Investing Bank Mergers
1 – Introduction
With the altering environment of concern all over the universe the demand for the Bankss to scrutinize and update their schemes has besides increased and become important. Merger is an of import scheme as a portion of growing and enlargement, which is being adopted by many of the Bankss in order to increase their market portion and geting other motivations. “Usually amalgamations occur in a consensual scene where executives from the mark Company help those from the buyer in a due diligence procedure to guarantee that the trade is good to both parties ( Wikipedia, 2007 ) .”
In Europe, some of the largest mega bank amalgamations include UBS – Swiss Bank, The Royal Bank of Scotland – The National Westminster Bank, Credit Lyonnais – Credit Agricole, and the tendency besides exists in Asia, with Japan making the world’s foremost trillion-Dollar bank from the amalgamation of Fuji Bank, Dai-Ichi Kangyo Bank, and the Industrial Bank of Japan.
This survey will analyze the station amalgamation public presentation of Investment and Commercial Banking amalgamations that occurred between 1998 and 2004 in the planetary fiscal industry. The cardinal research inquiry isDoes the Merger of an Investment Bank and a Commercial Bank Create Value? A Study of the largest Banking Merges between 1998 and 2004.
2- Literature Review
Many writers have dealt with the issue of lucidity and apprehension of the subject of amalgamations. Most of the research surveies are aimed at analyzing the factors, which motivate the direction of the Bankss to set about the determination of amalgamation and the advantages and disadvantages.
The survey of amalgamations and acquisitions focal points on understanding what motivates directors to prosecute in this type of activity and the impact that amalgamations and acquisitions have on stockholder returns. Chiefly the cardinal purpose of the Bankss for amalgamations could be empire edifice through growing in size, gross revenues, and assets ( Mastracchio, et Al, 2002 ) .
The consolidation of Bankss is understood to make value as a consequence of graduated table economic systems, decrease in entire outgo, decreased net incomes volatility, and increased market power. Recent surveies centered on the planetary fiscal amalgamation addition sustain the theory that planetary banking amalgamations are efficiency-driven and that the American instance defines the theoretical account for all other banking systems.
However, several other empirical surveies present grounds of irrelevant additions in the value and public presentation of bank amalgamations, this provides the inquiry of: “What is the motive for the addition in M & A ; A deals” . Berger, Demsetz, and Strahan ( 1999 ) and Dymski ( 1999 ) , provide grounds of undistinguished links between amalgamations and fiscal firms’ public presentation in a survey of the American banking amalgamations between 1990 and 2000.
Efficiency betterments can be gained from synergism of mark and command Bankss due to economic systems of graduated table and usage of extra capacity. Recent surveies stated that value creative activity couldn’t be achieved in instance of horizontal amalgamation ( Berger & A ; Ofek, 1995 ; Lang & A ; Stulz, 1994 ; Maquieira et al. , 1988 ) .
The amalgamation will be examined harmonizing to the undermentioned motivations:
- Economies of Scale: “This refers to the fact that the combined company can frequently cut down duplicate sections or operations, take downing the costs of the company relation to theoretically the same gross watercourse, therefore increasing profit.” ( Wikipedia, 2007 )
- Through the amalgamation the Bankss will consolidate under monetary value and border force per unit area.
- Increased Revenue/Increased Market Share: This motor assumes that the bank will be absorbing a major rival and duplicate its power ( by capturing increased market portion ) to put monetary values.
3 – Reasons for Choosing this Subject
The cardinal ground for taking this subject is that holding searched literature I found that really few plants have been conducted refering the amalgamation of an IB and the Commercial bank. This fact has encouraged me to make this piece of work in order to lend to the bing cognition about this topic by adding a new point of position.
Another ground is that most troughs have hapless background in be aftering amalgamations, so it is so hard for them to understand the factors set uping the successful amalgamation. In add-on to that directors should understand the hazards and returns with the amalgamation in order to set about it efficaciously. This has urged me to carry on this survey in order to demo the importance amalgamation for IB and commercial Bankss.
4 – Purpose
The purpose of this research is to analyze “Does the amalgamation of IB and Commercial bank create value? ”
5 – Aims
- To reexamine the literature about this issue up till now.
- To better the presentation of hazard factors involved.
- To underscore the importance of clear planning.
- To show the benefits attached with the successful amalgamation in banking industry.
