This paper "Value Creation - Mergers and Acquisitions in the Banking Industry" reviews much of the scientific literature on the market for corporate control of banks and other financial institutions through mergers and acquisitions (M&A).The evidence indicates that corporate takeovers generate positive gains, that target firm shareholders benefit, and that bidding firm shareholders do not lose. …
The dominance of the US and Europe in the current global financial services landscape means that most European and American banks enter new markets outside their region through transatlantic M&As. These developments are not lost on bank CEOs, who must keep a watchful eye on competitors’ strategies and assess what these acquisition moves mean to their own bank’s position. With their massive increases in market capitalization due to mergers, leading banks are in a strong position to invest heavily in new products or services and to make even larger acquisitions. This would pose a significant competitive threat that would require other banks to respond.
Indeed, all acquisitions will result from value enhancing unless there exists some element of market inefficiency, i.e., imperfect competition in either the product and/or labour market and/or agency conflicts. Most large mergers and acquisitions fall short of achieving the desired synergies. In January 1999, The Economist reported that study after study of past merger waves has shown that two of every three deals have not worked. And at least 50% of major mergers since 1990 have eroded shareholder returns. Reasons for failed mergers are diverse and complex, but most can be attributed to losing something: critical people, customers, market confidence. Uncontrolled costs, hidden losses, unrealized benefits, avoiding decisions, cultural barriers, and power struggles can also undermine the most promising unions.
Despite the high failure rate, M&As that succeed can pay large dividends. The most successful acquiring firms have clearly established and well-understood acquisition processes, both for ensuring good strategic decisions before the acquisition decision is made and for integrating the acquired firm once the deal is complete. This has created an interest amongst other banking firms to make a research on the M&As and the reasons behind their success or failure. ...
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(Value Creation - Mergers and Acquisitions in the Banking Industry Thesis)
“Value Creation - Mergers and Acquisitions in the Banking Industry Thesis”, n.d. https://studentshare.net/finance-accounting/341669-value-creation-through-mergers-and-acquisitions-in-the-banking-industry-a-case-study-of-five-mergers-acquisitions-in-banking-industry.
Since the past decade, the globalisation of the businesses across the globe has initiated a search for the competitive advantage, worldwide. With the increased competition to fetch the customer satisfaction in a cost effective way, the companies have responded to the pressure of attaining scale in a quickly consolidating global economy
Much attention has been devoted to the issue of the motivations behind managerial pursuit of an acquisition policy and the resulting impact on firm value. For banking, in particular, the issue is of crucial importance.
Bank mergers and acquisitions (M&A's) come in waves, and today they are once again at the top of many corporate strategic agendas.
Most companies carry it out to improve their business fortunes.
The terms mergers & acquisitions are generally used together or sometimes even interchangeably but there is a sight difference in the two terms. Acquisition takes place when one company becomes the owner of another company in a way that the company sold ceases to exist and the buyer company continues to trade its stock.
Mergers and Acquisitions may construe to buying of one company by another in a friendly or hostile manner. Where a friendly acquisition interprets cooperation of companies in negotiations, a hostile acquisition or take-over may interpret a target which is reluctant to be acquired.
The stock price of the Citicorp in January 1998 opened at $54.00 and closed at $49.56. The highest stock price reported in the month was at $54.38 with the lowest being $45.13 and the volume being traded at $7,562,600. The adjusted closing stock price for splits and dividends for the month stood at $17.33.
The more important objectives of the Review of Literature are to find precedents that may be applied to the subject under discussion; to find theoretical precepts that coherently and satisfactorily analyse the subject that may be applied to the two organisations undertaking the merger process, formulating conclusions and suggest recommendations to make the processes work effectively.
In a merger, the surviving firm acquires the assets and liabilities of the other firm(s). A relevant example here is the recent merger of HDFC Bank and Times Bank. After the merger, Times Bank will go out of existence and expanded HDFC Bank will continue to exist.
The current P/E ratio of the shares is 6.6 and the market price per share is 1.03. Since P/E ratio = market price per share/earnings per share (www.12manage.com), if the P/E ratio is to be 8 without affecting the earnings from the share, the value of the
The first one is the event study methodology, for which the target variables are abnormal stock price return (ASRP), cumulative abnormal stock price return (CASRP) and the Sharpe ratio. The second one method is the accounting performance techniques, in which the target
lly starts through a series of informal discussions among the board members of the companies, following with formal negotiations, letter regarding the objectives, goal towards the company, acquisition or merger agreement and finally, executing the deal and transferring the
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