26% of the
0
100
200
300
400
500
0
10000
20000
30000
40000
50000
2003 2004 2005 2006 2007 2008 2009 2010 2011 20 12
Deal value Number of Deals
Figure 1. Deals by year.
Table 1. Top 10 target nations (ranked by number of deals) 20032012.
Target firm nation
Number of
deals Percent
Deal value
(in $US billions) Percent
1. South Africa 1766 49.9 118.252 46.5
2. Egypt 360 10.2 49.503 19.5
3. Nigeria 189 5.3 25.093 9.9
4. Morocco 152 4.3 16.029 6.3
5. Mauritius 85 2.4 2.849 1.1
6. Zimbabwe 83 2.3 1.548 0.6
7. Namibia 69 2.0 1.374 0.5
8. Kenya 66 1.9 1.430 0.6
9. Tunisia 54 1.5 5.020 2.0
10. Mozambique 51 1.4 0.339 0.1
Mergers and Acquisitions in Africa 139
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deal value in Africa. Also, firms from India and China have been making major
investments over the last five years to acquire assets and resources in Africa.
Finally, the scope of M&A activity in Africa is expanding beyond the traditional
energy and mining industries to include the telecommunications, financial services,
consumer goods, retail, and private equity sectors. Moreover, the number of deals valued
in excess of $500 million has grown steadily over the last decade to account for almost
67% of deal value. Over half (54%) of the deals are cross-border, and 45% involve firms
operating in the same sector.
REVIEW OF EXISITNG STUDIES ON M&As IN AFRICA
We conducted a search in ABI-Inform Complete to identify existing studies of M&As in
Africa. Our primary search criteria included (1) the words merger, acquisition, or M&A in
the abstract; (2) the name of any African country in the article text; (3) full-text
availability; and (4) peer-reviewed publication. Numerous articles were eliminated
because they either did not concern acquisitions of assets, or were not specifically
focused on the African region. Also, we considered published articles that were included
in the reference section of the identified articles. However, we were not able to locate the
full text of many of these articles. In sum, our review is based on the 30 existing studies
summarized in Table 3. It is worth noting that 18 of these studies examined M&A activity
in Nigeria with 15 focused on the Nigerian banking industry. Five studies focused on
South Africa, examining domestic deals within the country (Horwitz, Anderssen,
Bezuidenhout, Cohen, Kirsten, Mosoeunyane, Smith, Thole, & van Heerden 2002;
Sehoole 2005; van Vuuren, Beelen, & de Jong 2010), or South African acquirers (Smit &
Ward 2007; Wimberley & Negash 2004). With three additional studies focused on bank
mergers in Tunisia (Abdelaziz & Bilel 2012; Kammoun & Ammar 2012; Samet 2010),
banking was by far the most represented industry in the existing literature. Also, 70% of
the articles have been published since 2010 indicating that research examining M&As in
Africa is still in an embryonic stage.
We structure our review to correspond with key areas of focus in the mainstream
M&A literature. As such, the existing research on M&As in Africa is categorized and
Table 2. Top 10 acquiring firm nations (ranked by deal value) 20032012.
Acquiring firm nation
Number
of deals Percent
Deal value
(in us billions) Percent
1. South Africa 1303 36.8 70.430 27.8
2. France 118 3.3 29.626 11.7
3. United Kingdom 285 8.1 26.744 10.5
4. India 78 2.2 13.240 5.2
5. China 24 0.7 12.768 5.0
6. United States 136 3.8 9.728 3.8
7. Morocco 80 2.3 8.142 3.2
8. Egypt 186 5.3 6.329 2.5
9. United Arab Emirates 58 1.6 6.302 2.5
10. Nigeria 132 3.7 6.229 2.5
Note: Acquiring firm nations in Africa are italicized to highlight M&A activity within the continent.
140 Africa Journal of Management
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Table 3. Existing studies focused on M&As in Africa.
M&As by non-African acquiring firms
Study Primary research
question
African context and
idiosyncrasies
Theory Sample and methodology Key findings
Portelli &
Narula 2006
What are the
implications of FDI via
acquisitions on
technology transfer in
acquired firm?
Tanzania, agro-food
manufacturing
Tanzania is in the midst of
an extensive economic
liberalization process and
privatization of state-
owned enterprises
Increase in privatization-
related FDI has sparked
cross-border M&A activity
in Sub-Saharan Africa
Builds on absorptive
capacity logic
20022003
Two cases of formerly
government-owned targets
Case studies exploratory
questionnaire, company
visits, semi-structured
interviews, and other
documents
Tanzanian targets
experienced technological
upgrades following the
acquisition
The combined firms also
engaged in technical
collaborations with local
suppliers that facilitated
improvements in their
operations
Triki & Chun 2011 What is the effect of
firm-level and country-
level governance
characteristics on post-
deal performance?
Multiple African target
countries (South Africa
and Egypt leading target
nations) and various
industries (with most in the
manufacturing and mining
sectors)
Some African countries
have a reputation for weak
governance structures. This
issue is exacerbated by
reports of high levels of
corruption in various
African countries Problems
continue despite reforms
designed to promote and
enhance sound corporate
governance
These issues reduce the
attractiveness of M&As of
African companies
Alludes to agency
theory and
institutional theory
M&As of African targets
by US acquirers from
March 1982 to March
2010; of 240 deals, 77%
funded by cash only; 55%
of South African targets;
average shares acquired
75%; transaction values
available for 49% and
averaged $62 million
After adjustments for
missing data, final sample
for 64 deals used for model
testing, of which 36 were
South African targets
DV: 1-year buy & hold
returns; secondary data
from Datastream, Thomson
One, annual statements,
Kenneth French website,
and ICRG
US acquirers report
negative returns following
their M&As of African
firms
US acquirers with smaller
board size and prior
experience in Africa
experienced higher returns
Strong and impartial legal
systems and deals
involving South African
targets also resulted in
higher returns, while
unstable economies led to
lower returns
Level of corruption has no
effect on post-deal returns
Mergers and Acquisitions in Africa 141
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Study Primary research
question
African context and
idiosyncrasies
Theory Sample and methodology Key findings
Curwen &
Whalley 2011
*While most of
the acquirers
were
headquartered
outside of
Africa, one was
based in South
Africa (MTN)
How has the
restructuring of the
African mobile telecom
industry supported
economic
development?
Multiple African target
countries including Ghana,
Nigeria, South Africa, and
Sudan
telecommunications
A poor
telecommunications
network infrastructure
existed in many African
countries
Foreign acquirers were
needed to finance upgrades
to and expansion of the
network, which in turn
would facilitate national
economic development
No theory formally
stated
Descriptive information on
efforts of three key rivals
to increase their stakes and
enhance their market
position in multiple
African countries Zain
headquartered in Kuwait,
MTN headquartered in
South Africa, and Bharti
Airtel headquartered in
India
Multiple takeover bids
were made by these three
firms along with other
foreign MNCs Etisalat
(UAE), Vivendi (France),
and RCom (India) for
partial or complete
ownership of the two
largest telecoms operating
in Africa (MTN and Zain)
Foreign firms with
financial muscle can easily
acquire African assets
However, operating the
assets may prove extra-
problematic due to the
wide variety of cultures
within Africa, some targets
being former state
monopolies, limited
attention to managerial
skills needed to learn from
the target and host
environment, diverse
responses by regulators
and governments in host
countries, and parts of
Africa being Francophone
and Anglophone
(especially French and UK
acquirers)
No concrete findings
provided that M&As in the
telecom industry
contributed to overall
economic growth in Africa
Table 3 (Continued)
142 Africa Journal of Management
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M&As by African acquiring firms
Wimberley &
Negash 2004
What are the long-term
price effects on M&A
activity of South
African firms?
South African acquirers
publicly listed
The JSE Listing
Requirements classifies
acquisitions based on a
size criterion (the targets
value relative to the
acquirers market
capitalization)
Only those in Category 1
(ratio > 30%) and 2 (ratio
between 20% and 30%) are
viewed as being significant
No theory formally
stated; alludes to
external and internal
drivers of M&A
activity
Reviewed newspaper
articles published by the
SA Press Group to create a
database of M&A activity
in the industrial sector for
19891999 period
Used stock price
information on 609 listed
firms to generate abnormal
returns
Short-term market reaction
for both firms in the South
African market is similar to
US & UK
One difference is that in
the context of South
African acquirers, the
neutral firms, not the
glamour firms, were the
worst performers
South African firms that
engage in multiple M&As
suffer more negative CARs
Smit & Ward 2007 Do M&As add value to
acquiring firms?
South African acquirers
publicly listed
M&As and tender offers of
publicly traded firm occur
less frequently in South
Africa as compared with
other nations
The listing requirements of
the JSE identify deals as
Category 1 or 2 based on
the targets value relative
to the acquirers market
capitalization
This has implications for
required public disclosure
of the unlisted target firms
historical financial
performance
Refers to economic
theory (i.e. synergies,
economies of scale,
empire building, etc.)
and signaling theory
Used Ernst & Young
annual review of M&As in
South Africa in 20002002
to create database of deals;
only 27 deals out of 802
met the 5 criteria
established for hypotheses
testing
Event study
T-test of mean and median
differences
Findings mostly consistent
with US & UK studies
ACARs were not
significant for full sample
Firms engaged in M&As
outperformed industry
peers only in one period (2
years before the
acquisition)
While firms may be more
inclined to engage in
M&As following a period
of superior performance,
there is no significant
change in their operating
financial performance after
the deal
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
Mergers and Acquisitions in Africa 143
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Domestic M&As within African countries
Agundu &
Karibo, 1999
What are the effects of
a merger on firmsrisk
levels and corporate
health?
Nigeria consumer
products
Many firms in the Nigerian
economy are prone to
corporate collapse (as was
Lipton in this case) due to
factors including
ineffective development
and implementation of
corporate strategy as well
as open and concealed
power dynamics
M&As are an option to
enhance corporate health,
minimize risk, and
maximize earnings
Loosely refers to
views on mergers
consequences for
risk levels
Case study of the
celebrated merger between
Lipton Nigeria Limited and
Lever Brothers Nigeria Plc
Compared pre-deal period
with post-deal period using
secondary data and
primary data Analyses
included tabulations, F-
tests, and multiple
discriminant analyses
The analyses indicated
lower risk and better
corporate health following
the merger attributed to
synergy realization
Erhun et al. 2005 What has been the
impact of M&As in the
global pharmaceutical
industry on Nigerian
pharmaceutical firms?
