商业银行管理全套配套课件英文PPT教师手册习题习题答案 Chap019.ppt 43页

ChapterNineteenAcquisitionsandMergersinFinancial-ServicesManagement KeyTopicsMergerTrendsintheUnitedStatesandAbroadMotivesforMergerSelectingaSuitableMergerPartnerU.S.andEuropeanMergerRulesMakingaMergerSuccessfulResearchonMergerMotivesandOutcomes IntroductionAglobewaveofmergersinvolvingbanks,securitiesfirms,insurancecompanies,andotherfinancial-serviceprovidershasbeenunderwayReflectsthegreatforcesofconsolidationandconvergencethataredramaticallyreshapingthefinancial-servicesindustryThistrendisdrivenbyIntensecompetitionDeregulationThesearchfortheoptimalsizefinancial-servicesorganization MergersontheRiseManyofthemergerssweepingthroughthebankingindustryreflectlowerlegalbarriersthatpreviouslyprohibitedorrestrictedexpansionForexample,intheU.S.,theRiegle-NealInterstateBankingActof1994andtheGramm-Leach-Bliley(GLB)Actof1999TheGLBlawopenedwidethearenaforbank–nonbankfinancial-servicecombinationsPermitsbanks,insurancecompanies,andsecurityfirmstoacquireeachotherCriticsoftheGLBlawarguethatwhileGLBmayresultinreducingU.S.financialfirms’riskexposure,itdoesnotappeartoholdgreatpromiseformajorimprovementsinoperatingefficiency MergersontheRise(continued)CompetitionamongEuropeanfinancialfirmsisbecomingmoreintense,leadingtocontinuingmergersandacquisitionsFinancial-servicemergersinEuropehaveslowedfromtimetotimeduetoaslowingeconomyandEuropeangovernmentsattemptstoprotecttheirhomebanksfromacquisitionbyoutsidersAsiaandJapanalsohaveexperiencedagrowingnumberofmergersDuetoanefforttoshoreupcreditqualityproblems,fendofftheravagesofdeflationandsluggisheconomies,andcompetewithpowerfulU.S.andEuropeanbanks TABLE19–1RecentLeadingInternationalFinancial-ServiceMergersandAcquisitions TABLE19–2SomeoftheLargestFinancial-ServiceMergersandAcquisitionsinAmericanHistory TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergersMergersusuallyoccurbecauseThestockholdersinvolvedexpecttoincreasetheirwealthorreducetheirriskexposureManagementexpectstogainhighersalariesandemployeebenefits,greaterjobsecurity,orgreaterprestigefrommanagingalargerfirmBothstockholdersandmanagementmayreapbenefitsfromamerger TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)ProfitPotentialSomearguethattherecentincreaseinfinancial-servicemergersreflectstheexpectationofstockholdersthatprofitpotentialwillincreaseonceamergeriscompletedIftheacquiringorganizationhasmoreskillfulmanagementthanthefirmitacquires,revenuesandearningsmayriseEspeciallytrueofinterstateorinternationalmergerswheremanynewmarketsareenteredIftheacquiringfirm’smanagementisbettertrainedthanthemanagementoftheacquiredinstitution,theefficiencyofthemergedorganizationmayincreaseMayresultinmorecontroloveroperatingexpenses TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)RiskReductionManymergerpartnersanticipatereducedcashflowriskandreducedearningsriskThelowerriskmayarisebecauseMergersincreasetheoverallsizeandprestigeofanorganizationOpenupnewmarketswithdifferenteconomiccharacteristicsfrommarketsalreadyservedMakepossibletheofferingofnewserviceswhosecashflowsaredifferentintimingfromcashflowsgeneratedbyexistingservicesMergerscanresultinamorestablefinancialfirm,abletowithstandfluctuationsineconomicconditions TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)RescueofFailingInstitutionsThefailureofacompanyisoftenamotiveformergerManybankmergershavebeenencouragedbytheFDICasawaytoconservefederaldepositinsurancereservesandavoidaninterruptionofcustomerservicewhenadepositoryinstitutionisabouttofailThegreatcreditcrunchof2007–2009resultedinnumerousfinancialfirmseitherfailingorinrealtroubleforwhichmergersandacquisitionswereoftentheonlyoption TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)RescueofFailingInstitutions TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)TaxandMarket-PositioningMotiveManymergersarisefromexpectedtaxbenefitsEspeciallywheretheacquiredfirmhasearningslossesthatcanbeusedtooffsettaxableprofitsoftheacquirerTheremayalsobemarket-positioningbenefitsAmergerwillpermittheacquiringinstitutiontoacquireabaseinacompletelynewmarketExamplesofU.S.market-positioningacquisitions:BankofAmericaCorp.acquiringFleetBostonFinancialCorp.WachoviaCorp.acquiringGoldenWestCapitalOneCorp.acquiringNorthForkBancorpandHiberniaCorp. TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)TheCostSavingsorEfficiencyMotiveLarge-scalestaffreductionsandsavingsfromeliminatingduplicatefacilitieshavefollowedinthewakeofsomeofthelargestmergersinthefinancial-servicessectorResearchhasshownthatsometimesthesinglemostimportantmergermotivationwasthedesiretoreduceoperatingcostsfollowedbyaplantodiversifyintonewmarketsManymergersareofthemarketextensiontypeMeansthatthemerginginstitutionsdonotoverlapmuchoratallintermsofgeographicareaserved TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)MergersasaDeviceforReducingCompetitionWhentwocompetitorsareallowedtomerge,thepublicisservedbyfewerrivalsfortheirbusinessServicequalitymaydiminishandpricesandprofitsmayriseMoreaggressiveprosecutionoftheantitrustlawsmayneedtobeconsidered TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)MergersasaDeviceforMaximizingManagement’sWelfare(AnAgencyProblem)Managementmayviewaprospectiveacquisitionasawaytoincreasesalariesandemployeebenefits,lowertheriskofbeingfired,andenhancemanagers’reputationinthelabormarketfromworkingforabiggerfirmIfmanagersreapthesebenefitsattheexpenseofcompanystockholders,anagencyproblememerges TheMotivesBehindtheRapidGrowthofFinancial-ServiceMergers(continued)OtherMergerMotivesIncreasedgrowthcapacityEnablesalendinginstitutiontoexpanditsloanlimittobetteraccommodatelargeandgrowingcorporatecustomersThisisparticularlyimportantinmarketswherethelender’sprincipalbusinesscustomersmaybegrowingmorerapidlythanthelendinginstitutionitselfGivesmallerinstitutionsaccesstocapablenewmanagementandcostlynewelectronictechnology SelectingaSuitableMergerPartnerHowcanmanagementandtheownersofafinancialfirmdecideifaproposedmergerisgoodfortheorganization?Measureboththecostsandbenefitsofaproposedmerger(noteasytodo)AmergerisbeneficialtothestockholdersinthelongrunifitincreasesthestockpricepershareThepriceofafinancialfirm’sstockdependsuponTheexpectedstreamoffuturedividendsflowingtothestockholdersThediscountfactorappliedtothefuturestockdividendstream,basedontherateofreturnrequiredbyinvestmentsofcomparablerisk SelectingaSuitableMergerPartner(continued)Inordertomaximizestockholdervalue,theproposedmergershouldImproveOperatingEfficiency(reduceoperatingcostperunitofoutput)ConsolidateoperationsandeliminateduplicationGeographicDiversificationProductLineDiversificationFindanacquisitiontargetwhoseearningsorcashflowarenegativelycorrelated(orhavealowpositivecorrelation)withtheacquiringorganization’scashflows SelectingaSuitableMergerPartner(continued)Amajorconsiderationinanyproposedmergerisitsprobableimpactontheearningspershare(EPS)ofthesurvivingfirmStockholdersofbothacquiringandacquiredinstitutionswillexperienceagaininearningspershareofstockifbothofthefollowingoccurAcompanywithahigherprice-to-earnings(P-E)ratioacquiresacompanywithalowerP-EratioCombinedearningsdonotfallafterthemergerInthisinstance,EPSwillriseeveniftheacquiredinstitution’sstockholdersarepaidareasonablepremiumfortheirshares