The impact of mergers and acquisitions on the corporate financial performance of Guinness Ghana Breweries Limited

Abstract

Mergers and acquisitions are a relatively new but fast growing phenomenon in the Ghanaian economy as a response to increasing competition, emanating from the changing business environment. However, because they are relatively new in the country, mergers and acquisitions are not well understood in Ghana. This study examines the impact of mergers and acquisitions on the acquiring company’s corporate financial performance, within the Ghanaian economy, using Guinness Ghana Breweries Limited as case study. The issue was investigated using performance measure based on the company’s annual reports. The results of the study show that the accounting performance declined after the merger. There has being a downward fall in profitability performance. Sales growth declined sharply during the post-merger periods, although in absolute terms there were increases. Operating expense has being increasing while liquidity and financial leverage have both being on the decline. However, earnings per share and dividends per share were in continuous increase from the pre-merger period to the second post-merger year, due to the increases in absolute post-merger sales. But in the third post-merger year both of these indicators started to decline sharply. To be able to attain the merger objectives of achieving synergy, reducing cost of operations and improving market performance and profitability of the joint operations and other performance benefits, the company should strengthen its business processes, restructure its capital base and improve its cash operation cycle.