The pre and post Merger performance of firms in Ghana

Abstract

Ghana’s economy has experienced a windfall of merger and acquisition activity recently. This has necessitated several structural changes in the operations of the companies involved. One of the acquisitions that occurred in Ghana was between Guinness Ghana Limited (GGL) and Ghana Breweries Limited (GBL) in 2004. Using the pre and post-acquisition performance of the acquirer from financial statement information running from 1999 to 2009, the impact of the merger on the profitability and financial performance on the acquirer is examined. The growth rate implications for the merged firm are also examined by considering both the sustainable and internal growth rates. The results indicate a general downward trend in profitability after the acquisition. Generally, liquidity ratios increased during the post-acquisition period but plummeted in the last two years post-acquisition. Earnings per share and dividend per share increased continuously except in one year, where it fell marginally.