Effects of Mergers and Acquisitions on Organizational Performance in the Insurance Industry in Kenya A Case of UAP Old Mutual Insurance Company

Abstract

The purpose of this study was to assess effects of mergers and acquisitions (M&As) on the performance of UAP Old Mutual Insurance Company. The objectives were to establish the drivers of mergers and acquisitions, determine the performance before and after the M&A, and assess the effect of M&As on organizational performance in UAP Old Mutual Insurance Company.The study was guided by the resource dependency theory and the theory of efficiency. Descriptive research design was used and the study targeted 218 employees. The sample size was 65 respondents and the primary data was collected using questionnaires. Quantitative data analysis was aided by the Statistical Package for the Social Sciences (SPSS) and Microsoft excel to generate descriptive statistics in the form of percentages, tables, frequency distributions, and measures of central tendencies. Inferential statistics was employed in the form of a multivariate regression model, correlation analysis, and analysis of variance to assess the relationship between the variables. The study established that the quest by the organization to gain synergy, diversify risk and increase market share were drivers in of the M&A. Further , it was established that synergy had a positive impact on organizational performance, as indicated by the correlation factor of 0.473. Also, a positive relationship was found between risk diversification and organizational performance, as indicated by a correlation coefficient of 0.566. The study also revealed that market share had a positive impact on organizational performance, as indicated by the correlation factor of 0.473. The variables of the study (synergy, risk diversification, and market share) showed that there was 46.3% variation in the performance of UAP Old Mutual Insurance Company after the merger. The study recommends that companies consider undertaking M&As as this is deemed as a key driver in improving performance of organizations in terms of enhancing customer growth, customer satisfaction, operational efficiency, profitability, and service quality.