By Steven I. Davis
Why do banks around the globe proceed to merge and traders proceed to motivate such mergers while the great physique of educational learn demonstrates that mergers both upload no price or really decrease stockholder price? A former banker and present advisor to banks within the US and Europe, Mr. Davis addresses this factor by way of a sequence of in-depth interviews with senior executives from over 30 banks with large merger event, in addition to over a dozen banking analysts and experts. Key matters equivalent to the power to accomplish major rate and profit synergies, due diligence, humans choice, IT integration, cultural clash, management and velocity of decision-making are all tested intimately. whereas the interviewees nearly unanimously are expecting an acceleration of the present merger pattern, the e-book concludes with an exam of possible choices to this consensus. It presents suggestions for the long run in focussing at the significance of considerable fee reductions, company and skilled management, effective IT integration and fast determination making. ultimately it means that the deliberate explosion of go border mergers calls for a revision of the previous merger version in keeping with immense brief time period price mark downs.
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In the words of Tom Grondahl of Den norske Bank as it enters its second major merger of the decade with Postbanken, when confronted with a merger issue: We can just take out the old material, dust it off, and know exactly how we did it in the past. The role of outside consultants appears to have changed as well. For their first major merger, most of the European banks we met used Planning the Merger 49 teams of up to 50 and more professionals from leading consulting firms to manage the extraordinarily complex execution process.
Conversely, a supposedly unfriendly merger stemming from a contested take-over bid or sale over the head of management by a controlling stockholder can become essentially a friendly one. For example, the Bank Austria/Creditanstalt merger began as a take-over vigorously resisted by the CEO and many executives of Creditanstalt concerned about their purchase by their traditional rival. The opponents soon left the merged bank, but, as Danilo Melamed of Bank Austria acknowledges: Creditanstalt was taken by surprise by our successful offer.
It doesn't serve any purpose except that of the unions, and it unsettles staff and customers. I can't understand why some of our competitors do it! Achieving these savings requires one-off restructuring costs, which are generally booked at the time of the merger. In the US and many 24 Bank Mergers European markets, these approximate one to two times the projected annual savings. In our European interview series, however, we were told of much higher cost/benefit ratios stemming from the need to pay handsome `voluntary' retirement benefits, particularly for senior staff in markets with strong union influence.