Nigeria pharmaceutical
While facing some of the
same challenges as other
firms (i.e. poor
infrastructure, regulatory
inconsistencies, etc.),
unique to pharma firms are
the challenges associated
with fake and adulterated
No theory formally
stated
Questionnaire administered
to two groups: (1) reps of
MNCs that have engaged
in M&As and are fully
represented in Nigeria; (2)
local firms that have not
engaged in M&As between
April and June 2003
60% of MNCs experienced
cultural clashes, 40% faced
power struggles/infighting
among executives, and
20% had turnover of R&D
staff
Major hindrance for local
firms was lack of equity to
finance the deal
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
144 Africa Journal of Management
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products and a
disorganized distribution
system
Because of such, the
industrys capacity
utilization is at 35%
Views exist that M&As
could serve as a solution
for future industry growth
For local firms, 93%
agreed that M&As could
help grow local
pharmaceutical industry
Aduloju &
Awoponle 2008
How do underwriters
react to recapitalization
exercises? How do
M&As affect the
sustainability of
companies?
Nigeria insurance
Government intervention
needed to alleviate crisis
within the industry and
facilitate the repositioning
of surviving firms to
improve their service
delivery, strengthen their
financial position, and
enhance their public image
Crisis stemmed from the
large number of small local
insurance companies,
many of which were not
financially sound enough
to meet clientsclaims
No theory formally
stated
54 staff members of 22
insurance companies listed
on NSE at the time of the
study
Surveys, interviews and
company records
combined with data
gathered from magazines,
journals, business
publications
Chi-square used to test
hypothesized effects
M&As allowed companies
to remain in business;
series of policy and
practical recommendations
offered
Emeni &
Okafor 2008
What is the relationship
between bank M&As
Nigeria banking
Reforms designed to give
the banking sector priority
Loosely refers to two
effects static &
dynamic associated
Primary data collected
20042006 via survey
from 4 of the 25 surviving
Observed static and
dynamic effects post-
merger pertaining to the
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
Mergers and Acquisitions in Africa 145
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and lending practices to
small businesses?
attention in the economic
development of Nigeria,
especially in cottage
industries and for small
and medium size
enterprises
with the creation of
larger, more complex
firms after M&As
banks (3 engaged in a
merger, 1 did not)
Secondary data from
company and CBN
records; cross-sectional
design, OLS
relationship between bank
size and lending to small
businesses
Elumilade 2010 Have merged banks
obtained efficiency
gains in line with their
financial intermediation
roles?
Nigeria banking
Government reform
programs needed to
overhaul the financial
system /banking industry
which was in distress
Institutional realities
substantially different in
Nigeria as compared with
both other undeveloped
countries and developed
economies
Loosely refers to
benefits of
economies of scale
and scope, market
power, and increased
diversification
25 surviving banks 19
were formed by the fusion/
merger of 69 banks and 6
were banks that did not
engage in M&A
Secondary data (2002
2007) from regulatory
authority records; pooled
data time series and
cross-sectional GLS; two
models: lending activity
(interest rate on loan) and
deposit activities (rate)
M&As improved
efficiency of borrowing
and lending operations
Involvement in M&A was
positively related to
interest and deposits rates;
banks involved in M&As
and facing more
competition resulted in
higher rates
Anifowose
et al. 2011
How does
consolidation influence
HR practices and post-
M&A performance?
Nigeria banking
Government reforms
intended to create
surviving firms capable of
competing on a global
scale
Government policy exists
which establishes a staffing
ratio/mix by operational
level and position
categories of financial
institutions
No theory formally
stated; arguments
consistent with RBV
89 staff members from top,
middle, and lower levels at
four banks of which two
had recently merged
Primary data from surveys
(items not clear) and
individual interviews; and
secondary data
Chi-square tests; no clear
info given as to how focal
constructs were measured
Consolidation increases the
extent to which banks
engage in HR practices and
organizational performance
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
146 Africa Journal of Management
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Non-compliance can result
in the revocation of a
firms operating license by
the Central Bank of
Nigeria
Also, there is a shortage of
qualified personnel, many
inexperienced workers, and
existing managers and
executives who are
overstretched and thinly
spread within the local
market
Gunu &
Olabisi 2011
What is the effect of
M&As on employment
levels in the banking
industry?
Nigeria banking
Large number of bank
failures in Nigeria between
1994 and 2003
Two common features of
the failed banks were small
size and unethical practices
This resulted in a
government reform
program
No theory formally
stated
24 surviving banks
Longitudinal data 1999
2009; descriptive statistics
and linear regression
After M&A period, the
number of branches rose,
while employment growth
rate declined
Maude &
Okpanachi 2012
Is there a relationship
between pre- and post-
acquisition
profitability?
Nigeria banking
M&As are a relatively new
occurrence in Nigeria
First merger proposal
recorded in 1982
M&A activity picked up
around 1995
No theory formally
stated
Study focused on 3 of the
11 banks that maintained
their corporate names and
identities after the M&A
Correlational study;
secondary data from
financial statements,
Profit after tax before the
M&A correlated with gross
earnings after the M&A;
no significant relationship
in bank profitability before
and after the M&A
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
Mergers and Acquisitions in Africa 147
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Popular in banking sector
due to government reforms
aimed at strengthening the
industry and repositioning
banks to improve
profitability
Emphasis on the role of
banks as the economic
drivers of Nigeria
reports, and accounts;
20032008
Oghojafor &
Adebisi 2012
What are the motives to
engage in M&As and
how do M&As impact
performance of the
industry and overall
economy?
Nigeria banking
Government reform policy
to save the system from
total collapse due to a host
of structural and
operational weaknesses
and facilitate
improvements in strategy
efficiency, etc.
No theory formally
stated; reference to
diversification
benefits
20 managers of 5 banks
Primary survey data;
secondary data from
financial statements/reports
OLS and t-tests; no
information provided as to
how various constructs
were measured
Main motive for M&A was
weakness of corporate
governance; M&A activity
helped curb distress
experienced in banking
industry during the focal
period; average capital of
banks relates to profit
recorded during pre- and
post- M&A periods
Gomes et al. 2012 What are the pre- and
post-M&A HRM
practices used by the
banks? How/to what
extent do these HRM
practices influence
outcomes?
Nigeria banking
Mentioned huge
implications of M&A wave
for the strength and
integrity of Nigerias
economic system (i.e.
public confidence,
transparency, etc.) and on
the nations social
wellbeing (i.e. post-M&A
job losses combined with
Relates to Schweiger
et al.s(1993)
integration
framework
Links to learning
theory, strategic fit
theory, and M&A
process perspective
19 merged banks
(excluding 6 banks that did
not merge)
Qualitative, exploratory
inductive multiple case
study; primary data; total
of 37 semi-structured
interviews with managers
at different levels and from
different functions/
Regional differences,
experience of external
advisors in managing
M&A, and linking pre- and
post-acquisition phases
influence M&A outcomes
Post-deal HRM practices
and communication varied
greatly within and across
integration approaches
Table 3 (Continued)
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148 Africa Journal of Management
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already saturated labor
market conditions)
Cultural differences exist at
the regional level within
Nigeria, particularly
between the North and
South
There are longstanding
divides in and conflicts
between ethnic groups
within Nigeria
Also, the ethnic groups do
not view themselves as
part of same culture
departments; Conducted
4 years after merger
integration approach not an
indicator of M&A outcome
Adegoroye &
Oladejo 2012
How do various
innovative HRM
practices affect post-
deal performance?
Nigeria banking
Discussion of reasons
leading to and desired
outcomes of government
reforms
Links banking sector to the
strength of the entire
economy
Mentions problems and
challenges created by the
reforms within the sector
and overall economy
No theory formally
stated; alludes
to RBV
150 staff members 30
each from 5 of the 15
quoted banks as of
September 2012
Survey; Z-score statistics
used to test hypothesized
effects
Innovative recruitment
(ranked #1) and
compensation/reward
practices (ranked #2) were
perceived to influence
post-deal bank
performance
Innovative HRM practices
were positively related to
perceptual measures of
bank performance
Udoidem &
Acha 2012
What are the effects of
M&As on banks
assets?
Nigeria banking
Initial M&As in Nigeria
(19831996) involved
mostly foreign firms so
No theory formally
stated
Comparative analysis of
pre-deal (19972003) and
post-deal (20042010)
bank assets
Nigerian banks performed
slightly better after M&As
Several policy-related
recommendations offered
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
Mergers and Acquisitions in Africa 149
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impact on the economy
was limited
The M&A wave in the
banking sector in 2004
2005 raised concerns about
their effect on Nigerian
banksperformance and
thereby the economy as a
whole
Akinbuli &
Kelilume 2013
Are M&As a good
solution to bail out
organizations in
distress?
Nigeria banking
M&A activity in its
infancy stage in Nigeria
Recent activity in the
banking sector driven by
regulatory policy designed
to address a range of issues
(i.e. weak governance,
management turnover,
weak capital base,
inaccurate reporting, etc.)
that led to distress and
insolvency among
Nigerian banks
M&As viewed by some as
the only solution to
overcome the crisis
No theory formally
stated
10 of 25 remaining banks
randomly selected
Secondary data from
financial statements,
reports, and accounts;
interviews with 20 CEOs
and managers of selected
banks; 20042008; no
statistical tests of changes
in various measures
reported
M&As lead to growth but
not to performance
improvements, especially
if regulatorily imposed
Operating efficiency
suffered after the deal (esp.
if merged banksoperating
structures and cultures
differed, both banks were
smaller in size, or one bank
was weaker/more
distressed)
Assaf et al. 2013 Did Nigerian banks
improve their
efficiency after the
mergers of 2005?
Nigeria banking
Minimum capitalization
requirements set by the
Central Bank of Nigeria
No theory formally
stated; refers to
benefits of scale/
scope economies,
Included all 25 banks that
meet recapitalization
threshold
Data from 2002 to 2007;
Cost efficiency of Nigerian
banks increased during the
post-deal period
Surviving banks benefited
Table 3 (Continued)
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idiosyncrasies Theory Sample and methodology Key findings
150 Africa Journal of Management
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All foreign banks survived
via capital injection from
their parent company
higher revenues,
knowledge transfer
Bayesian random frontier
model to account for bank
heterogeneity
from reform and
consolidation process
Nwankwo 2013 What is the impact of
pre- and post-bank
consolidation on the
growth of Nigerias
economy?
Nigeria banking
High concentration among
Nigerian commercial banks
prior to the 2004
reformation
Additional reforms enacted
in 2012 with government
taking over some banks
Refers to (1) Says
law of market and
(2) concentration
theory
Data from 2000 to 2011;
t-test to compare pre- and
post-period
Economic growth
measured in terms of
money supply, exchange
rate, and interest rate
Post-bank consolidation
had a significant, positive
effect on the growth of the
Nigerian economy, but pre-
bank consolidation had an
insignificant effect
Several recommendations
related to government
policy and firm strategy
offered
Ikpefan &
Kazeem 2013
Did mergers have a
significant effect on the
performance of
Nigerian banks?
