Section E
Banking M&A
There are certain specific conditions which exist in banking M&A that are not universal. These are discussed here. If you are not interested in or not involved in banking M&A transactions then this section can be skipped.
WHAT MAKES BANKING M&A UNIQUE?
While there are many books written about M&As and what is required to make them successful, few are written from a banking perspective. The regulatory pressures involved are much greater and on the face of it, contradictory. This makes banking M&A unique. Normally the competition regulators are concerned about two aspects of M&A activity. The first concern is whether this deal is anti-competitive. If it is, they will be inclined to prevent the deal from taking place. The second concern is that the deal is conducted correctly, in a way that is not detrimental to the shareholders. If the deal were not to happen both firms should be no less able to compete than they were earlier. To make sure that this is the case, legislation is in place to effectively keep the two firms apart as much as possible.
What makes banking unique is that the regulators insist that the new firm resulting from the M&A activity is able to trade as a single entity with all of its regulatory reporting and risk management put in place from ‘day one’. Because of this, considerable work between the two banks, and considerable integration and testing, are required. This closer working poses a potential risk. Both sides need to be aware of the ...
