Influence of Degree of Integration on Post-Acquisition Business Performance at Coca Cola Beverages Africa, Kenya

Abstract

Influence of Degree of Integration on Post-Acquisition Business Performance at Coca Cola Beverages Africa, Kenya 1. Introduction Acquisitions as a component of strategic management are known to be a critical aspect of business value creation tools, specifically as a growth and stability strategy where there is an indication of growth and / or business performance challenges or when simply applied as a means of gaining access to new markets (Hacklin, Bjorkdahl, & Wallin, 2018). Acquisition entails purchase of one company by another and controlling over 50% equity of the target firm (KPMG, 2016). It enables companies to grow faster than competition, reduce administration costs, assume additional market share, enhance economy of scale, and increase returns for shareholders (Wanjiku, 2017). Acquisitions as well as mergers have become popular business growth strategy. According to the Institute of Mergers Acquisition and Alliances (2019) an estimated 790,000 acquisition and mergers transactions were completed worldwide between 2000 and 2019 with a value of over US $57 trillion. A total of 49,000 M&A transactions were completed in 2018 amounting to US$ 3.8 trillion. The US had the largest number of acquisition and merger transactions in 2018 numbering 14,767 with a value of US$ 1.8 trillion. A survey by Deloitte (2019) in the United States found that 79% of respondents expected the number of M&A transactions to increase in 2019 owing to relaxed regulating climate, tax reform, and growing cash reserves. In the Deloitte (2019) survey, the success of acquisitions and mergers was linked to various factors including effectiveness of the integration process (according to 23% of respondents), economic environment (19%), accurate valuation of target (18%), stability of legal regulatory environment (16%), proper identification of target (14%), and proper due diligence (11%) (Deloitte, 2019). In Europe, the UK was leading with 4,355 M&A transactions worth US$423 billion while in 2018 (Institute of Mergers Acquisition and Alliances, 2019). Germany had 2,117 transactions worth US$141 billion while France 2,113 transactions worth US$150 billion. The rise in the number of M&A transactions in recent decades is largely attributed to the gradual integration of European countries into the EU bloc making cross-border mergers and acquisitions easier (Dutcik, 2017). There has also been a spike in the number of acquisition and merger transactions within the emerging countries.