Nigeria banking
Central Bank of Nigeria
instituted a 13-point reform
program in 2004, the major
of which was the minimum
capitalization requirement
No theory formally
stated
Sample includes 10 of the
banks involved in a M&A
Panel data from 2000 to
2009; regression analysis
Firm size had a significant
negative effect while the
loans to deposit ratio had a
significant positive effect
on bank performance in
both the pre and post-
merger periods
Deposit growth rate also
had a significant positive
effect during the post-
merger period
Several recommendations
related to firm strategy and
government policy offered
Nwidobie 2013 Did the M&A wave in
20042005 maximize
shareholderswealth?
Nigeria banking
98% of the banks in
existence in 2004 could not
Loosely refers to
market control and
power as well as cost
Sample included 6 of the
21 commercial banks in
existence at the time of the
Shareholders of the banks
sampled experienced a
significant increase in DPS
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
Mergers and Acquisitions in Africa 151
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meet the minimum
capitalization requirement
on a stand-alone basis;
reform intended to address
issues of governance, risk
management, and
efficiency in order to
increase earnings of banks
and their shareholders
History of bank M&As in
Nigeria including a
detailed account of which
firms combined to form the
25 surviving banks
and profit
efficiencies
study
Paired t-tests of dividends
per share (DPS) from 2003
(pre-M&A) and 2009
(post-M&A)
Regression analysis with
change in dividends (DV)
and change in capital,
earnings, and cash (IVs)
after the M&A as
compared with the pre-deal
period
Several recommendations
related to firm strategy and
government policy offered
Oluwasanya 2013 No formal research
question posed
Nigeria banking
Brief overview of M&A
activity in Nigerian
banking sector since 1912
Provides a table detailing
the 25 surviving banks and
the former banks combined
to create them
No theory formally
stated
No sample or case study
used
Paper is mostly a generic
discussion of (1) difference
between mergers and
acquisitions, (2) types of
M&As, (3) reasons for
M&As, and (4) benefits
and challenges of M&As
Several benefits and
recommendations offered
for increased overall M&A
activity in Nigeria
Sanda & Adjei-
Benin 2011
How does a merger
affect employee
satisfaction and
performance?
Ghana mining
M&As have not occurred
frequently in Ghana
because of the countrys
unique entrepreneurial
business culture
Refers to justice
theory and anxiety
theory
Case study of a merger
between two mining firms;
169 respondents to a short
survey
Qualitative case study of
2004 merger collected
Deal communication
challenges, anxiety, and
stress negatively related to
worker productivity and
commitment; unfair
treatment in terms of
Table 3 (Continued)
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idiosyncrasies Theory Sample and methodology Key findings
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Identifies 2004 as the start
of more M&As in Ghana
and mentions a few
specific examples and
affected industries
during an 8-week period in
2009; convenience
sampling of 200
employees; snowballing
technique; descriptives
distributive and procedural
justice triggered employee
dissatisfaction with new
role in merged firm, which,
in turn, led to lower
commitment &
productivity, negative work
attitude, and higher
turnover
Samet 2010 What are the effects of
M&As on the
performance of merged
banks?
Tunisia banking
Brief mention of the
scarcity of M&A activity
in the Tunisian banking
industry and that the two
observed transactions may
be in response to new
banking system
requirements
Alludes to agency
theory
Case study of a banking
merger (one of only two
such mergers in Tunisias
history)
19982001 period
Secondary data to capture
ROA, ROE, ROS, and
abnormal yield
There was no effect of the
merger on the wealth of
STBs shareholders
Despite the lack of value
creation, and actually value
destruction, in the short-
and mid-term, the author
encourages more M&As in
the Tunisian banking
industry because they are
viewed as necessary to
deal effectively with
increased, intense
competition and pressure
for globalization
Abdelaziz &
Bilel 2012
What is the effect of
banking M&As on the
credit availability of
other firms?
Tunisia banking
Over half of the banks in
Tunisia are private (~62%)
The 11 that are public
banks play a major role in
No theory formally
stated
Study of 83 firms from
several sectors affected by
a single bank merger
Surveys; panel data from
2001 to 2008 (four years
M&As had a significant,
negative effect on credit
availability from Tunisian
banks, whereas firm size
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
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financing the Tunisian
economy
before and three after);
logarithm of banking debts
received
had a significant, positive
effect
Kammoun &
Ammar 2012
What is the effect of
M&As on efficiency or
competition in the
banking industry?
Tunisia banking
20 banks in 2007; top 5
held 65% of sector assets
Less concentrated than
Algeria 95% and
Morocco 66%
Financial reforms in
Tunisia did not motivate
banks to engage in
sufficient number of
M&As or otherwise
restructure or strengthen
themselves
Refers to the theory
of industrial
organization (i.e.
market power and
concentration; SCP
paradigm)
18 banks included in the
sample
Panel data from 2000 to
2008
Market power measured by
profitability, revenues and
costs
Fixed effects regression
model
Tunisian banks are
operating in conditions that
are neither monopolistic or
perfectly competitive
M&A activity among
Tunisian banks though
slow has resulted in some
increase in market power
But more M&As are
needed to reduce market
fragmentation
Horwitz
et al. 2002
How do HR practices
influence cultural
integration following
a M&A?
South Africa multiple
industries (i.e. insurance,
financial services,
pharmaceuticals, medical
research, and iron/steel)
No explanation provided
about uniqueness of the
South African context
There is brief mention that
M&A approaches and
practices in South Africa
are similar to those
identified in the existing
literature
No theory formally
stated
Five case studies one for
each industry
Data from firm documents,
interviews of senior
managers, and focus
groups with employees
from different departments
and organizational levels
Type of culture in each
firm affects how
effectively the new entity
deals with hardHR
issues
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
154 Africa Journal of Management
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van Vuuren
et al. 2010
What are the dynamics
underlying processes of
identification in
organizations involved
in a merger?
South Africa universities
Under apartheid, South
Africa established policies
that permitted separate
institutions for its citizens
along racial lines
In the post-apartheid era,
government initiated
policies to eliminate
existing racial inequalities
among institutions
As such, the government
insisted that several
historically black and
historically white
institutions merge
Sense-making
perspective, social
identity theory, and
self-categorization
theory
Single case involving the
merger between two
universities one
historically white and the
other historically black
Inductive, qualitative
approach that involved
primary data from
interviews and a focus
group of faculty members
Faculty members from
both universities claimed
to be the dominated group
Despite highlighting their
own higher academic
status, members of one
former university claimed
they were dominated by
the other because of their
increased post-apartheid
political status, which
provided the power to be
dominant
Conversely, members of
the other university based
their feelings of being
dominated solely on the
former universitys
academic status
Feelings of being
dominated led to a
discontinuity of pre-merger
organizational identities
As a result, post-merger
identification was
described in terms of their
profession instead of their
membership with the
university
Table 3 (Continued)
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idiosyncrasies Theory Sample and methodology Key findings
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Sehoole 2005 How do social,
economic, and political
forces influence merger
processes and
outcomes in institutions
within developing
nations?
South Africa universities
Post-apartheid, the South
African government
initiated policies designed
to steer educational
institutions toward national
goals that included (1)
rectifying deep systemic
inequalities that existed
among higher education
institutions and (2)
positioning the higher
education system to
function in a competitive,
globalized economy
Contingency theory
with reference to
resource dependency
theory
Three case studies:
(1) merger of two distance-
education institutions
(2) merger of two
historically white, urban
institutions with financially
stable bases
(3) merger of two
historically black, rural
institutions with severe
financial challenges
Inductive, qualitative
approach that utilized
document analysis and
semi-structured interviews
3 areas of focus: (1)
autonomy vs.
incorporation; (2) choice of
incorporating partner; and
(3) ownership of college
plant and property
Institutional politics and
government politics
interact to influence merger
rationale, processes, and
outcomes
Provincial and national
government officials
intervened to ensure that
(a) incorporations
occurred, even though in
all 3 cases the colleges
requested the autonomous
option available in the
framework; (b) they
occurred with the partners
chosen or preferred by the
Department of Education;
and (3) they stayed on
track when threatened by
disintegration
Strong institutional
leadership is needed that
commands respect at both
the government and
institutional levels as well
as provides continuity in
the merged institutions
necessary to create
favorable conditions for
staff and students
Table 3 (Continued)
Study Research question African context and
idiosyncrasies Theory Sample and methodology Key findings
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discussed in terms of deal characteristics, motivations for engaging in M&As, the process
for integrating the focal firms, and outcomes associated with M&As (Cartwright &
Schoenberg 2006; Haleblian, Devers, McNamara, Carpenter, & Davison 2009). Also,
while most scholars did not explicitly focus on understanding the unique nature of the
African context, they often alluded to such factors. We draw on this insight to highlight
how distinct features of the African context influence deal characteristics, motivations,
integration process factors, and outcomes.
Deal Characteristics
Based on the seminal work of Rumelt (1974) and Lubatkin (1983), one of the most
common ways of characterizing deals is based on the degree of relatedness between the
firmsprimary operations. In 26 of the 30 studies reviewed, the deals involved firms
operating in the same or closely related industries. Another common characteristic of
deals considers where the respective firms are headquartered to determine if they are
domestic or cross-border in nature. Twenty-five of the 30 studies reviewed focused on
domestic deals within a given African country. The primary focus on domestic, related
deals appears to be a function of the early state of M&A activity in many African
countries (i.e. Akinbuli & Kelilume 2013; Samet 2010). Such deals can be perceived to
present fewer integration challenges and lead to financial gains via economies of scale/
scope and market power (i.e. Assaf, Barros, & Ibiwoye 2013; Elumilade 2010).
Only three studies considered other deal characteristics highlighted by Haleblian et al.
(2009). These studies involved South African and US acquiring firms, and examined the
effects of so-called glamouracquirers-, those firms that are highly valued as a result of
their prior stock market performance (Wimberley & Negash 2004), and payment method
(Smit & Ward 2007; Triki & Chun 2011) on the acquiring firmsstock-market based
returns.
Deal Motivations
Based on the studies reviewed, the primary factors motivating M&As in Africa appear to
differ from those emphasized in the existing M&A literature. In particular, a driving
motivation seems to be the need for firms to comply with government mandates and
regulatory reforms. For example, almost all of the bank M&As were necessitated by
increased minimum capitalization levels set by the respective Central Banks (i.e.
