Mergers and Acquisitions as a driver for SME’s growth and profitability

Abstract

Mergers and acquisitions are widely known as growth strategies for large entities worldwide, not always yielding positive results and sustaining businesses over and above challenges they may bring if not properly executed. Small and medium-size enterprises in South Africa have been failing prematurely for various reasons, and little research has been done to look at solving these early failures, which are in turn contributing to a high unemployment rate, as layoffs continue due to lack of business sustainability. This study seeks to establish the extent to which M&As can drive growth through profitability and sustainability of SMEs, as well as whether the acquisition of entrepreneurial start-ups inject much-needed innovation, and the energy to grow and survive failure. About seven enterprises were interviewed through a qualitative case study approach in three industrial sectors, where construction, manufacturing and professional services were selected. Results proved the positive impact of M&As to a large extent, however, some failures to inject growth were also found with the guidance necessary to succeed. Entrepreneurial start-ups were found to be risky for SMEs, however these do provide the edge at times. Skills, niche market access, profitability, and growth were all noted to be positives, while profit losses and high employee turnover were all noted to be negatives. A conceptual inductive theory building model was established, and a conclusive theoretical model conceived from research results, contributing to both realms of academia and business.