Post-acquisition Integration

Abstract

The M&A deals in European banking produced, on average, a fairly small positive impact on banks’ ability to create shareholder value and they do not have caused substantial improvements in banks’ cost efficiency In order to create shareholder value, an M&A operation has to achieve some or all of the following benefits (KPMG, 2000, p. 7):

• Added growth prospects;

• Acquisition of strategic asset(s) such as technology or R&D;

• Reduced SG&A costs (combined basis);

• Reduced capital expenditures in the future (combined basis);

• Enhanced gross margins (for example, better market pricing power or greater purchasing power from suppliers);

• More efficient use of working capital;

• Better perception by the investment community (for example, the company appears to be more focused, or committed to market leadership, or less likely to be “steamrolled” by competitors, or has more broadly traded shares);

• One-time cash “creation” (for example, by selling idle assets or non-core divisions):

• More immediate (or likely) future “exit” / “liquidity” event (that is, IPO or sale of company, thanks to better size/scale, after the deal is done);

• Lower (combined) borrowing costs;

• Tax-related savings or efficiencies.