Paper on Post-merger Analysis of Bank

Added on - Sep 2019

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Running head- Post-Merger ReviewPost-Merger Review
1Post-Merger ReviewTable of ContentsExecutive Summary.........................................................................................................................2Introduction......................................................................................................................................2Merger & Acquisition of Southern Bank.........................................................................................3The pre-acquisition profile of the both banks..................................................................................5Post-Acquisition profile...................................................................................................................7Stakeholder Analysis.....................................................................................................................10Policy.............................................................................................................................................13Conclusion.....................................................................................................................................15References......................................................................................................................................16Appendices: Part A........................................................................................................................17The satisfaction of the stakeholder of the Northern bank..............................................................17Appendices: Part B........................................................................................................................18The satisfaction of the stakeholder of the Southern bank..............................................................18Appendices: Part C........................................................................................................................20The satisfaction of external stakeholders.......................................................................................20
2Post-Merger ReviewExecutive SummaryThe northern bank and southern bank have been merged with the intention to compete with theeastern and western bank. The eastern and western banks have been merged and have becomeone of the largest banks. It was very difficult for the southern bank as well as a northern bank tocompete with the eastern and western bank after the merger. In this paper, the post-mergeranalysis of northern bank and the southern bank has been studied. Apart from this the pre-acquisition profile of both the banks has also been added to have an understanding of the featuresof the banks before the merger. The activities such as human resource practices of both banks aswell as product and services of both the banks before the merger and after the merger have beenstudied. This study has included what changes have been made in the southern bank and whatchanges have been made in the northern bank. What has been retained, replaced, and linked inboth the banks has also been studied. This study also gives precise information regarding theconcept of the merger & acquisition so that the readers can easily understand the concept andrationale behind the merger.IntroductionAs a strategic decision Mergers & Acquisitions are among the major decision before theorganization. Mergers & Acquisitions can be defined as alliance of the companies. But both theterms Merger and Acquisition are different from each other. Merger is a term used to define as acombination of the two companies to form one (Cartwright et al., 2014). On the other hand,when a company is taken over by the other company is called an acquisition. Therefore, merger& acquisition is one of the major decisions taken by the companies. One of the main objectives
3Post-Merger Reviewof the companies is to go for the merger and acquisition is to maximize the values of thecompany (Cartwright et al., 2014). The companies evaluate various opportunities with the aim ofmaximizing the wealth through the merger and acquisition. Merger and acquisition among thecompanies can take place in the following form;If one company is purchasing the assets of the other companyIf one company is purchasing the common shareIf one company is exchanging the share for assetsIf one companies is exchanging shares for shareThere are two forms of merger; first one is through absorption and second one is throughconsolidation. There are various reasons that induce the companies to go for the merger andacquisition. The following are the reasons of merger and acquisition (Ledenyov et al., 2014);Financial cooperation for lower cost of capitalsTo improve the performance of the company and accelerate the growth rate of the companyTo get the economies of scaleTo diversify to increase the growth rate of the products and servicesTo enhance the market share and position the business into the mind of the customersTo mitigate the risk of businessMerger & Acquisition of Southern BankThe potential of merger of southern bank was started earlier this year. First of all the northernbank approached the southern bank for the same. The reaction of the management of thesouthern bank was considerable for the merger but it became more positive with the passage of
4Post-Merger Reviewtime due to the increased rumors of the possible merger of the eastern bank and western bank.Both the bank made their transaction clear and prepared for the merger because it was difficultfor both of them to compete with the combination of western and eastern bank. The coverage ofthe eastern and western bank was as much as twice of the coverage of the southern bank ornorthern bank. Apart from this, both of the banks had numerous opportunities for saving the costsignificantly. The cross-selling activities were also an opportunity in front of the both if theywork as a combination. The actual arguments of conflict were the typical ones such as the valueof both entities, the governance structure of the joint franchise, the strategic method to take in theultimate post-combination period, etc. (Boschma et al., 2014).The negotiation process between the two banks northern and southern bank started in July. In thefirst week of July a transitory due assiduousness exercise was conducted for the northern bankand in the third week of July for the southern bank. The due assiduousness process of the mergerof both banks was based on the intent which was signed on 29thJune by the northern bank thatincluded non-binding and preliminary consideration of $1.34 billion in stock. Both banks werecooperating with each other, and there was friendly environment all around both banks. None ofany other bank was involved in this negotiation.Both the bank signed the agreement to merge on 12thSeptember. The amount of price paid was$15 billion in stock. The price paid was based on the share price of the northern bank on 12thSeptember at the close of trading.The advisors of the merger from both the banks were;The advisors of the northern bank- The investment bank consultant- Golding Ritter Sergeant &company
5Post-Merger ReviewThe advisors of the southern bank- the Investment bank consultant- Fort stein Berger Thomton &NickleThe pre-acquisition profile of the both banksThe profiles of both the companies were prepared by merger & acquisition team of New YorkSergeant. These profiles were based on the comparative analysis of southern bank as well as anorthern bank as per the data available on 31stAugust.Southern BankNorthern BankOwnershipPublic institution with greater than 5 percent12 percent23 percentFunding family12 percent0 percentPublic- other69 percent63 percentManagement7 percent14 percentFinancials (30thJune)Non-interest income$ 106 million$91 millionNet interest income$231 million$314 millionTotal income$ 337 million$ 405 millionTaxes$ 23 million$54 millionNon-interest expenses$229 million$239 millionNet earnings$85 million$112 millionLoan (non-performing) 90 days$68 million$72 millionTotal assets$8.6 billion$10.4 billionTotal portfolio of loan$5.4 billion$6.9 billionThe value of stock market (12thSeptember)$1.2 billion$1.8 billionHuman Resource Practices (pre-acquisition profiles)Salariesmore than averagesalaryalmost equal to theIndustryIn the averageindustry salary basedon individual.fixed grade pay forNegotiation. 17 gradesare available.ContractsBased on individualfixed
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