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Mergers and acquisitions often have unforeseen consequences even as companies join forces to create formidable businesses.


In West Africa, there has been a recent flurry of activity in the mergers and acquisitions (M&A) market, particularly in Ghana and Nigeria, in the financial, telecommunications, oil and gas and manufacturing sectors. Although these M&A transactions are of a higher transaction value in Nigeria based on its position as Africa’s largest economy, M&A activities in Ghana have been on a steady increase over the past decade.

In what was seen as a broader move to consolidate the banking system and protect customers from financial institutions who had failed to meet the new capital requirements for banks in Ghana, the Bank of Ghana withdrew the licenses of some five well-known banks. The proposed amalgamation of the banks – Construction Bank, Beige Bank, Royal Bank, UniBank and Sovereign Bank – resulted in the newly-formed Consolidated Bank Ghana, with the  government of Ghana owning 100% shares of the bank.

The merger of the banks makes the newly-formed financial institution one of the largest in the country with over 148 branches across Ghana.

For many customers who were fortunate enough to not lose their life savings, Consolidated Bank Ghana represents a much-needed lifeline.

However, the history of recent mergers does not make for good reading. The financial experts FORBES AFRICA spoke to are skeptical about how the amalgamation will play out.

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“Merging five struggling banks together with the hope of making them stronger is an ill-advised move. A lot of businesses have lost confidence in the brands and, to be honest, nobody will be beating down their doors to be coming in for loans or opening accounts with the newly-formed bank,” says Kaz Bello, an economist in Ghana.

Where the new merger may seem positive on the claim of size and economies of scale, in reality, there are those who feel it might be negative due to weak asset quality and staff-related concerns. Furthermore, the bank’s management focus could shift from tackling non-performing assets to integration of the banks.

“The bank of Ghana took over the assets and also the liabilities of these banks. These insolvent banks will need some more years to start working properly as a bank, even though it is considered a bank by the central bank,” says Franklin Cudjoe, the founding president of the IMANI Centre for Policy and Education, a think-tank in Ghana.

Consequently, there is also the issue of how costs would be more effectively managed, if there were no reductions in jobs through this amalgamation.

“The government has made available about 450 million cedis ($86 million) as starting capital for the new bank. We understand that the takeover will present several challenges and we are committed to ensuring we maintain the integrity of the Ghanaian financial sector and ensure we maintain investor confidence as well,” says Daniel Addo, the CEO of Consolidated Bank Ghana.

According to Cudjoe, Ghana is one of the “big three” countries in Africa that dominate the African M&A landscape.

“In recent years, there has been a steady growth in the banking and telecommunications industry including the AirtelTigo merger in 2017 effectively creating the second-largest telecommunications network provider in the country.

Bayport Financial Services and CFC Savings & Loans also merged in 2017. Also, that year, there was the takeover by Ghana Commercial Bank when it acquired all the deposits, liabilities and assets of both UT Bank and Capital Bank.

M&A is a term that refers to the consolidation of companies or assets through various types of financial transactions. This has become an important channel for investment in Africa both locally and globally by improving access to market and competitiveness of companies, which is invariably good for consumers.

According to the African Development Bank (AfDB), M&A deals on the continent totaled $27 billion in 2011. In 2018, an analysis by Baker Mackenzie, for Thomson Reuters which was featured on CNBC Africa, estimated a decline of 44% in deal volume and 57% in aggregate value of M&A transactions in Africa with a total of 485 deals valued at $19.4 billion in the first half of 2017 alone.

“Overall, few mergers and acquisitions are taking place in Africa. If you look at the statistics, there has been a downturn of mergers and acquisitions since 2017 and I think this is due to political uncertainty and unpredictability, especially where Nigeria is concerned,” says Bismarck Rewane, CEO Financial Derivatives, an economic think tank in Lagos.

With regard to Africa’s largest economy, the trend in M&A transactions in the banking sector are largely driven by regulatory directives.

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