Mergers and acquisitions of Maltese PLCs and their implications on corporate governance

Abstract

PURPOSE: The purpose of this dissertation is to analyse the M&A process within local PLCs and the motives behind such transactions, whilst looking to amalgamate the research area with the contemporary issue of Corporate Governance. Its primary objective is to evaluate the impact of M&A on Maltese PLCs’ internal corporate governance mechanisms. DESIGN: Ten semi-structured interviews were conducted with representatives of PLCs and experts from big four accounting firms. FINDINGS: The dissertation established that the theoretical M&A Process is often adhered to with varying levels of formality by the local PLCs that were taken into consideration. It is also highly dependent on the size and nature of the entities involved. Moreover, the researcher ascertained that the most common motive for the execution of M&A transactions was for the parent companies to achieve extensive growth within their respective market whilst also diversifying their portfolio through the facilitated entry into new markets. Thereafter, the researcher sought to comprehend the effects that M&A had on the internal mechanisms of corporate governance of local PLCs; particularly the structure and role of the board of directors, the role of the CEO, the nature of their internal controls along with employee incentive and rewards systems. CONCLUSIONS: The study outlined that companies’ internal corporate governance mechanisms are in fact seen to be tangibly affected throughout the entire duration of the M&A process, varying distinctly from one mechanism to the other according to their overall functionality and materiality to the entity’s operational performance. IMPLICATIONS/VALUE: This study brings to light a variety of new insights into the research area, whereby it can serve as a solid reference to acquiring and merging companies who wish to evaluate the potential impact of M&A transactions on internal corporate governance mechanisms.