SelectingaSuitableMergerPartner(continued)Aslongastheacquiringinstitution’sP-Eratioislargerthantheacquiredfirm’sP-Eratio,thereisroomforpayingtheacquiredcompany’sshareholdersamergerpremiumHigh-premiumdealsoftenyielddisappointingresultsforthestockholdersoftheacquiringfirm SelectingaSuitableMergerPartner(continued)ExchangeRatioThenumberofsharesofstockofferedbyanacquiringbankforeachshareofstockoftheacquiredbankDilutionofOwnershipSpreadingthefirm’sownershipovermorestockholderssothattheaverageshareholder’sproportionoffirmownershipdeclinesResultsfromofferingtheacquiredfirm’sstockholdersanexcessivenumberofnewsharesrelativetothevalueoftheiroldsharesDilutionofEarningsSpreadingafixedamountofearningsovermoresharesofstocksothattheEPSofthecombinedfirmdeclinesWilloccuriftheP-EofthefirmtobeacquiredisgreaterthantheP-Eoftheacquiringfirm TheMergerandAcquisitionRoutetoGrowthTheacquiredfirm(usuallythesmallerofthetwo)givesupitscharterandadoptsanewname(usuallythenameoftheacquiringorganization)TheassetsandliabilitiesoftheacquiredfirmareaddedtothoseoftheacquiringinstitutionAmergernormallyoccursaftermanagementsoftheacquiringandacquiredorganizationshavestruckadealProposedtransactionmustthenberatifiedbytheboardofdirectorsofeachorganizationandpossiblybyavoteofeachfirm’scommonstockholders. TheMergerandAcquisitionRoutetoGrowth(continued)Ifthestockholdersapprove(usuallybyatleastatwo-thirdsmajority),theunitofgovernmentthatissuedtheoriginalcharterofincorporationmustbenotified,alongwithanyregulatoryagenciesthathavesupervisoryauthorityovertheinstitutionsinvolvedIntheU.S.,thefederalbankingagencieshave30daystocommentonthemergeroftwofederallysupervisedbanksThereisa30-dayperiodforpubliccommentsaswellPublicnoticethatamergerapplicationhasbeenfiledmustappearinanewspaperofgeneralcirculationservingthecommunitieswherethemainofficesofthebanksinvolvedarelocatedTheU.S.JusticeDepartmentcanbringsuitifitbelievescompetitionwouldbesignificantlyreducedaftertheproposedmerger TheMergerandAcquisitionRoutetoGrowth(continued)TheprincipalcharacteristicsofthetargetedinstitutionthatareexaminedbythepotentialacquirerfallintosixbroadcategoriesThefirm’shistory,ownership,andmanagementTheconditionofitsbalancesheetThefirm’strackrecordofgrowthandoperatingperformanceTheconditionofitsincomestatementandcashflowTheconditionandprospectsofthelocaleconomyservedbythetargetedinstitutionThecompetitivestructureofthemarketinwhichthefirmoperates(asindicatedbyanybarrierstoentry,marketshares,anddegreeofmarketconcentration) TheMergerandAcquisitionRoutetoGrowth(continued)Inaddition,potentialacquirerswilllookatthesefactorsaswellThecomparativemanagementstylesofthemergingorganizationsTheprincipalcustomersthetargetedinstitutionservesCurrentpersonnelandemployeebenefitsCompatibilityofaccountingandmanagementinformationsystemsamongthemergingcompaniesConditionofthetargetedinstitution’sphysicalassetsOwnershipandearningsdilutionbeforeandaftertheproposedmerger MethodsofConsummatingMergerTransactionsMergersusuallytakeplaceemployingoneoftwomethodsPoolingofinterestsPurchaseaccountingFormergersbegunbeforeJuly1,2001,theFinancialAccountingStandardsBoard(FASB)permitteduseofthepoolingofinterestsMergerpartnersmerelysumthevolumeoftheirassets,liabilities,andequityintheamountsrecordedjustbeforetheirmergertakesplace