Adegoroye & Oladejo 2012; Assaf et al. 2013). Such reforms are intended to save the
countriesbanking systems from collapse and to reposition surviving firms in order for
them to become more competitive, efficient, and profitable. Similarly, mergers of colleges
and universities in South Africa occurred as a result of a government mandate following
the end of its apartheid policy (e.g. Sehoole 2005; van Vuuren et al. 2010). Also, in other
instances, mergers were being encouraged and completed in African markets for the
primary purpose of facilitating overall national economic development (i.e. Curwen &
Whalley 2011; Emeni & Okafor 2008; Maude & Okpanachi 2012).
To a lesser extent, several studies mentioned deal benefits associated with economies
of scale/scope, diversification, and technological transfers as important motivations for
M&A activity (Assaf et al. 2013; Elumilade 2010; Smit & Ward 2007). However, given
that many firms involved in M&As within the African region were financially distressed,
and seemed to have weak governance structures prior to merging, it often proved difficult
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for the combined firms to achieve scale economies needed to improve performance (i.e.
Akinbuli & Kelilume 2013; Samet 2010). Moreover, as articulated in the study of two
M&As in the Tanzanian agro-food manufacturing sector, acquirers suspect that targets
lack absorptive capacity (Portelli & Narula 2006), which may deter firms from engaging
in M&As within the region for the primary purpose of technology transfer.
Motivations also differ for domestic and cross-border deals in Africa. Domestic deals
seem to be driven particularly by regulatory reforms, overcoming poor corporate
governance, fostering national economic development, and improving efficiency and
market power (e.g. Agundu & Karibo 1999; Anifowose, Genty, & Atiku 2011; Emeni &
Okafor 2008; Oghojafor & Adebisi 2012). In contrast, cross-border deals are much more
likely to be motivated by access to raw materials, large consumer markets, and markets
with low penetration rates (e.g. Curwen & Whalley 2011; Triki & Chun 2011). As such,
African cross-border deals follow recent globalization trends (Buckley & Ghauri 2004).
Integration Process Factors
The emergent literature on M&As in Africa places a heavy emphasis on human resource
(HR) management issues. On the one hand, the studies point to many factors that reflect
dominant themes in the mainstream M&A literature. Scholars highlight the roles of
communication, identity, justice perceptions, HR and cultural integration, and employee
responses on deal outcomes (i.e. Adegoroye & Oladejo 2012; Anifowose et al. 2011;
Gomes et al. 2012; Sanda & Adjei-Benin 2011; van Vuuren et al. 2010). What is more
unique to the African context is that regional differences are accentuated, and may often
have a deeper impact on the integration challenges following domestic and international
deals. For example, Gomes et al. (2012) observe that cultural differences exist at the
regional level within Nigeria, particularly between the North and South. They also note
longstanding divides in, and conflicts between, ethnic groups, who do not view
themselves as part of the same culture, within Nigeria. Such cultural differences have
important implications for communication, training, and other process decisions.
Therefore, cross-border deals more often may have a triple-layeredacculturation
challenge where national, regional, and organizational cultural differences play a role,
which places extraordinary cultural strain on management in integration processes.
As mentioned above, several studies emphasize the challenges of weak corporate
governance and weak financial position of firms prior to a deal that were often a driving
force for M&A activity in Africa (i.e., Adegoroye & Oladejo 2012; Akinbuli & Kelilume
2013; Oghojafor & Adebisi 2012). Such pre-deal motivations to consolidate industries
likely preoccupy post-deal decisions related to the integration process. For example,
given such pre-existing conditions and the importance of integrating the right people,
products, and processes in order to position the combined firm to be competitive,
profitable, and viewed with confidence by its stakeholders going forward, some merged
banks increased their focus on innovative HR management practices during the process
(Adegoroye & Oladejo 2012; Anifowese et al. 2011). Attention was paid to various HR
tasks such as role/goal clarification, training of employees, alignment of compensation
and reward structures, retention of key employees, recruitment strategies designed to
attract new talent, and selection of the best people for leadership posts (Horwitz et al.
2002; Portelli & Narula 2006). Clearly, weak pre-deal financial positions and governance
structures require extra attention in the process of integrating companies.
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Finally, unique historical conditions in Africa may also affect how employees make
sense of the M&A itself, which has implications for how the post-deal integration process
is managed. In particular, there may be potentially lingering effects of the former
apartheid policy in South Africa (e.g. van Vuuren et al. 2010), and the colonial ties of
many African countries to the United Kingdom and France (e.g. Curwen & Whalley
2011; Mangaliso & Nkomo 2001). For example, as uncovered by van Vuuren and
colleagues (2010), organizational membersperceptions of social dominance, as well as
their views of both sources of and changes to status were influenced by factors related to
apartheid and its subsequent repeal. This, in turn, affected their identification with, and
willingness to collaborate within, the unit. Besides these issues, the unique entrepren-
eurial culture in some countries influences the responses of employees (e.g. Sanda &
Adjei-Benin 2011). In coping with the inherent changes following a deal, the extent to
which employees form negative justice perceptions, exhibit negative attitudes toward
work, reduce commitment to the merged firm, and engage in other undesirable behaviors
may be exacerbated. Thus, unique historical factors must be understood upfront and their
implications considered when making decisions pertaining to the integration process.
Outcomes
Some studies, especially those applying more of a finance and economics perspective,
focus on traditional performance indicators. For example, to assess post-deal perform-
ance, the studies that focused on the M&A activity of South African acquirers utilized
abnormal returns (e.g. Smit & Ward 2007; Wimberley & Negash 2004), and the study of
M&As in Africa initiated by US firms used buy and hold returns (Triki & Chun 2011).
The study of a Tunisian bank merger used abnormal yield, which is comparable to
abnormal returns as well as return on assets, return on equity, and return on sales to
determine the effects of the M&A on performance (Samet 2010). Similarly, other studies
used traditional accounting measures based on assets, revenue, gross earnings, and net
profit (i.e. Agundu & Karibo, 1999; Akinbuli & Kelilume 2013; Ikpefan & Kazeem
2013; Maude & Okpanachi 2012; Udoidem & Acha 2012).
Beyond traditional performance outcomes, some studies emphasized outcomes related
to key stakeholder groups. This broader interest in part stems from the fact that few firms
in African countries are publicly held. Many deals involve firms that are at least partly
owned by local governments. Broader national outcomes are also considered, as scholars
are particularly concerned about the impact of domestic M&As on facilitating national
economic growth. This is especially stressed for the group of banking M&As, which are
believed to have an impact on the development of various sectors within the economy
through their lending to businesses (e.g. Abdelaziz & Bilel 2012; Elumilade 2010; Emei
& Okafor 2008) and providing employment opportunities (e.g., Gunu & Olabisi 2011).
Such national interests are also stressed in the deals concerning telecommunication
service providers. For these deals, attention was given to their role in helping to facilitate
not only economic growth, but also societal development through improved delivery of
government services, expanded infrastructure allowing for greater connectivity, and
enhanced provision of healthcare (e.g. Curwen & Whalley 2011).
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Contributions and Shortcomings of Existing Studies
Current research on African M&As is mostly descriptive in nature. Some articles make
generalizations on the basis of data on only a single deal or a very small number of deals,
while at the same time not offering enough depth to gain rich comprehension of the
uniquenesses of the deal. Moreover, research based on multiple case studies or larger
sample sizes tends to follow mainstream ideas, replicating or testing conventional logic
with an African sample. For example, Wimberley & Negash (2004) employ methodo-
logies and variables from studies of M&A activity in the US and UK to compare findings
with M&A activity of South African acquirers. While some international business
scholars have advocated for such comparative research to test whether Western findings
are generalizable to emerging economies (i.e., Earley, 1989; Tsui, 2007), it still is
essential to understand the uniqueness and complexity of conditions within African
countries that have a bearing on multiple aspects of M&A decision-making.
While much of the current research is consistent with the findings from the broader
M&A literature and does not yet provide clear, in-depth insight into the unique nature of
the African context, it does offer initial possibilities of several distinctive features. Some
of the more unique motivations of M&A in Africa are to respond to governmental
mandates and policy reforms, to correct for poor corporate governance, or to further
governmental economic development goals. The unique integration challenges appear to
be additional cultural complexity (national, regional, and organizational), weak pre-deal
financial and governance positions of acquired firms, and complications posed by
colonial ties and idiosyncratic historical conditions. Although the studies reviewed
provide a valuable account of this rapidly emerging phenomenon, they are often limited
in the extent to which they help develop or test theories. Few studies articulate formal
hypotheses and these are often not grounded in theory. Moreover, while initial emphasis
on description is important to begin to understand this new phenomenon, theory is needed
to develop well-defined arguments about what determines the likelihood that a firm will
engage in a M&A in Africa, whether the M&A will be result in partial or full ownership
of the African target, and what are the key sources of M&A success and failure in this
context.
Thus, most of the current research on M&A activity in Africa is descriptive and
suggestive. The existing case studies lack adequate depth to gain considerable
understanding about process dynamics, while larger sample studies lack theory
development and theory testing. As a result, current African M&A research is nearly
completely missing in the top-tier journal outlets. Yet, despite shortcomings of the
existing studies, they do provide some insight into ways in which the African context
appears to differ from the US and European M&A context and thus may offer promise in
extending our understanding of M&A motivation, selection, process management, and
outcomes. Exactly what the promise may be is beginning to emerge in the literature.
Accordingly, we now turn to our own exploratory attempt to gain sufficient depth of
understanding about the African M&A context to better articulate some of the promise
that M&A research in Africa may hold for extending the boundary conditions of our
theorizing. Given the nascent state of research and theorizing about M&As in Africa, a
grounded qualitative approach would seem warranted (Edmundson & McManus 2007).
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GROUNDED GLIMPSE INTO THE AFRICAN CONTEXT
Two of the authors interviewed five executives with extensive M&A experience in Africa
and based in Johannesburg, South Africa in January 2014. We chose Johannesburg as our
review shows that it is the hub of M&A activity on the continent. The interviews lasted
between one and two hours each. Three different companies currently employed the
executives, but their experiences were from many acquisitions across a range of industries
within South Africa, Kenya, and other Sub-Saharan African countries. The firms that
employed the executives had main corporate headquarters in three different countries
(USA, South Africa, and Netherlands), with the foreign firms having their African
regional headquarters in Johannesburg. Two executives were involved in acquisitions as
managers of both an acquirer and a target. And two of the executives were with a firm
that had such disastrous M&A experiences that they had serious doubts if their firm
would ever make another acquisition in any African country again. So, although the
number of executives we interviewed was limited, the information was rich and very
deep. As such, we feel we tapped a broad range of factors related to the M&A phenomena
in Sub-Saharan Africa, particularly south and east Africa.
Many of the themes discussed by the executives offered support for the conjectures in
the existing Africa M&A literature, but others went beyond them. The various themes
could be grouped into two broad areas: bases for synergies and integration challenges. In
general, it was very clear that the African context offers unique opportunities for
extending our theories of effective M&A selection and process management.
