Chapter Nineteen Acquisitions and Mergers in Financial Services Management

1、Chapter Nineteen Acquisitions and Mergers in Financial Services ManagementChapter NineteenAcquisitions and Mergers in Financial Services ManagementMotives Behind the Rapid Growth in Bank MergersProfit PotentialRisk ReductionRescue of Failing BanksTax and Market-Positioning MotivesCost-Savings or Eff

2、iciency MotiveMergers as a Device for Reducing Mergers as a Device for Maximizing CompetitionManagements WelfareOther MotivesMerger Motives Identified By Bank ExecutivesQuality of ManagementProfitability (Return on Assets)Efficiency of OperationsMaintenance of Market ShareMost Important Goal of Any

3、MergerThe Most Important Goal of Any Merger Should Be to Increase the Market Value of the Surviving Firm.Impact on Earnings Per ShareGenerally Speaking Shareholders of Both the Acquired and Acquiring Firm Will Gain If:1. Bank with Higher P/E Ratio Acquires Bank with Lower P/E RatioAnd If:2. Combined

4、 Earnings Do Not Fall After the Merger Merger PremiumA Merger Premium is Paid if the Acquiring Banks Shareholders Receive More Than the Current Market Price for Their StockExchange RatioThe Number of Shares of Stock Offered By an Acquiring Bank for Each Share of Stock of the Acquired BankDilution of

5、 OwnershipDilution of Ownership Occurs When the Acquiring Bank Offers an Excessive Number of Shares to the Acquired Bank Shareholders. The EPS Will Fall Below its Original Level for the Acquiring Bank When This Happens.Characteristics of Target Firm to ConsiderThe Banks History, Ownership and Manage

6、mentThe Condition of Its Balance SheetThe Firms Track Record of Growth and Operating PerformanceThe Condition of Income StatementThe Condition and Prospects of the Local EconomyCompetitive Structure of the Market AreaOther Characteristics of the Target Firm to ExamineThe Comparative Management Style

7、s of the Merging OrganizationsThe Principal Customers the Targeted Bank ServesCurrent Personnel and Employee BenefitsCompatibility of Accounting and Management Information Systems of the Merging OrganizationsCondition of the Banks Physical AssetsOwnership and Earnings Dilution Before and After the P

8、roposed MergerPurchase of Assets Method of Purchasing Another BankA Method of Carrying Out a Merger in Which the Buying Company Purchases All of the Assets of the Acquired Firm Using Either Cash or its Own StockPurchase of Stock Method of Purchasing Another Bank A Method of Consummating a Merger in

9、Which the Acquired Firm Exchanges its Equity Shares for the Stock of the AcquirerBank Merger ActFirst Major U.S. Law to Bring Merging Banks Under Federal Supervision, Requiring Government Approval to Merge with or Acquire Other BanksUnder the Bank Merger ActMerger Must Be Approved By Principal Regul

10、atorNational Banks Comptroller of the CurrencyState Member Banks Federal ReserveState Insured Banks FDICRegulatory Agency Must Give Top Priority to Competitive EffectsMergers with Anti-Competitive Effects May Be Approved if it Can Be Shown That There Are Significant Public Benefits Such As Providing

11、 Convenient Services or Rescuing a Failing Bank Herfindahl-Hirschman IndexMeasure of Market ConcentrationIt is the Sum of the Squared Market Share for All Banks in a Specific Market AreaDepartment of Justice GuidelinesPostmerger HHI of Less Than 1800Change in HHI of Less Than 200Keys to Merger Succe

12、ssAcquirer Must Start By Evaluating Its Own Financial ConditionMust Have Detailed Analysis of Possible New MarketsMust Establish a Realistic Price for Target FirmAfterwards Combined Team Must Direct Progress Towards ConsolidationMust Establish Communication Between Senior Management and All EmployeesMust C