6 – Methodology
6 -1- Doctrine
Research is a fact happening activity ( Dominowski, 1980 ) . The purpose of primary research is to do known something antecedently unknown to human existences and to progress human cognition by doing it more certain or better adjustment ; the purpose is discovery ( Elias, 1986 ) . Kerlinger ( 1970 ) uses more proficient linguistic communication to specify it as the systematic, controlled, empirical and critical probe of conjectural propositions about presumed dealingss among natural phenomena.
The research doctrine depends on the manner we think about the development of cognition and this thought affects the manner we do search ( Saunders 2000 ) . Whilst set abouting the research, a clear apprehension of research doctrine is indispensable. Easterby-Smith et Al ( 1997 ) place three grounds why the geographic expedition of doctrine may be important with peculiar mention to research methodological analysis:
First, it can assist the research worker to polish and stipulate the research methods to be used in a survey, that is, to clear up the overall research scheme to be used. This would include the type of grounds gathered and its beginning, the manner in which such grounds is interpreted, and how it helps to reply the research inquiries posed.
Second, cognition of research doctrine will enable and help the research worker to measure different methodological analysiss and methods and avoid inappropriate usage and unneeded work by placing the restrictions of peculiar attacks at an early phase. Third, it may assist the research worker to be originative and advanced in either choice or version of methods that were antecedently outside his or her experience.
Two positions about the research procedure dominate the literature: positivism and phenomenology which have an of import portion to play in concern and direction research ( Saunders, 2000 ) . Positivism is founded on the belief that survey of human behavior should be conducted in the same manner that as surveies conducted in the natural scientific disciplines. On the other manus phenomenology is concerned with the understanding human behavior from the participant’s ain frame of mention ( Hussey and Collis, 2003 ) .
Tends to bring forth quantitative informations
Tends to bring forth qualitative informations
Uses big samples
Uses little samples
Concerned with hypothesis proving
Concerned with bring forthing theories
Data is extremely specific and precise
Data is rich and subjective
The location is unreal
The location is natural
Reliability is high
Reliability is low
Validity is low
Validity is high
Generalises from sample to population
Generalises from one puting to another
Figure 1: Features of the two chief paradigms ( Hussey and Collis, 2003 )
As the research doctrine depends basically on the research inquiry ( Saunders 2000 ) , the phenomenological doctrine has been chosen in this paper. This pick originates from that researcher’s topic/question that aimed to look into does the amalgamation of IB and commercial bank creates value. In this specific research, -related to the question- the writer will roll up informations and develop a theory as a consequence of information analyses instead than developing a theory and trial it afterwards.
6 – 2 – Qualitative Versus Quantative Primary Research
Qualitative techniques stand in contrast to quantitative techniques, the chief difference being that quantitative techniques involve numerical informations whereas qualitative techniques involve more abstract information. Data collected utilizing qualitative techniques do non by and large lend themselves to statistical analysis whereas quantitative techniques do ( Veal, 1997 ) .
A assorted methodological attack will be used in this research, because blending methods enables the inadequacies of both qualitative and quantitative methodological analysiss research design to be overcome and can help with informations aggregation and informations analysis ( Jennings, 2001 ) .
6 – 3 – Interviewing
An interview is a purposeful treatment between two or more people. It enables you to garner valid and dependable informations that are relevant to tour research inquiry and aims. There are three types of interview ; structured, semi-structured and unstructured interviews ( Saunders et al, 2000 ) .
A semi-structured interview theoretical account will be utilised as it:
- Is flexible, non standardised
- Enables me to derive an analysis, account and description in relation to my research purpose and aims.
- Facilitates the explorative nature of my research
- Gives me an chance to detect issues I have non considered before
Interviews provide in-depth information about a peculiar research issue or inquiry. They are designed to garner a wide scope of information from a few units. They are the best method to acquire elaborate replies about your inquiries. They are besides the best method for publicizing pre-testing, where research worker is seeking single readings and responses. The chief disadvantage of interviews is that they are clip consuming, and that the respondent may experience like ‘a bug under a microscope’ and be less willing to open up than in the relaxed ambiance of a group ( Research solutions 2005 ) .
A figure of 10 people working in the managerial degree in the accounting section of different companies in England.
Questions concluded from the literature reappraisal will be asked such as:
- What are the motives behind the amalgamation?
- How the planning for the amalgamation should be undertaken?
- How can a director estimation the hazard involved in taking a amalgamation determination?
- Surveies have revealed that careful planning can take to a successful amalgamation. What are the other factors in your sentiment which can consequence the success of a amalgamation?
