Strategic approaches to achieve corporate goals : a case study of the financial sector.

Abstract

This research examined mergers and acquisitions in the South African banking sector. Many studies analysing bank mergers and acquisitions have been conducted in the United States and Europe. However, not much is investigated about these deals in South Africa. The purpose of this research was to understand mergers and acquisitions and the motivations for these corporate actions and to analyse some mergers that have occurred in the South African banking sector. In 2013, Barclays increased its interest in the Absa Group to 62,3%. The deal was part of the restructuring of most of Barclays African operations, Barclays Africa Group. This deal lead to Barclays introducing most of its African interest into ABSA Group – currently known as Barclays Africa Group. Research in the United States and Europe showed that organisations can take into consideration investing in mergers and acquisitions for motives for instance growth, diversification, synergy, market power and tax considerations. The research questions were as follows: What are the motives that drive banks to use mergers and acquisitions as a corporate strategy? What are the effects of mergers and acquisitions in the South African banking sector? Can a bank become a large global player without making any acquisitions? Since the aim of the study was to understand mergers and acquisitions in the South African bank sector and the motives for these corporate actions, the researcher conducted a qualitative, exploratory study. It was important to find the relevant literature and articles that could explain the motivations behind mergers and acquisitions. The findings led the researcher to use the following conceptual framework of motivations that could explain why mergers and acquisitions occur: strategic motivations refer to extension, consolidation and capabilities. Financial motivations refer to financial efficiency, tax efficiency and asset stripping. Managerial motivations refer to personal ambition and bandwagon effects. The results showed that the most important motivations mentioned were strategic and financial motivations. Participants were then asked to give their opinions on a few bank transactions that have occurred in South Africa. The most common answers given were that South Africa is mainly used as a gateway to the rest of Africa and that South Africa has a well-regulated financial system. People concerned with the conceptualisation, structuring and execution of bank mergers transactions, should consider the motivations mentioned by participants in this research.