Are Corporate Unions The Way To Go?

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

- Peace Hyde

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.

“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.