Effect of mergers and acquisitions on organizational performance A case of Development Bank of Rwanda

Abstract

This research was about determining the main effect of mergers on the performance of Development Bank of Rwanda, by critically analyzing the key factors that drive the mergers and acquisitions on a global perspective with the research examining the impact of mergers and acquisition on employees’ satisfaction. The specific objectives were established if mergers and acquisitions in the banking sector increased the profitability of BRD after its merger, the impact it had on employee satisfaction as well as the effect of this merger on nonperforming loans of the bank. Data was gathered from financial statements and annual reports for the period of three years before the merger and 3 years after the merger, in addition interviews were conducted, a sample of all former BHR employees was taken. The findings were on average there was a higher employee satisfaction at BRD compared to BHR especially on Job security, mission and vision, payments, motivation and compensation as well as low turnover of employees, the research further highlighted that BHR had better performance on ROA in the three years compared to BRD with an ROA of 3.3% compared to 2.3% of BRD. Regarding the ROE, BRD outcompeted BHR as it had on overage 7.6% in the three years as opposed to 6.3% of BHR as for the net profit margin, these were almost the same on average for the three years, as BRD slightly had a bigger percentage of 44.3% compared to 43.3% of BHR. The findings on NPL, BRD was performing badly on its NPL ratios compared to BHR before the merger, while after the merger, BRD improved its NPL as it had 6.6% on average for the three years after the merger compared to 9.6% average before the merger, hence an indication of improvement in performance as well as profitability due to higher recovery of the non – performing loans as opposed to the situation before the merging. Recommendations in this research were BRD should improve its key variables on job satisfaction like promotions and career development factors, training and capacity development, also BRD has to improve its ROA ratios, as well as its NPM as they indicated lower rates as compared to BHR as all of these are below required standards for profitability, efficiency and effectiveness.