EFFECT OF MERGER AND ACQUISITION ON ORAGIZATIONAL PERFORMANCE OF SMALL AND MEDIUM ENPTERPRISES IN MOGADISHU, SOMALIA

Abstract

Mergers  and  acquisitions  continue  to  be  a  highly  popular  form  of  corporate  development across  the  globe.  Many  organizations  facing  challenges  in  recent  times  have  often  adopted mergers  and  acquisitions  as  a  means  of  increasing firm’s Performance.  However, contrary to their popularity, acquisitions appear to provide at best a mixed performance to the broad range of stakeholders involved. This research fills the gap in literature by investigating the effects of mergers and acquisitions on Organizational Performance of Small and Medium Sized Enterprises in Mogadishu, specifically this study investigated the effects of Horizontal M&A, Vertical M&A, Concentric M&A and Conglomerate M&A on Organizational Performance of SMEs in Mogadishu - Somalia. This study was conducted through a descriptive study. The target population of this study was 43. Responses are given by top managers, owners and investors of four selected industries which are Remittance companies, Electronic companies, Electricity companies and Telecommunication Companies. Therefore, a proportionate sample size of approximate 39 respondents, the population was selected using purposive sampling or judgmental sampling technique. In addition the study employed a survey research design in data collection. The sampling procedure of this study used was non-probability sampling procedure particularly purposive sampling or judgmental sampling.This research employed quantitative data collection method whereby data was gathered by the use of closed ended questionnaires which are self-administered. This research employed quantitative data collection method whereby data is gathered by the use of closed ended questionnaires which are self-administered. The data collected was analyzed using the software called Statistical Package for the Social Sciences (SPSS) version 20 and results shown in terms of frequency distribution and percentages. A regression model would be applied to determine the relationship between Horizontal merger, Vertical merger, Concentric Merger and Conglomerate merger as the independent variables and Organizational Performance of SMEs as the dependent variable.Results confirm the varying importance of the effects of Merger and Acquisitions on Organizational Performance of SMEs in Mogadishu. In general, the results reveal that Horizontal M&A, Vertical M&A and Conglomerate M&A have significant and positive effectson Organizational Performance of SME, the study also revealed that Concentric M&A has insignificant and negative effects on Organizational Performance. The study recommends that to improve Merger and Acquisitions decisions on merchandising and services companies in Mogadishu;there is need for merchandise and services companies to adopt merger/acquisition as a strategic approach to boost organizational performance. The merger/ acquisition strategy is sure way to enhance external Organizational performance of SMEs in Mogadishu. However, correct choice of the target must be identified to allow generation of synergies that will foster Organizational Performance and improve profitability. Merger/Acquired companies should also offer high quality services to satisfy consumers' needs, will be the potential competitive advantage. Management should come up with a sound strategy towards its long term goals so as to avert the problem of mismatching investments