Bases for Synergy
In contrast to most developed countries, the executives frequently noted that cost-based
synergies are difficult to realize in most African countries, particularly South Africa. This
fact did not come out in our literature review. This was generally due to the extremely
high unemployment rates and peculiarities in the labor markets that made the reduction of
employees difficult and the retention of key, highly skilled employees very costly. Laws,
highly militant unions, and specialized governmental agencies protected workers from job
loss. For example, in South Africa, the Competition Tribunal must approve M&A deals
and frequently hold up deals that may result in job loss. The executives also mentioned
the organized and violent tactics of the labor unions as real deterrents to workforce
reductions. Beyond the difficulties in reducing labor costs after an acquisition, all of the
executives noted that since highly skilled employees were in short supply, it was costly to
retain them with the uncertainty involved in M&As. Skilled employees had to be paid
more to stay or new employees had to be recruited at higher wages. In fact one executive
noted that labor cost increases were typically budgeted into any M&A deal. In South
Africa, as an example of both labor regulation and skilled labor shortage, the Black
Economic Empowerment program requires certain numbers of black South Africans in
each job class, which has led to rising demand and wages for skilled and still relatively
rare black South Africans, especially at the top management or executive level. These
highly skilled black South Africans who have ascended into the upper echelon of local
firms have been referred to as Black Diamonds (Forbes 2010), and were noted by our
executives as particularly important with regard to executive managerial retention and in
the estimation of post-deal labor costs. Since cost-reduction synergies are one of the most
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easily realized outcomes of M&As, our theories about value creation from M&As require
modification for the African context.
As is true in other developing markets, relational capital (Dyer & Singh 1998; Gulati
2007) and locational capital (Kostava & Zaheer, 1999; Zaheer & Nachum 2011) were
mentioned by our interviewees as important to gaining value from acquisitions in Africa.
The importance of local knowledge was alluded to in our literature review, but was far
more prominent in the interviews. Limitations of the formal institutions, particularly
contract enforcement, and widespread corruption in many African countries elevate the
importance of embedded business relationships and networks and the possession of local
knowledge in securing timely and effective market transactions. These relational assets
and local knowledge were mentioned by our executives as being some of the most
important capabilities being acquired in cross-border acquisitions in Africa. Preserving
these local assets in an acquired firm while leveraging knowledge assets from the acquirer
seemed important in securing value from acquisitions. Unfortunately, as we note in the
next section, this may be a difficult feat to accomplish for many acquirers.
Consistent with our literature review, institutional similarity and historical familiarity
also seemed to drive the selection of certain acquisition targets. Most of the executives
thought African firms that engaged in intra-continent deals had an advantage over foreign
multinationals headquartered outside the African continent in better selecting acquisition
targets and understanding the local institutions important to the acquired business. But
African acquirers were not equally adept in all markets. For intra-African acquirers
regional connections seemed to be important, a fact that was not evident in our review of
the literature. Our executives emphasized the African continent is made up of five general
regions (North, West, Central, East, and Southern Africa) with commonalities within and
differences across regions. As such, African acquirers from a given region such as
Kenyan firms in the east or Nigerian firms in the west may have some advantages over
those from outside the region due to shared histories and former administrative
connections. With regard to non-African acquirers, the level of institutional similarity
between the two firmshome countries seemed to be paramount. And firms from
countries with former colonial ties were perceived to have greater insight into the local
institutions due to similarities in language, religion, and historical knowledge than firms
without the former colonial ties. The colonial ties appeared to pose significant integration
and knowledge transfer challenges as well, which we deal with below, but the
institutional similarities between acquirers and targets may offer an institution-based
advantage (Ahuja & Yayavaram 2011) for an acquirer.
Integration Challenges
Our interviewees identified three broad categories of integration challenges that seemed
to pose significant hurdles for acquirers of African firms: cultural complexity, knowledge
transfer, and trust and justice expectations. All three were identified in our literature
review, but the interviews added more nuance to the existing literature. And while all
three are hardly unique to African M&A, there were subtle and important differences that
do appear to take on different forms in this setting.
Cultural complexity was clearly at the forefront of the minds of the executives we
interviewed, because it came in so many different forms. National cultural differences
between an acquirer and target were viewed as detrimental to effective collaboration and
integration, as is commonly noted in cross-border M&A research (Reus & Lamont 2009).
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But acquirers from particular countries in Africa (e.g. Nigeria), outside of Africa (e.g.
China) and former colonial powers were noted as particularly problematic, but for
different reasons. Nigerian and China-based acquirers were noted as frequently holding
cultural norms or managerial styles at odds with many African firms, but the firms from
former colonial powers were more likely to attempt to dominate or misread the
capabilities of the African firms. African M&As were also complicated by tribal and
religious differences among employees within the acquired firms and between the two
firms. One of our executives commented that it was important to maintain tribal balance,
or careful representation of different tribes without domination, within acquired firms in
order to sustain direction and effective integration. So, beyond the triple-layered
(national, regional, and organizational) cultural integration issues highlighted in our
literature review, our interviews suggest that tribal, in particular, and religious differences
added further layers of complexity to any integration effort. How this heightened cultural
complexity affects M&A integration process management and the interrelationships
between them represents additional opportunities for M&A theory development.
Since cost-based synergies were difficult to realize, knowledge-based synergies were
important to our executives, but fraught with knowledge transfer difficulties. The acquirer
executives frequently blamed the difficulties on the inability to retain key employees in
the acquired firm and the acquired firms general lack of absorptive capacity, themes
echoed in our literature review. That is, the acquired firms were viewed as lacking the
know-how necessary to understand and adopt the acquirers best practices and routines.
However, we were fortunate also to interview executives of a South African acquirer who
were previously acquired and divested by a foreign acquirer. These two executives told a
very different story. It was the arrogance and perceived superiority of the acquirer, from a
country with former colonial ties, imposing its routines on the acquired African firm
without consultation that led to its employees actively sabotaging the new business model
of the acquirer. The firms subsequent performance declined so sharply that the foreign
acquirer divested the firm to stave off further losses. Our executives assured us that such
occurrences were common in the African M&A context.
One of our executives made it clear that he did not expect for his firm to be treated
fairly if acquired nor would he trust the managers of an acquired firm before or after a
deal. Most of the executives noted that trust and justice expectations were fairly low in
business in Africa, in general, with M&As being no different. Although recent research
has begun to highlight the importance of anticipatory justice in explaining effective
integration processes in M&As (DeGhetto, Ro, Lamont & Ranft, in press), it would seem
that the low expectations of justice by both parties before the combination in the African
M&A context may pose unique hurdles to be overcome in order to engage the managers
and key employees in the acquired firm in cooperative blending of the two firms into a
productive whole. How the executives effectively dealt with these low justice expecta-
tions was not well articulated, however. Still, what we believe to know about anticipatory
and other forms of justice in the integration process appears to deserve additional theory
development and process research in the African context.
AN EMERGING RESEARCH AGENDA
Clearly, research on African M&As is in its embryonic stage. The African continent was
affected by the recent global recession, though the extent of the impact on deal activity
was definitely less than in other regions. Hence, the business spotlight is increasingly
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focused on the African continent (Clifford Chance 2015; Thomson Reuters 2012).
Chinese investments in the region are substantial, mainly driven by a need to secure
natural resources, but also to engage in developing African infrastructure and securing
new markets for its consumer products (Mergermarket 2012). Similarly, on a recent trip to
Africa, President Obamas principal objectives were to deepen American trade and
investment in Africa and to promote an environment that fosters the stability and
economic growth critical for greater US commercial engagement (Hinshaw, 2013; White
House, 2013). Companies are also increasingly stressing Africa as an important region in
targeting the base of the pyramid (Prahalad & Hammond 2002). In addition, as the studies
indicate, select African governments are placing particular interest in improving their
markets and facilitating the ability of their firms to compete on a global scale. These
multi-faceted interests influence the development of business in Africa in unique ways,
which is expected to have a continued impact on domestic as well as cross-border M&A
activity on the continent.
The African Context
Many African markets are characterized by higher levels of political instability,
unpredictable regulatory environments, corruption, unreliable power supplies, and poor
transportation infrastructure, which often make non-African firms reluctant to engage in
acquisitions (Curwen & Whalley 2011; Erhun, Demehin, & Erhun 2005; Triki & Chun
2011). However, robust economic development and saturated markets elsewhere make
this region increasingly attractive for deal making (Clifford Chance 2013; Mergermarket
2012). All indicators are that M&A activity in Africa has only just begun, with
exponential growth in the number and magnitude of the deals expected in the decades
ahead.
Existing research has documented trends in acquisition activity in Africa and offered
glimpses into the peculiarities of African markets. Most of the M&A challenges in Africa
are the same as those around the world: selecting an attractive acquisition candidate
where value can be realized and then integrating the firm into a larger firm to capture that
value (Haspeslagh & Jemison 1991). However, our review of the existing literature and
the tentative evidence from a series of interviews of executives with extensive acquisition
experience in Africa show that these common challenges are clearly different in Africa.
Below we reiterate these differences and highlight how they can usefully inform
institutional theory, the development of selection capabilities, learning and knowledge
transfer theories, the role of cultural differences in cross-border M&As, organizational
justice theory, a subset of institutional theory on institutional legacies, and social
dominance theory.
Effective Selection of M&A
A better understanding of the traditional market-based or country determinants of M&A
activity seems warranted, as it is likely to affect much of the investment patterns we have
observed in our review. For example, the stage of development of formal institutions (e.g.
private equity, government regulation, legal and political systems) has long been known
to affect levels of M&A activity in developing countries (North 1990; Peng & Heath
1996). From our review and data, the same appears true on the African continent. Recent
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research among international business scholars highlights the importance of informal
institutions (e.g. social conventions underlying business exchange) as compliments to
formal institutions in emerging markets (Bevan, Estrin, & Meyer 2004; Zhou & Peng
2010). Our interview data suggests that formal and, in particular, informal institutional
similarity between the two firms may hold promise for greater value creation in African
acquisitions. Therefore, given the variance in cross-country formal institutions in Africa,
the interplay of formal and informal institutions as inducement for M&As and utility in
creating value warrants additional research. Similarly, how government incentives, global
natural resource scarcity, or emerging market opportunities interact with institutional
development may hold promise as well. These are familiar topics for international
business researchers and represent opportunities to push the boundaries of institutional
theory as it relates to cross-border M&As.
