An investigation of the effects of Mergers and Acquisitions on financial performance: A case of insurance companies in Zimbabwe

Abstract

With mergers and acquisitions becoming one of the ideal strategies which has been utilised by investors. The main aim of this research was to investigate the effects of mergers and acquisitions on financial performance of Zimbabwean insurance companies. The objective of the study was to; to evaluate the feasibility of mergers as a strategy to meet statutory capital requirements; to evaluate the financial position of the insurance companies before and after mergers; to investigate if these insurance companies have grown and survived through mergers; and to identify if whether profitability of insurance companies in Zimbabwe has grown following mergers. The major theories that guided the study include the Eat or be Eaten” theory of mergers and the Agency theory. The study made use of a descriptive research design and quantitative data. The research findings indicated that the employees of insurances companies in Zimbabwe were aware of the mergers and acquisitions occurring within the sector. The major reasons for mergers includes; meeting the statutory minimum requirement for capital, accumulate and enjoy economies of scale, anticipation of cost synergies and strategically managing the industrial independence. The study also found that Mergers and Acquisitions contributed positively to the profitability of insurance firms in Zimbabwe. The study recommends that Management of insurance firms need to implement programs and policies which facilitate knowledge and skills sharing within the group to enhance competitive power and that companies specifically the insurance firms in Zimbabwe need to embark on effective cost management policies which creates cost synergies such as inventory management