MethodsofConsummatingMergerTransactions(continued)Incontrast,underpurchaseaccountingthefirmtobeacquiredisvaluedatitspurchasepriceandthatpriceisaddedtothetotalassetsoftheacquirerTheacquirerrecordstheacquisitionatthepricepaidbutmustvaluetheacquiredfirmatmarketvalueplusgoodwill(iftheacquisitionpriceandmarketvaluearedifferent)NogoodwillisfiguredinwhenusingthepoolingofinterestsapproachAfter2001,thepoolingofinterestmethodformergeraccountingwaseliminatedforU.S.financialfirms MethodsofConsummatingMergerTransactions(continued)AnotherwaytoviewthemergerprocessistodetermineexactlywhattheacquirerisbuyinginthetransactionAssetsorsharesofstockPurchase-of-assetsmethodTheacquiringinstitutionbuysalloraportionoftheassetsoftheacquiredinstitution,usingeithercashoritsownstockTheacquiredinstitutionusuallydistributesthecashorstocktoitsshareholdersintheformofaliquidatingdividendandtheacquiredorganizationisthendissolved MethodsofConsummatingMergerTransactions(continued)Purchase-of-stockmethodTheacquiringfirmassumesalloftheacquiredfirm’sassetsandliabilitiesandtheacquiredfirmceasestoexistWhilecashmaybeusedtosettleeithertypeofmergertransaction,inthecaseofcommercialbanks,regulationsrequirethatallbutthesmallestmergersandacquisitionsbepaidforbyissuingadditionalstockoftheacquirerAstocktransactionhastheadvantageofnotbeingsubjecttotaxationuntilthestockissold,whilecashpaymentsareusuallysubjecttoimmediatetaxation MethodsofConsummatingMergerTransactions(continued)ThemostfrequentkindofmergeramongdepositoryinstitutionsinvolveswholesalebanksmergingwithsmallerretailbanksLetsmoneycenterbanksgainaccesstorelativelylow-cost,lessinterest-sensitiveconsumeraccountsandchannelthosedepositedfundsintoprofitablecorporateloans RegulatoryRulesforBankMergersintheUnitedStatesTwosetsofrulesgenerallygovernthemergersofbanksandotherfinancialfirms:DecisionsbycourtsoflawStatutesenactedbylegislators,reinforcedbyregulationsForexample,theShermanAntitrustActof1890andtheClaytonActof1914forbidmergersthatwouldresultinmonopoliesorsignificantlylessencompetitioninanyindustryWheneveranysuchmergerisproposed,itmustbechallengedincourtbytheU.S.DepartmentofJustice RegulatoryRulesforBankMergersintheUnitedStates(continued)TheBankMergerActof1960RequireseachmergingbanktorequestapprovalfromitsprincipalfederalregulatoryagencybeforeamergercantakeplaceNationalBanks–ComptrolleroftheCurrencyStateMemberBanks–FederalReserveStateInsuredBanks–FDICEachfederalagencymustgivetopprioritytothecompetitiveeffectsofaproposedmergerMergerswithanti-competitiveeffectsmaybeapprovedifitcanbeshownthattherearesignificantpublicbenefitsForexample,providingconvenientservicesorrescuingafailingbank RegulatoryRulesforBankMergersintheUnitedStates(continued)ThedegreeofconcentrationinamarketismeasuredbytheproportionofassetsordepositscontrolledbythelargestinstitutionsservingthatmarketTheJusticeDepartmentguidelinesrequirecalculationoftheHerfindahl-HirschmanIndex(HHI)asasummarymeasureofmarketconcentrationItisthesumofthesquaredmarketshareforallbanksinaspecificmarketareawhereAirepresentsthepercentageofmarket-areadeposits,assets,orsalescontrolledbytheithfinancialfirminthemarket,andtherearekfinancialfirmsintotalservingthemarket RegulatoryRulesforBankMergersintheUnitedStates(continued)UnderthelatestDepartmentofJustice(DOJ)GuidelinesIfamarkethasapostmergerHHIbelow1,000points,thenthemarketisunconcentrated;nofurtherDOJreviewAmarketisconsideredmoderatelyconcentratedifitspostmergerHHIis1,000to1,800pointsandasaresultoftheproposedmergerthechangeintheHHIislessthan100points;usuallynofurtherDOJreview(unlessthechangeintheHHI>100points) RegulatoryRulesforBankMergersintheUnitedStates(continued)UnderthelatestDepartmentofJustice(DOJ)GuidelinesAmarketisconsideredhighlyconcentratedifthepostmergerHHIliesabove1,800pointsandthepostmergerchangeintheHHIexceeds50points;usuallynofurtherDOJreview(unlessthechangeintheHHI>50points)IfthechangeintheHHI>100pointsinahighlyconcentratedmarket,significantcompetitiveissueswillberaisedandasuittoblocktheproposedmergermaybefiledbytheDOJ TheMergerRulesinEuropeandAsiaTheEuropeanCommission–anexecutivebodyoftheEuropeanCommunitycurrentlybasedinBrussels–hasemergedasakeymediatorofmergersinvolvingEuropeanbusinessesBecausetheEuropeanCommissioncannotbreakapartamergerafterthatcombinationhasoccurred,theBrusselscommissionhasbeensomewhatmoreaggressiveindenyingsomecompaniespermissiontomergeThedoctrineofcollectivedominancesuggeststhatifasignificantEuropeanmarketwouldbecomesoconcentratedasaresultofaproposedmergerthatonlyaboutfourfirmswouldcometodominatethatmarket,thentheEuropeanCommissionmayvotetoblockanyfurthermarketconcentration TheMergerRulesinEuropeandAsia(continued)InAsia,mergerrulesareinastateoffluxasleadingnationsseektomodernizetheirmergerreviewprocessanddevelopmoredefinitiveguidelinesformergingfirmsInassessingaproposedmergers,AsianauthoritiesemphasizeMarketshareAvailabilityofalternativesourcesofsupplyfortheconsumerWhetherforeignfirmsareinvolvedthatwillsignificantlyimpactdomesticinstitutionsinadangerouswayMergersthatappeartorescuelosingdomesticcompanies,protectjobs,andbringnewtechnologiesandmanagerialtalentintothehostcountryoftenreceivefavorablerulings MakingaSuccessofaMergerManymergerssimplydonotworkAvarietyoffactorsoftengetinthewayPoormanagementMismatchofcorporateculturesandstylesExcessivepricespaidbytheacquirerfortheacquiredfirmFailuretotakeintoaccountthecustomers’feelingsandconcernsLackofstrategic“fit”betweenthecombiningcompanies MakingaSuccessofaMerger(continued)HelpfulstepsthatimprovethechancesforadesirablemergeroutcomeAcquirermuststartbyevaluatingitsownfinancialconditionMusthavedetailedanalysisofpossiblenewmarketsMustestablisharealisticpricefortargetfirmAftermerger,combinedteammustdirectprogresstowardsconsolidationMustestablishcommunicationbetweenseniormanagementandallemployeesMustcreatecommunicationchannelsforcustomersandemployeestounderstandwhymergertookplaceShouldcreatecustomeradvisorypanelstoevaluateandcommentonmergedbank’simageandproducts ResearchFindingsontheImpactofFinancial-ServiceMergersTheFinancialandEconomicImpactofAcquisitionsandMergersMerger-activefinancialcompaniestendtogrowfasterthannonmergingfirmsGenerally,acquiringfinancialfirms,onaverage,arenotmoreprofitablethanthefirmstheybuyThissuggeststhatmanagementoftheacquiringfirmhopestobuyintosuccessAcquiredcompaniesareoftensignificantlylessprofitablethanthefirmstheycompetewithAcquirerspaysizablepremiumsfortargetfirmsThus,stockholdersofacquiredcompaniesoftengainafinancialadvantage,whileacquirersoftenwindupwithmixedresults ResearchFindingsontheImpactofFinancial-ServiceMergers(continued)PublicBenefitsfromMergersandAcquisitionsResearchhasfoundfewrealbenefitsfromthepublic’sperspectiveOnthepositiveside,thereisnoconvincingevidencethatthepublichassufferedfromadeclineinservicequalityorinserviceavailabilityThereisalsosomeevidencethatbankfailureratesdeclineinthewakeofmergeractivityMergersandacquisitionsusuallyhavemultipleoutcomesandgenerateamixtureofwinnersandlosers QuickQuizWhatfactorsshouldafinancialfirmconsiderwhenchoosingagoodmergerpartner?Whatfactorsmusttheregulatoryauthoritiesconsiderwhendecidingwhethertoapproveordenyamerger?Whenisamarkettooconcentratedtoallowamergertoproceed?Doesitappearthatmostmergersservethepublicinterest?