About Mergers and Acquisitions in Banking Sector
Mergers and acquisitions in banking sector have become familiar in the majority of all the countries in the world. A large number of international and domestic banks all over the world are engaged in merger and acquisition activities. One of the principal objectives behind the mergers and acquisitions in the banking sector is to reap the benefits of economies of scale.
With the help of mergers and acquisitions in the banking sector, the banks can achieve significant growth in their operations and minimize their expenses to a considerable extent. Another important advantage behind this kind of merger is that in this process, competition is reduced because merger eliminates competitors from the banking industry.
Mergers and acquisitions in banking sector are forms of horizontal merger because the merging entities are involved in the same kind of business or commercial activities. Sometimes, non-banking financial institutions are also merged with other banks if they provide similar type of services.
Through mergers and acquisitions in the banking sector, the banks look for strategic benefits in the banking sector. They also try to enhance their customer base.
In the context of mergers and acquisitions in the banking sector, it can be reckoned that size does matter and growth in size can be achieved through mergers and acquisitions quite easily. Growth achieved by taking assistance of the mergers and acquisitions in the banking sector may be described as inorganic growth. Both government banks and private sector banks are adopting policies for mergers and acquisitions.
In many countries, global or multinational banks are extending their operations through mergers and acquisitions with the regional banks in those countries. These mergers and acquisitions are named as cross-border mergers and acquisitions in the banking sector or international mergers and acquisitions in the banking sector. By doing this, global banking corporations are able to place themselves into a dominant position in the banking sector, achieve economies of scale, as well as garner market share.
Mergers and acquisitions in the banking sector have the capacity to ensure efficiency, profitability and synergy. They also help to form and grow shareholder value.
In some cases, financially distressed banks are also subject to takeovers or mergers in the banking sector and this kind of merger may result in monopoly and job cuts.
Deregulation in the financial market, market liberalization, economic reforms, and a number of other factors have played an important function behind the growth of mergers and acquisitions in the banking sector. Nevertheless, there are many challenges that are still to be overcome through appropriate measures.
Mergers and acquisitions in banking sector are controlled or regulated by the apex financial authority of a particular country. For example, the mergers and acquisitions in the banking sector of India are overseen by the Reserve Bank of India (RBI).
Major Mergers and Acquisitions in the Banking Sector of the United States
Following are some of the important mergers and acquisitions that took place in the banking sector of the United States:
- The merger of Chase Manhattan Corporation with J.P. Morgan & Company. The name of the new company formed as a result of the merger is J.P. Morgan Chase & Company.
- The merger of Firstar Corporation with U.S. Bancorp. The name of the resultant entity is U.S. Bancorp.
- The merger of First Union Corporation with Wachovia Corporation. The name of the newly formed company is Wachovia Corporation.
- The merger of Fifth Third Bancorp with Old Kent Financial Corporation. The name of the merged company is Fifth Third Bancorp.
- The merger of Summit Bancorp with FleetBoston Financial Corporation. The new company is named FleetBoston Financial Corporation.
- The merger of Golden State Bancorp, Inc. with Citigroup Inc. The name of the newly formed company is Citigroup Inc.
- The merger of Dime Bancorp, Inc. with Washington Mutual and the name of the merged entity is Washington Mutual.
- The merger of FleetBoston Financial Corporation with Bank of America Corporation. The newly formed entity is Bank of America Corporation.
- The merger of Bank One with J.P. Morgan Chase & Company. Name of the new company is J.P. Morgan Chase & Company.
- The merger of SunTrust with National Commerce Financial and the newly formed entity is also named SunTrust.
- The merger of Hibernia National Bank with Capital One Financial Corporation and the merged entity is known as Capital One Financial Corporation.
- The merger of MBNA Corporation with Bank of America and the resultant entity is known as Bank of America Card Services.
- The merger of AmSouth Bancorporation with Regions Financial Corporation and the name of the newly formed entity is Regions Financial Corporation.
- The merger of LaSalle Bank with Bank of America and the new entity formed is called as Bank of America.
- The merger of Mellon Financial Corporation with Bank of New York Company, Inc. and the newly merged entity is known as Bank of New York Mellon.