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EFFECT OF MERGERS AND ACQUISITIONS ON EMPLOYEE MORALE (A CASE STUDY OF FIRST CITY MONUMENT BANK PLC, CALABAR)
The study set out to examine the effect of mergers and acquisitions on employee morale using First City
Monument bank, Calabar main branch as a case study. The need for the study arose from the prevalence of
information in the branch that indicated low morale and dissatisfaction among the staff due to various corporate
restructuring in form of mergers and acquisitions. Among problems investigated in the study are job stress, role
conflicts and frustration among staff. This scenario revealed poor management of the restructuring process by
the administrators. Four hypotheses were formulated and tested at 99 percent confidence interval using a linear
regression analysis technique and correlation. The research design used was a case study approach. From a target
population of 65 respondents, a random sample of 30 was selected using simple random sampling. Data
pertaining to the study was collected using a self administered questionnaire. The findings revealed that mergers
and acquisition was a positive significant predictor of staff morale in the bank. On the other hand, working
environment, corporate governance policies had a significant positive effect on staff confidence, zeal to take up
newer tasks, employee engagement/retention and job satisfaction. For that reason, the study concluded that
merger and acquisition have a significant effect on staff morale. Basing on the findings of the study, the
researcher recommended a uniform treatment (in terms of employee benefits, contracts and promotions) for both
employees of the acquired firm and parent company in-order to boost productivity and avoid conflict of interest
among both employees and management of the parent company and subsidiary.
1.1 BACKGROUND TO THE STUDY
The Nigerian banking industry has witnessed tremendous changes and expansion since the mid 1980s.
Unfortunately the growth and expansion in the sector are not the manifestation of a sound or vibrant banking
system known anywhere in the world. Most banks in Nigeria are characterized by inadequate capital base, poor
services, huge rate of bankruptcy, and lack of management expertise, bad debt syndrome and greater exposure to
The central Bank of Nigeria on July 6th 2004, announced the recapitalization of banking sector from N2 billion
to N25 billion with effect from 1st January 2006. This was with a view to make the sector internationally
competitive, sound and improves its ability to provide credit to all the productive sectors of the economy. In
order to meet this obligation, banks embarked on strategies of merger and acquisition, floating of new shares and
so on. At the end of the exercise, 25 new banks emerged (Olaitan 2006).
Managing and maintaining employee morale is one of the most important functions of effective HR. The cliché
that a happy worker is a productive worker is a cliché for a reason. While it may be more accurate to say that an
unhappy worker is an unproductive worker, every HR professional knows the value in good staff morale.
As a result of the bank recapitalization process that commenced from 2005, commercial banks over a hundred
had to close shops or merge with another bank to still be in business. The effects of mergers and acquisitions in the banking industry of Nigeria on employee morale can be significant if the reorganization of the business is not
handled effectively. During any merger or acquisition effort, there are at least two groups of employees involved,
often coming from organizations with distinctly different cultures and styles. Learning a new culture can be
challenging, but is especially so when employees are faced with uncertainty about what the future may hold and
whose job is on the chopping block.
Bank recapitalization which was effective from 2006 is aimed at making Nigerian banks stronger and better inorder
to finance all sectors of the economy including the major drivers of the economy-Small and Medium Scale
Enterprises. This effort to stabilize the banking industry of Nigeria and make it financially strong and healthy
will definitely affect employee morale and productivity-either positively or negatively.
1.2 STATEMENT OF THE PROBLEM
Change is often difficult for employees, especially if they were not directly involved in decisions that impact
their jobs. During mergers and acquisitions, change can be especially difficult and can lead to stress which can
have a negative impact on morale if not handled effectively (Iloh, 2012). Communication is critical during these
times. To the extent possible organizations should strive to share as much information about what is happening
and, most importantly, how the changes will affect individual employees, as they possibly can.
When two or more organizations come together, culture clash is inevitable. Rarely do two organizations have the
same culture. As these groups get to know each other there will inevitably be conflict and perceived or real
losses on both sides, says Pophal. Employees may fear losing their jobs or losing opportunities that they
formerly had. This fear can negatively impact productivity and may even result in employees leaving the
company to seek jobs elsewhere. It is important for organizations and their managers and HR staff to recognize
this and to provide opportunities for employees to get to know each other, to openly address concerns, and to
work together toward the creation of a new culture that will merge the best of both worlds (Leigh, 2008).
When employees are concerned about their own job security they are more likely to become competitive with
others and this competitiveness can result in conflict–sometimes even violence. During mergers and acquisitions
it is important for managers and HR professionals to be alert to signs of negative competition and to ensure that
employees are being kept informed about impacts on their jobs and their futures with the company. While some
competition is good, competition is not good when it creates tension and negative conflict in the organization
1.3 OBJECTIVES OF THE STUDY
The main objective of this study is to examine the effects of mergers and acquisitions on employee morale in
First City Monument Bank (FCMB), Calabar Main branch. Specific objectives of the study are:
1. To examine the effect of merger and acquisition on employees’ confidence on a given task in FCMB.
2. To appraise the effect of merger and acquisition on employees’ will to remain with current employer.
3. To examine the effect of merger and acquisition on employees’ zeal to take on newer task.
4. To examine the effect of merger and acquisition on employee job satisfaction with respect to new
company policies, reviewed employees’ benefits and working condition.
1.4 RESEARCH QUESTIONS
In-order to guide the study and achieve the research objectives stated above, the following research questions
apply to the study:
1. What effect do merger and acquisition have on employees’ confidence on a given task in FCMB?
2. What effect do merger and acquisition have on employees’ will to remain with current employer?
3. What effect do merger and acquisition have on employees’ zeal to take on newer task?
4. What effect do merger and acquisition have on employee job satisfaction with respect to new company
policies, reviewed employees’ benefits and working condition? 1.5 RESEARCH HYPOTHESES
1. Ho: There is no significant relationship between merger and acquisition and employee confidence on a
Hi: There is a significant relationship between merger and acquisition and employee confidence on a given task.
1. Ho: There is no significant relationship between merger and acquisition and employee retention.
Hi: There is a significant relationship between merger and acquisition and employee retention.
1. Ho: There is no significant relationship between merger and acquisition and employee Zeal to take up
Hi: There is a significant relationship between merger and acquisition and employee to take up newer tasks.
1. Ho: There is no significant relationship between merger and acquisition and employee job satisfaction.
2. Hi: There is a significant relationship between merger and acquisition and employee job satisfaction.
1.6 SIGNIFICANCE OF THE STUDY
The study will aid organizations currently undertaking strategic changes through mergers and acquisitions to
design and implement corporate governance policies that will benefit both employees in the acquired firm and
that of the parent company. Various insights into how confidence, zeal, commitment and overall productivity of
employees can be affected by mergers and acquisitions will be clearly highlighted in the study to further
enlighten managers of various organizations on proper ways to go about merging and acquiring other firms
without risking productivity of employees.
Furthermore, the study will serve as guide to student researchers who may wish to explore more into the effects
of mergers and acquisitions on overall performance of an organization.
1.7 SCOPE OF THE STUDY
The study is delimited to First City Monument Bank Plc, Calabar main branch. All findings and
recommendations from the study are based on issued questionnaires to employees of the bank. A wider scope
could not be covered by the researcher due to time and financial constraints.
1.8 CONCEPTUAL FRAMEWORK
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