The role of mergers and acquisitions on the performance of companies within the chemical sector in South Africa.

Abstract

Mergers and acquisitions are a strategic tool that is used by companies to grow their performances and portfolio inorganically. Mergers and acquisitions are done to increase improve shareholders’ wealth through synergy achieved from merged companies. Increased organisational performance as the main objective to embark on mergers and acquisitions has drawn increased interest amongst scholars and practitioners to study performance of merged entities. There are conflicting results though, that have been reported on the impact of mergers and acquisitions on performance of merged entities. The main objective of this study is to determine the role of mergers and acquisitions on the performance of companies within the chemical industry in South Africa. Purposive sampling of non-probability sampling method was used to collect data from a population of 120 directors and senior managers of the merged entities in South Africa. The sample size was 102 and the sampling frame was based on all the transactions that were initiated and approved within South Africa between 2006 to 2016. The data was gathered utilising closed-ended questionnaire based on a five-point Likert scale. The questionnaire was administered electronically, using email. The data was examined using SPSS version 25. The findings of the research demonstrate that mergers and acquisitions have an impact on financial performance of entities within the chemical industry in South Africa through increased profitability, liquidity, capital market, cash flow, sales growth, market share, customers, and market power. The study adds to the body of knowledge by capturing a multidimensional facet of organisational performance by allowing executives to provide feedback on financial parameters and non-financial parameters of performance. The results provide investors, as well as practitioners with practical proof of the role of mergers and acquisitions on the performance within the chemical industry in South Africa. It gives perspective to the decision makers on the motives of embarking on mergers and acquisitions within the South Africa chemical industry context. It is recommended that managers and practitioners utilize the model developed in this research with precaution as organizational performance through mergers and acquisitions is influenced by a variety of variables and motives.