Choosing interviews for this phase of this portion of the research was in order to acquire every bit much information as possible from the few people that will be interviewed. Interview inquiries will be compiled from the bing literature and detailed in relation to the research subject, purpose and aims
6 – 4 – Documentation Reappraisal
Documentation reappraisal is an first-class manner of measuring the industry by taking a reappraisal of the research done in the yesteryear. Lot of utile information can be obtained through this method. For the effectual execution of the certification major aims of the research should be identified. Research program should be developed really carefully maintaining in position the chief aims of the research. Sequence of procedure should be such, that the a big sum of information can be possible to obtain in a really short clip span, written notes should be taken and eventually written notes on the certification reappraisal are verified.
Agenda should hold, reappraisal of the docket, reappraisal of the end of the docket, reappraisal of the land regulations and wrap-up etc.
Documentation reappraisal usually comprise of the of import information from paperss of similar nature relating to the field of research, so paperss should be selected from the set of paperss holding utile information sing the research subject. They should be selected from assortment of beginnings such as journal article, newspaper reappraisals, experts interviews, information available at Internet. In the reappraisal each papers should be referenced decently and the key addressed points should be summarised.
6 -5 – Analysis
On their ain, informations are seldom used in their original signifier. Through the procedure of informations analysis, value is added to the informations to turn them into information. It is information instead than informations which users particularly policy and decision-makers are interested in ( Uganda agency of statistics, 2005 ) . However this will be a really sensitive and critical phase in my research procedure as misunderstanding or over-interpretation is ever a possible hazard.
The procedure of informations analysis in this research will include the undermentioned stairss:
- Indicate the day of the month of the questionnaires. Who completed them, and the figure of returns?
- Categorize the information collected. This can be done harmonizing to gender, beginning, age… etc.
- Reading through the certification reappraisal and interviews carefully and coding them after the event in relation to the types of replies, subjects and issues, and so categorizing of response ( maintaining a note of what the codifications refer to ) .
- Then by inquiring some inquiries like what are the replies that keep repetition, what are the divergences from these replies, and Are at that place themes emerging? Contradictions? Then it would be possible to pull some comparative generalizations.
7 – Possible Restrictions of the Research
- Lack of literature done so far refering the revelation of hazard in one-year studies might represents a major obstruction.
- Another restriction might be deficiency of clip. The research worker will follow a intercrossed attack in informations aggregation, which will include interviews and questionnaires. Roll uping informations through these methods, analyzing and showing them is clip devouring and the research worker does non hold much clip.
- There might be challenges in converting to derive entree to the relevant information required within the companies I intend to research. Confidentiality has been a barrier before research workers. It is required to reassure the house that all informations and information collected will be treated in the strictest assurance.
- When trying to direct questionnaires to stockholders, it might be hard to entree companies’ stockholders databases in order to direct them these questionnaires.
- Berger, P.G. & A ; Ofek, E. ( 1995 ) . Diversification ‘s consequence on house value. Journal of Financial Economics, 37, 39-65.
- Dominowski, R, L, 1980. Research Methods. Prentice-Hall
- Easterby-Smith M. , Thorpe R. & A ; Lowe A. , 1997, Management Research: an Introduction, London, Sage Publications.
- Elias, R. ( 1986 ) . The political relations of exploitation: Victims, victimology and human rights. New York: Oxford University Press.
- Hussey R. , Collis J. , Business Research, 2nd Ed. 2003, Palgrave Macmillan
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- Maquieira, C.P. , Megginson, W.L. , & A ; Nail, L. ( 1988 ) . Wealth creative activity versus wealth redistributions in pure stock-for-stock amalgamations. Journal of Financial Economics, 48, 3-33.
- Mastracchio, Nicholas J. & A ; Zunitch, Victoria M. , ( 2002 ) . “ Differences between amalgamations and acquisitions, ” diary of Accountancy, Online Issues, November 2002, available at hypertext transfer protocol: //www.aicpa.org/pubs/jofa/nov2002/mastra.htm
- Research solutions, 2005. Information available from: www.researchsolutions.co.nz/in_depth_interviews.htm
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- Uganda agency of statistics, 2005. Information available from: www.ubos.org
- Veal, A, J, 1997. Research Methods for Leisure and Tourism: A Practical Guide. Chatham, Kent, Pearson Education Limited.
- Wikipedia, ( 2007 ) . Amalgamations and acquisitions, available from hypertext transfer protocol: //en.wikipedia.org/wiki/Mergers_and_acquisitions