There also appear to be opportunities for going beyond these traditional explanations
of M&A activity in developing countries by considering how acquirer-based factors may
also play an important role in the particular M&A targets chosen. The rise in acquirers in
Africa from India, Korea, and China, where institutional voids are common (Khanna,
Palepu, & Sinha 2005), may help explain this trend. Prior experience in navigating
institutional voids in their home countries may make the lack of formal institutional
infrastructure less daunting for these acquirers. In fact, they may have a competitive
advantage rooted in their institution-based expertise (Ahuja & Yayavaram 2011) that
acquirers from other countries may not have. Or, it could be that acquirers from countries
with former colonial ties (e.g. UK or France) may have unique knowledge in a particular
country and its conventions or heritage, thereby partially offsetting liabilities of
foreignness (Zaheer 1995), to make it a more attractive expansion option. The
institution-based advantages of acquirers offer the potential to extend the institution-
based view (Ahuja & Yayavaram 2011) within the context of M&A.
The interview data paint a more nuanced picture, where effective acquirers may
develop selection capabilities (Capron & Mitchell 2012) unique to the African context.
The more successful acquirers were not only able to take into account the institutional
similarities between the target candidates and the acquirer, but were also attuned to the
importance of relational assets (Gulati 2007) and locational capital (Zaheer & Nachum
2011) in the acquired firm. The executives from the acquirers with disastrous outcomes
had not learned these things. How firms develop and hone these selection capabilities
deserves future research attention and can help inform the broader literature on how firms
learn to choose and manage different modes of corporate scope expansion.
Effective M&A Process Management
Perhaps the area that holds the most promise for management researchers interested in
M&A activity in Africa lies in the effective management of the acquisition process. M&A
integration and other processes are believed to account for a large percentage of failed
M&A events, particularly across borders (Bertrand & Betschinger 2012). The African
context is likely to be similar, but with additional idiosyncratic challenges. For example,
knowledge transfer, referring to the sharing and adaptation of knowledge within and
across organizational units, may pose additional hurdles and opportunities. Existing
evidence suggests that targets in some countries may lack the absorptive capacity,
adequate corporate governance mechanisms, or regulatory enforcement to facilitate
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knowledge transfer from a foreign acquirer (i.e. Erhun et al. 2005; Portelli & Narula
2006). In such cases, successful knowledge transfer may require a slower-paced and more
adaptive process than the typical acquirer may have experience with. The frequency of
partial acquisitions preceding more complete ones (i.e. Curwen & Whalley 2011; Triki &
Chun 2011), also suggests that the initial acquisition of shares in an African firm may
permit provisional knowledge adaptation and transfer opportunities between the legacy
firms before a major knowledge transfer or integration effort takes place. Partial
acquisitions are often pursued as toeholds in a promising yet volatile context, but also
permit tapered knowledge sharing, trust-building, and experience working with the
partner, so vital to productive combinations. So, unlike acquisition contexts in other
countries, the frequency of partial acquisitions may ease knowledge transfer and
integration processes in the African context.
Our interview data also highlight how the arrogance of the acquirer can lead to the
non-adaptive transfer of knowledge from the acquirer to the acquired firm, a phenomenon
recently described as the darker side of knowledge transfer (Reus, Lamont, & Ellis, in
press), that can lead to subversive behavior by target firm employees and subsequent
performance deterioration. If this type of behavior is as common in the African context as
our interviewees suggested, then the various types of cross-border deals in Africa and the
importance of local knowledge in making the deals work represent important opportun-
ities for clarifying the many faces of the darker side of knowledge transfer.
Cultural differences are a challenge in most cross-border M&As. The cultural distance
between the typical acquirer and African target is considerable, posing both learning
opportunities and possible integration challenges (Reus & Lamont 2009). The role of culture
in the integration process is as likely to be positive and negative. Most of our literature
review and executive accounts emphasize the negative aspects of cultural complexity on the
integration process. These are undoubtedly in play, and probably amplified in the African
context. Still, we also expect there to be positives associated with the cultural differences, if
they can be tapped. For example, the phenomenon of Africapitalism (see Ameshi &
Idemudia, in this issue), resting on the pillar of Ubuntu and so prevalent in many Sub-
Saharan countries, holds considerable promise for engagement of disparate African people
in an uncertain change process inherent to M&A integration. Although there are more
nuances, the essence of Ubuntu refers to the value of striving for collective well-being and
the common good of the community over the individual (Mangaliso & Nkomo 2001). Or
similarly, the unique entrepreneurial culture in some countries may also be tapped to enhance
the adaptiveness of the change process and learning involved in the M&A integration (e.g.
Sanda & Adjei-Benin 2011). Obviously, more research is warranted.
Recent research has highlighted the importance of justice in the M&A process as an
important determinant of success or failure (e.g. Ellis, Reus, and Lamont 2009). Justice
is socially constructed. And the importance of anticipatory, procedural, informational,
distributive, retributive, and restorative justice is likely to vary across cultures. For
example, our interview data suggest that anticipatory justice is very different in the
African context. And the culturally embedded norm of Ubuntu suggests that restorative
justice, based on the making good of the community or whole, may be more important
in the African context than retributive justice, involved with the punishing of
individuals, is in Western and other cultures. With the cultural variety in the African
context, it represents a natural experimental context for the exploration of boundary
conditions on the role of justice in successfully managing M&A processes from the pre-
deal phase, where negotiations are conducted and initial bases for trust are established,
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through post-combination, where collaboration, engagement, and identification are
critical to establishing a cohesive organization.
Finally, unique historical conditions in Africa may make institutional legacies, status,
and social dominance more salient in certain M&As. Institutional legacies are beliefs
rooted in the past that persist over time in communities and communities of organizations
(Greve & Rao 2014). Institutional legacies may be especially important and observable in
the African context. In particular are the potentially lingering effects of the former
apartheid policy in South Africa (e.g. van Vuuren et al. 2010), and the ties of many
African countries to the UK and France (e.g. Curwen & Whalley 2011). These beliefs,
when they are combined with perceived status differences between firms, frequently
hamper effective integration. And a history of prior social stratification may yield
perceptions of domination and oppression where none was intended by either firm (van
Vuuren et al. 2010). As such, social dominance theory (Sidanius & Pratto 1999) may
hold unique applications in the illumination of M&A processes in Africa.
CONCLUSION
Much progress can be made in the theoretical and empirical understanding of selection,
process management, and outcomes of African M&As. This can provide important
insight into emic knowledge of the African business landscape that is, what practices
and processes can be identified that are unique to local customs, meanings, values, and
beliefs which is not captured well by extant theory developed on the basis of mostly
Western M&A activity (Peterson & Ruiz-Quintanilla 2003). In addition, comparative
research could also identify interesting commonalities and differences among nations and
regions to determine etic knowledge in the formation and implementations of acquisi-
tions, which are considered universally true across economic conditions (e.g. Morris,
Leung, Ames, & Lickel 1999). Such are both the challenges and the promise of future
research on M&As in Africa.
NOTES
1. The percentage of deals with an undisclosed transaction value has increased from 46.3% in 2003
to 52.0% in 2012.
2. We used the Securities Data Corporation (SDC) Platinum M&A Database to identify all
acquisitions of target firms headquartered in Africa during the 10-year period from January 1,
2003 to December 31, 2012. After eliminating those deals that were announced, but not
completed, our working population consists of 3537 deals. Data presented in all figures and
tables are based on the entire working population unless otherwise noted.
NOTES ON CONTRIBUTORS
Kimberly M. Ellis is an associate professor at Florida Atlantic University. She received her Ph.D.
from Florida State University. Her research builds on multiple theoretical perspectives to enhance
understanding of merger and acquisition process management, special merger and acquisition types,
unique deal contexts, and issues at the intersection of corporate strategy, corporate social
performance, and financial performance. Her research has been published in various journals
including the Academy of Management Journal, Strategic Management Journal, and Management
International Review.
Bruce T. Lamont is the Thomas L. Williams Eminent Scholar in Strategy. He received his Ph.D.
from the University of North Carolina at Chapel Hill. His current research addresses the effective
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management of acquisition processes, knowledge investments and novel applications of theory to
the African context. He has published numerous refereed journal articles, appearing in such outlets
as the Academy of Management Journal, Academy of Management Review, Journal of
International Business Studies, Journal of Management, and Strategic Management Journal. He
currently serves as Senior Associate Editor of the Africa Journal of Management.
Taco H. Reus is Endowed Professor in Global Strategy at the Rotterdam School of Management,
Erasmus University. He received his Ph.D. from Florida State University. His current research
focuses on the role of contextual factors in post-merger integration, the role of procedural qualities
during post-merger integration, and how firms can manage the post-merger integration process
successfully. His research has been published in several journals including the Academy of
Management Journal, the Academy of Management Review, the Strategic Management Journal, the
Journal of International Business Studies, and Management International Review.
Leon Faifman is a Ph.D. student at Florida Atlantic University. His research interests center around
examining various aspects of the M&A decision-making process from the perspective of both the
acquirer and seller with specific emphasis on acquisitions of high-tech and entrepreneurial firms.
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... We use hostage theory (Chen & Hennart, 2004) to explain how typical institutional features of the African context affect ownership stake in south-south CBAs within Africa. Consistent with south-south CBA activity in general, CBA activity in Africa has experienced an upward trajectory and is expected to keep growing in the upcoming years (Ellis, Lamont, Reus, & Faifman, 2015). Nonetheless, research on acquisitions in Africa is scarce and usually dominated by acquirers from outside of the continent, mainly Europe and the United States, seeking access to complementary resources and growing consumer markets (Ellis et al., 2015;Nkiwane & Chipeta, 2019). ...
... Consistent with south-south CBA activity in general, CBA activity in Africa has experienced an upward trajectory and is expected to keep growing in the upcoming years (Ellis, Lamont, Reus, & Faifman, 2015). Nonetheless, research on acquisitions in Africa is scarce and usually dominated by acquirers from outside of the continent, mainly Europe and the United States, seeking access to complementary resources and growing consumer markets (Ellis et al., 2015;Nkiwane & Chipeta, 2019). ...
... The results generally support our predictions. We contribute to advance research on south-south acquisitions, particularly in the African context, which, despite its growing importance in international trade, remains underexamined (Ellis et al., 2015). Doing so is important because the particularities of the African context, such as high fractionalization and strong colonial ties, might offer new theoretical and practical insights (George, Corbishley, Khayesi, Haas, & Tihanyi, 2016), contributing to research on CBAs in general (Chhabra et al., 2021). ...
