9726536__mergers_and_acquisition_

9726536__mergers_and_acquisition_ - Mergers and Acquisition...

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Mergers and Acquisition 1 Running head: CRITICAL APPRAISAL OF MERGERS AND ACQUISITION IN AMERICAN Critical Appraisal of Mergers and Acquisition in American Banks [Author’s Name] [Institution’s Name]
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Mergers and Acquisition 2 Abstract The international dimension to the mergers and acquisition business is not at all confined to the growing number of important cross-border and non-U.S. transactions that occur every year. It also is involved with many transactions that are never completed or are completed differently. Despite these limitations, this study demonstrates and reasserts that some bank mergers can provide significant operating cost advantages within the branch network. The key finding is that management may overlook or defer realizing these added profits available from mergers and acquisitions one possible cause of disappointing shareholder returns following the merger. If management more aggressively realigned and rationalized the control and operating systems of merged banks into a single bank -wide system, there is potential for a substantial increase in profits and shareholder value. Ignoring this potential may result in undervaluing the bank and a bargain purchase for an acquiring bank. If shareholders of merged banks demanded that these hidden assets be more rapidly transformed into real earnings and market value, perhaps fewer bank mergers would disappoint and more mergers would prove economically successful.
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Mergers and Acquisition 3 Critical Appraisal of Mergers and Acquisition in American Banks Generally, capital market services include the giving of advice on a variety of complex matters that a corporation must deal with in order to evaluate or accomplish particular financial transactions. Such transactions are usually ones that require specialized knowledge of the markets involved, and they also often require a network of contacts and extensive knowledge of local practices that a corporation itself is unlikely to possess to the degree necessary to ensure success. Advisory services are provided by both commercial and investment banks. They have been, however, a specialty of investment banks for a long time since they often involve the valuation of new or unusual securities by the market. Advisory services are provided on an “agency” basis for a fee that reflects the value added by the banker in the transaction. Typically, a small retainer fee is agreed upon, which is payable regardless of the outcome of the transaction, with the main part of the fee being dependent on the completion of the transaction and usually based on an agreed percentage of its value. Among such financial advisory services are those involving mergers, acquisitions and divestitures, recapitalizations, leveraged buyouts, creative “financial engineering” for new facilities or projects, real estate finance, and a variety of other transactions. The American banking industry has undergone rapid consolidation during the past 20 years as legal impediments to mergers, such as branching restrictions, have been relaxed. The present paper
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This note was uploaded on 11/29/2010 for the course MANAGEMENT EM-14793 taught by Professor Lindaryaan during the Spring '08 term at Windsor.

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9726536__mergers_and_acquisition_ - Mergers and Acquisition...

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