Article
We look at how emerging markets' institutional features affect ownership stake in cross‐border acquisitions (CBAs) within Africa. Particularly, we show that the presence of shared colonial history between the home and host country and the extent of fractionalization distance and formal institutional distance influence the acquiring firm's decision regarding its ownership stake in the target. Moreover, we show that geographic distance between the home and host country, by augmenting uncertainty faced by acquiring firms, moderates the relationship between these institutional features and ownership stake. We test our hypotheses in a sample of 341 intra‐Africa CBAs from 2001 to 2016. Generally, we find that greater ex ante uncertainty and ex post costs increase ownership stake. Specifically, greater geographic distance strengthens the positive relationship between shared colonial history and ownership stake and reverses the negative relationship between formal institutional distance and ownership stake. As for fractionalization distance, the relationship is more nuanced and needs to be further studied. We contribute to advance research on south–south CBAs in general, particularly within Africa, as well as to extend hostage theory in foreign market entry strategies in and from emerging markets.
... In addition, state owners in the least developed countries are likely to have business connections in other similar countries, perhaps reducing the difficulty and risk of internationalization. For example, African firms often internationalize by expanding into other African countries (Ellis et al., 2015), many of which are linked through intracontinental trade agreements (e.g., the East African Community agreements promotes free trade among Burundi, Kenya, Rwanda, Tanzania, and Uganda) that facilitate cross-country business ties (e.g., de Melo & Tsikata, 2014). In fact, the close proximity and small size of many of African countries, together with this economic cooperation, suggest that state owners might have business contacts (including with other governments) that enable new ventures to internationalize. ...
... African new ventures are an appropriate focus for several theoretical and practical reasons. In particular, state ownership remains common in Africa, and African firms recently have begun attracting significant equity investments from foreign firms as well (Ellis et al., 2015;Munisi & Mersland, 2016). Moreover, our data reveal that there is a significant variation in state versus foreign ownership, even among new ventures. ...
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This study examines the internationalization of emerging economy new ventures. We argue that different types of owners provide different benefits (e.g., resources) that help fuel emerging economy new ventures’ internationalization, and further, that these benefits depend on institutional conditions in the new ventures’ home countries. Examining these arguments in a sample of African new ventures, we find that state ownership and foreign ownership relate positively to emerging economy new ventures’ internationalization. Further, we find evidence that, while the effect of state ownership is contingent on the quality of the home countries’ formal institutions, the effect of foreign ownership is contingent on the fractionalization (i.e., variance and divisions) of the home countries’ informal institutions. Therefore, the results shed light on how fractionalization and formal institutions might condition the effects of ownership on new ventures’ internationalization strategies in emerging economies. Plain English Summary Internationalization can be critical to the scale-up strategies of new ventures and can contribute to the economic development of emerging markets. Various owners provide different types of resources and other benefits that can support such internationalization, but the legal environment and other societal conditions in the new ventures’ home countries might shape the nature and importance of these benefits. We examine these arguments by studying the internationalization of new ventures located in 34 African countries, using surveys collected from 2006 to 2016. The results reveal that although both state owners and foreign owners can help new ventures internationalize, the benefits of state ownership decline as the country’s legal environment becomes more developed, and the benefits of foreign ownership decline in countries where there is greater ethnic, religious, and linguistic division. Therefore, for scholars, our research suggests that the various factors that shape emerging economy new ventures’ internationalization might be interdependent. Similarly, the results suggest that practitioners and policymakers should consider conditions in the overall environment when considering the potential benefits of different forms of ownership.
... There were only two theoretical papers while the others are empirical studies (95%). In particular, of the theoretical papers, one is a literature review (Ellis et al. 2015) and one is a theory-building study (Weber and Tarba 2010). Regarding the empirical papers, 62% of the works adopt a quantitative methodology based on surveys for primary data or databases for secondary data. ...
... Five papers focus on the reasons that drive M&A operations in MENA countries. As suggested by Ellis et al. (2015), M&A operations in MENA countries follow slightly different reasons from the above literature. In fact, companies in many cases carry out M&A operations to comply with government mandates and regulatory reforms. ...
Article
Although the business strategies of mergers and acquisitions (M&As) are investigated theoretically and practically, their diffusion and features in the Middle East and North Africa (MENA) region are not clearly described in the literature. This is in particular due to the recent transformation that member countries have been going through since the financial crisis of 2008 and the Arab Spring. Through shareholder maximization theory, agency theory, and the resource-based view we identified the reasons and characteristics of M&As in the Middle East and North Africa regions. Following a systematic literature review methodology, we identified 37 articles related to M&A in MENA countries published in peer-reviewed journals and reported in CABS ranking (Chartered Association of Business Schools). Based on this analysis, we map the extant literature on the topic and present an integrative framework of these features for future researchers to further explore and expand the boundaries of the domain.
... Institutional reform in some African countries has lagged behind other developing nations (Dupasquier and Osakwe, 2006), particularly inadequate contract enforcement and widespread corruption (Ellis et al., 2015), putting Sino-African economic links at risk. Chinese investor's tolerance for risk, as argued above, has a limit. ...
... In this optic, the abundance of natural resources in Africa would lead to even more Chinese CBMAs aggressively pursuing these raw materials. These deals are largely supported by the central government as continued access to various raw materials and energy can sustain China's economic growth (Ellis et al., 2015). Biggeri and Sanfilippo (2009) find natural resources as one of the key pull factors of Chinese FDI into Africa, a finding supported by Mourao (2017). ...
Article
The introduction and conclusion notwithstanding, this thesis contains four essays on the theme of Chinese cross-border mergers and acquisitions (CBMAs). As essays they can be viewed ‘stand-alone’, with their own ‘separate’ contributions adding to the body of knowledge on the thesis’s theme. Yet, the first two essays can be seen as providing a foundation for the ‘empirical’ essays, in that they contribute to identify research gaps and new directions (though using different ‘approaches’). The next two empirical essays address specific unanswered research questions, some identified in the aforementioned essays . In Chapter 1 (the introduction), we describe the general background of Chinese CBMAs and research motivations for the thesis. Then we illustrate the ‘specific’ research objectives and questions addressed in the four essays and outline the thesis structure. Chapter 2 or Essay 1 adopts a ‘stylised facts’ approach to document the recent trends/patterns of Chinese CBMAs, whether pertaining to the deals value or frequency, spatial and industrial distribution, and ownership stakes. This essay contends that such a ‘simple’ fact-finding exercise that eschews any theorising and empirical causal examination can be highly insightful and provide guidance for new directions in research. The exercise documents several ‘new’ interesting facts about Chinese MNEs’ international acquisitions, some distinct from what is currently seen as received wisdom. It finds that both the value and frequency of Chinese CBMAs deals are in the process of ‘catching up’ to greenfield investments and identifies a regional orientation to Chinese CBMAs, whilst documenting the latter’s global reach as well (when we analyse both value and frequency of deals). Chinese MNEs are possibly transforming their value chain from backward to forward integration, with industrial upgrading as aim and a preference for more radical acquisition approaches. Several research questions directed for future research – to theorise and empirically examine the antecedents of the phenomenon – are outlined. Chapter 3 or Essay 2 provides a critical review and then proposes an ‘integrative’ conceptual framework to better organise our thinking on Chinese CBMAs. It explicitly articulates limitations of extant research and highlight aspects for future directions to investigate Chinese CBMAs based on a literature review. Two schools of thoughts – one management-oriented and one finance-oriented – highlight distinctive views on the antecedents of Chinese CBMA decision. Moreover, we find that variations on post-CBMA firm performance can be influenced by both CBMA motivation and integration process. It is this chapter’s contention that M&A decision, integration and performance could be studied together as most mergers and acquisitions are made of these three elements that interact with each other, while simultaneously acting as part of a whole system. The chapter eventually proposes a conceptual framework dubbed the ‘decision-integration-performance’ framework of CBMAs. This provides a means to study integration and performance together, which so far has been studied separately, and consider antecedents or motives behind acquisition decision with both merger integration and post-merger performance. From a practical standpoint it connects the antecedents of ‘why mergers fail’ (e.g. overconfidence/hubris) with the integration process which could provide a better understanding behind post-merger under-performance, when managerial motives are factored in. From an empirical methodological viewpoint (e.g. Heckman sample selection bias), it cautions us about ignoring M&A decision when studying post-merger performance (often seen in extant literature) .We view this allowing a closer connection between theoretical framework and empirical framework used to study theoretical predictions. Chapter 4 or Essay 3 empirically tests the contribution of the country-specific advantages (CSAs) and firm-specific advantages (FSAs), as sources of competitive advantages, to productivity variation of Chinese MNEs subsequent to CBMAs, while controlling for ex-ante CBMA FSAs. It uses a paired sample of CBMA firms by propensity-score matching during the period 2007–2017. The findings indicate that Chinese MNEs experienced lower productivity after CBMAs, thus indicative of a failure to generate FSAs or CSAs from CBMAs. It also demonstrates that post-CBMA productivity varies according to host country factors and firm heterogeneity. Non-state owned enterprises with strong absorptive capacity obtain higher productivity when investing in resource-abundant countries. The chapter contributes theoretically to our understanding of the sources of competitive advantages ex post (subsequent to EMNEs CBMAs). It investigates whether ex post competitive advantages accrue to EMNEs through CBMAs and how firm and host country heterogeneity moderates CBMA’s effect on CSAs and FSAs. Chapter 5 or Essay 4 tests whether Africa offers a different proposition to Chinese business interests than when investing in non-African developing economies. It takes a “comparative” institution-based view treating factors that determine Chinese CBMA as comparatively different for Africa to the rest of the developing world. It finds that only natural resources and market size have a distinctive effect, with Chinese investors being more attracted to African natural resources than the African market. The drive for natural resources provides impetus for Chinese MNEs to choose CBMAs over greenfield investments, and through majority ownership to exercise control. The chapter contributes theoretically to the comparative perspective of the institutional-based view by offering a novel understanding of whether and how Africa acting as a particular kind of institutional configuration influences Chinese CBMAs distinctively from other developing regions’ national institutions. Chapter 6 (the conclusion) summarises the main findings and implications of the thesis and provides some ‘general’ implications for the thesis as a ‘whole’ and a short discussion for future research directions.
... For example, Liou and Rao-Nicholson (2017) showed that colonial ties negatively impact the long-term performance of South African firms' acquisitions in developed economies, while also moderating the effects of institutional distance on their post-acquisition performance. In another example, Ellis et al. (2015) suggested that unique historical conditions, including colonial ties (see also Degbey & Ellis, 2019), affect the perceptions of (African) employees of A-MNEs and thus create challenges to post-acquisition outcomes for allochthonous MNEs in Africa. In addition, unlike their traditional advanced economy MNEs that have enjoyed global presence and economies of size due to favorable industrial policies, including expanded capitalization via international stock exchange listings and cheap and easy access to sources of funding from their various countries of origin, A-MNEs currently operate in environments bereft of appropriate industrial policies to facilitate flourishing, and in doing so bolster global presence and reputation (Amungo, 2020). ...
Article
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Research on African organizations has focused on the influence of environmental factors in organizational effectiveness. However, increasing concerns about challenges in Africa and how they negatively affect organizational outcomes have necessitated leveraging the “positive turn” of organizational scholarship to advance a perspective of how industrial policies can permit Africa-originated multinational enterprises (A-MNEs) to flourish. We propose a multilevel model in which the industrial policy environment comprised of agency and policy development positively impacts A-MNE flourishing, a composite index of human, environmental, and economic flourishing. This relationship is mediated by industrial policies – labor, trade, infrastructure, and resources – and moderated by policy fit, relevance, and timeliness. Overall, we shift the old paradigm of organizational outcomes represented by organizational effectiveness to a new paradigm represented by organizational flourishing. This new paradigm seems more appropriate for Africa, which is bedeviled by unusual challenges that limit effectiveness. We discuss empirical testing of the model and implications for managers.
... For example, a study on Africa's research outputs finds that there are publications by African and Asian universities that are highly-cited worldwide. Surprisingly, to a large extent, the share of highly-cited publications with 'no cooperation' implies the presence of niches of local excellence independent of external research partnerships (Ellis et al. 2015). Meanwhile, there are assumptions that research councils are now reviewing their funding patterns and approaches to a large extent in a format that better increases their coverage and impacts from funded research (TETROE et al. 2008). ...
Article
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Public research funding is a critical instrument in technology and social innovation. This paper explores the emerging themes and topical trends that commonly influence interdisciplinary research within a sample of global research projects, including reviewing a recent study of 1,000 projects used in the selection of expert interview participants (n = 15). It examines the extent to which research funding agencies and academic institutions are shifting research priorities in the energy and climate change domain. It asks: What challenges does interdisciplinary research raise? The study reveals how cross-disciplinary research funding focuses on or fails to address the themes of sustainable development goals. In addition, it emphasises policy seduction and difficulty (resistance) in understanding cross-disciplinary methods in research and how research collaborations promote (or fail to promote) global South institutions and topics. Finally, the paper recommends that research funding needs involve a broader array of stakeholders in industrial decarbonisation research, including policymakers, industries, and citizens.
... The leading management journals were accessed through electronic databases, including Science Direct, Scopus, Emerald, and EBSCO. Each volume and issue (including special issues) was searched, and their content was analyzed, which is a method widely used by M&A scholars (Ellis et al., 2015). The abstract and relevant sections corresponding to the research objectives were studied in detail by two researchers independently and then cross-checked by a third researcher. ...
Chapter
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Over the last few decades, management has witnessed a proliferation of research on mergers and acquisitions (M&As) and strategic alliances (SAs). Although both fields have been widely studied, the relationship between the two bodies of literature has not been sufficiently explored. Despite the enormous commonality between both phenomena in terms of the drivers behind them and of the critical success factors associated with the M&A and alliance process management, scholars from the two fields have rarely exchanged findings and insights, even though they may be highly relevant to each other. M&A and SA research remain mostly separated from each other, thus minimizing the ability for more mutually beneficial complementary and synergetic knowledge sharing effects. This chapter synthesizes and compares existing theoretical perspectives from the M&A and SA literatures and identifies opportunities for future research and knowledge cross fertilization between the two fields. Building upon previous review studies about M&A and SA literatures, the authors develop a comparative longitudinal review of both literatures published in top management journals over a 27-year period. For that purpose, the authors resort to machine learning algorithms to discover thematic patterns that may have gone unnoticed by using traditional review methods. By highlighting some of the shortcomings that limit the authors’ theoretical and practical understandings, they challenge scholars from both fields (M&A and SA) to go beyond what they think they know from compartmentalized received theory, and draw upon novel and meaningful ideas, concepts, and theoretical approaches from “the other side of the fence.” The authors believe that such a dialog will facilitate further theoretical exploration and empirical investigation of both phenomena and produce insights that will influence the practical management of M&A and SAs. © 2021 by Emerald Publishing Limited All rights of reproduction in any form reserved.
... China, Indonesia, Morocco, Turkey, and Venezuelasee the table about the surveyed paper), there is still a huge gap. For example, there is hardly any robust econometric analysis using data from African countries, as can be seen from the survey paper of Ellis et al. (2015). Or, apart from China, there is no notable research on the BRIC countries. ...
Article
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One important aspect of globalization is the cross-border flow of capital, namely foreign direct investment that is considered to be an important engine of economic growth via productivity enhancement. One important form of foreign direct investment is cross-border mergers and acquisitions (M&As). The effect of M&As on firm-level productivity has been analyzed in many papers. This article provides a survey of this literature following a kind of evolutionary perspective:The main results are presented following advances in data usage and methodology. Further research questions are also formulated. JEL code:F21, F43
Article
Cross-border mergers and acquisitions (M&As) are highly emotional events for the employees of involved organizations. The strength and directionality of emotional reactions can result in positive or negative employee outcomes contributing to success or failure of cross-border M&As. Existing studies on emotions and cross-border M&As have identified various underlying mechanisms and factors that influence employee emotions in cross-border M&A activities, leading to a fragmentation of current research on this topic. In this article, we systematically review the interdisciplinary literature on the role played by emotions in cross-border M&As by analyzing a sample of 78 articles published between 2000 and 2021. We contribute to the current literature by (1) providing a holistic and deeper understanding of the role played by emotions in cross-border M&As; (2) mapping the current state of the interdisciplinary literature on emotions and cross-border M&As; and (3) developing a multi-level framework, and identifying key theories and emerging themes to be examined in future studies.
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Purpose The purpose of this article is to address certain gaps and contribute to enriching the literature on mergers and acquisitions (M&A) in Africa; describe the phenomenon taking into account the particularity of the country; address recommendations to public policies and investors and make this article a ground-breaking article on research into the phenomenon of the M&A market in North Africa. Design/methodology/approach With description and an exploratory intention, the authors develop phenomenon driven research. As appropriate phenomenon driven research, the authors focus on characteristics of Moroccan M&A market. The authors use scientific investigation to provide descriptions and explanations of the phenomena in order to add a new perspective to the M&A literature in North African region. The authors work on the particularity of companies in Morocco, typology of M&A, geographic areas, socio-economic indicators, trade agreements, politics and culture. Findings Understand that the phenomenon of domestic M&A is a phenomenon of big cities and knows the participation of small and medium enterprises. The political variable, the trade agreements and the socio-economic weight of the countries influence the cross-border M&A in to out. Sharing a border and common culture has no impact on cross-border M&A but the history of colonization has an impact. Research limitations/implications The scientific contribution is first an extension of the neoclassical theory on the initiation of M&A operations. Throughout these 29 years of history, the existence of external shocks such as regulations has influenced the activity of M&A operations. Privatization, partial opening of sectors to foreign investment tax incentives have contributed to the realization of M&A operations. Practical implications This paper also has an economic and practical contribution, as it informs about the absence of M&A operation in the agriculture and agri-food sector in Sub-Saharan Africa. This region recognizes a food shortage that will increase by 70–100% between 2010 and 2050 with a strong population growth. The authors also note that regulations, royal directives, influence the activity and geographic choices of M&A. The political variable remains decisive for the cross-border M&A activity between Morocco and Algeria, but encourages acquisitions in countries in West and Central Africa. Originality/value M&A research in Africa is poor and suffers from several shortcomings; these barriers push researchers to produce fewer papers on this phenomenon. Through data collection, description and explanation, the authors tried to produce a paper focusing on the M&A phenomenon in a country in North Africa. To the authors’ knowledge, no article has dealt with this phenomenon in this country which is known for its strong M&A activity.
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This paper analyzes the evolution of competition in the Tunisian banking sector in the period 2000-2008, which is a period of deregulation, liberalization and consolidation of the sector. For this purpose, we use two indicators of the competition from the theory of the industrial organization (the Lerner index and the Panzar and Rosse's H-statistic). The empirical evidence does not permit us to reject the existence of monopolistic competition. The evolution of Lerner index over the period of study shows a low tendency to concentration. The movements of the mergers of the banking institutions seem to be slow, as a big effort of cleaning their balance sheets remains to be achieved before banks can merge. JEL Classification: G28
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The aim of this article is to identify attributes of organisational culture and human resource practices required for successful transitions in mergers and acquisitions. Using primary data from five case studies on mergers and acquisitions, findings show that where neglect of two key ‘soft’ due diligence factors of cultural and human resource compatibility occurs, transition and effective integration of the new entity is hampered. The need for a coherent integration plan including joint teams, effective communication and other appropriate human resource practices is considered vital for successful acculturation. A model for both managerial policy and further research is proposed.
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This paper examines corporate restructuring in Nigeria with emphasis on reviewing the history of mergers and acquisitions and went further to theoretically assess the implications of mergers and acquisitions for economic growth. The foray into history revealed very few mergers and acquisitions in the years prior to bank consolidation (2004 acquisitions during bank consolidation prompted the adoption of this period in the assessment of the impact of mergers and acquisitions on banks' perform consolidated performance of banks using seven years before (1997 bank consolidation in Nigeria in the analysis. The study concludes that Nigerian banks perfo after consolidation.
Article
Merger and Acquisition (M&A) is one of the instruments of the recent banking reforms in Nigeria. One of the implications of the reform is its effect on the lending to small businesses, which was divided into static and dynamic effect (restructuring, direct and external) in this study. Data were collected by cross-sectional survey research design and were subsequently analyzed by the ordinary least square method. The analyses show that bank size, financial characteristics and deposit of non-merged banks are positively related to small business lending, while for merged banks the reverse is the case. From the above result, it is evident that M&A have not only static effect on small business lending but also dynamic effect, therefore, given the central position of small businesses in the current government policy on industrialization of Nigeria, policy makers in Nigeria should consider both the static and dynamic effects of M&A on small business lending in their policy thrust. JEL: G21
Book
Part I. From There to Here - Theoretical Background: 1. From visiousness to viciousness: theories of intergroup relations 2. Social dominance theory as a new synthesis Part II. Oppression and its Psycho-Ideological Elements: 3. The psychology of group dominance: social dominance orientation 4. Let's both agree that you're really stupid: the power of consensual ideology Part III. The Circle of Oppression - The Myriad Expressions of Institutional Discrimination: 5. You stay in your part of town and I'll stay in mine: discrimination in the housing and retail markets 6. They're just too lazy to work: discrimination in the labor market 7. They're just mentally and physically unfit: discrimination in education and health care 8. The more of 'them' in prison, the better: institutional terror, social control and the dynamics of the criminal justice system Part IV. Oppression as a Cooperative Game: 9. Social hierarchy and asymmetrical group behavior: social hierarchy and group difference in behavior 10. Sex and power: the intersecting political psychologies of patriarchy and empty-set hierarchy 11. Epilogue.