Impact of Merger and Acquisition on Financial Performance in Financial Service Sector

This research report analyzes the impact of merger and acquisition on the financial performance of financial service sector. It also studies the factors driving the growth of merger and acquisition in recent years and evaluates the post acquisition performance of financial service firms.

Impact of Merger and
Acquisition on the financial
performance financial service
factor

Table of Contents
CHAPTER 1: INTRODUCTION ...................................................................................................3
Overview of the topic.............................................................................................................3
Problem statement..................................................................................................................4
Research aim..........................................................................................................................4
Research objectives................................................................................................................4
Research questions.................................................................................................................4
Rationale of the research........................................................................................................5
CHAPTER 2: LITERATURE REVIEW ........................................................................................6
What factors are leading financial service sector towards increasing trend of Merger and
Acquisition in recent years?...................................................................................................6
REFERENCES ...............................................................................................................................9

CHAPTER 1: INTRODUCTION
Overview of the topic
Merger and acquisition are considered as the most common term into the business where
consolidation of companies assets are being performed through different financial transactions.
When one company takes over another company and establishes the company as a new identity
or owner then this is considered as acquisition (Alhenawi and Stilwell, 2019) . On the other
hand, merger is considered as the method in which two firms of almost same size combines
together and form a new single identity rather than remaining separate. These methods are called
as business strategy in which different objectives of the business can be addressed such as
business expansion and profit procurement. In the current time mergers and acquisition are
interchangeably used by different business so that to define their business and to manage
different business functions. The scope of merger within an organisation is high as two firms are
get combined and would be helpful in attaining business objectives in direct or indirect manner.
Using merger and acquisition as a business strategy organisation may seek to avail various
opportunities in order to maximise their wealth and business objectives. The principle of merger
and acquisition would create synergy value to the organisation in which opportunities for earning
higher revenue and lowering of cost of capital can be acquired (Gadzo, Kportorgbi and Gatsi,
2019). In the year of global trend for merger and acquisition has reached to its new heights and
around the world more than 62000 merger and acquisition took place which is 24% higher than
the last year. There are certain reasons for increasing mergers and acquisition into the business
such as increasing need of technology, market trends, customer engagement and different others.
In order to align with such factors decisions are taken by the organisation in respect of merger
and acquisition. The current research report is based on the factors that are driving growth of
merger and acquisition in terms of UK financial institutions. Financial sectors are regarded as
boon for the economic growth so that continuos upgradation of financial sector is necessary. In
different countries there are various processes which are being exerted by service sector and this
is related with overall effectiveness of the nation. Financial institutions are integrated with
government and this will undergo under remarkable changes in the economic reform. Good
understanding of determinants of merger and acquisition is to assist practitioner so that to
identify essential factor on which decision of merger and acquisition are based.

Problem statement
Mergers and acquisitions are related with growth prospectus for long term growth of the
organisation. In the terms of financial sector there are radical changes which are seen within the
industry within the past decades and these are associated with regulations and functionality of
the industry. Besides this in recent years banking institutions are offering different services such
as insurance and different others. These services are providing ease to their customers to manage
different needs and demands (Yusuf and Ichsan, 2021). The consequence of these product range
regulation is that financial sector has become more liberalised and due to this reason different
merger and acquisitions are taking place. The identified research problem in the current research
is that there are different issues which may lead the industry to face several issues. The current
research report is highlighting different issues those would be faced by the the industry at the
time of taking merger and acquisition by the organisations.
Research aim
To find out the factors that are driving the growth of merger and acquisition in financial
service sector in recent years also to find to out the impact of such strategy on financial and the
performance of the financial service firms.
Research objectives
 To study the factors those are leading towards the intense growth of merger and
acquisition in financial service sector in recent years.
 To evaluate the impact of merger and acquisition by analyzing post acquisition
performance of the financial service sector.
 To observe the impact of Merger and Acquisition on the financial performance financial
service sector.
Research questions
 What factors are leading financial service sector towards increasing trend of Merger and
Acquisition in recent years?
 What are the effects of M&A on post acquisition performance of the firms?
 What are the impacts of M& A on the financial performance of financial firms?

Rationale of the research
The current research is based on service industry which is considered as the sector that is
being affected by result of liberalisation, globalisation and another elements. The current
research will increase basic understanding related with acquisition and merger taking place
within financial sector. Merger and acquisition is related with involving money within the
transactions. Thus this is necessary for the financial service sector that to operate business
functions effectively and manage sustainable business growth as well. As acquisition involves
large expenses so that some organisation cannot afford this (Sinthupundaja, Chiadamrong and
Kohda, 2019). The existing research would increase basic understanding on the topic of merger
and acquisition along with managing personal and professional perspective in it. In terms of
personal perspective the research will increase different skills of the researcher such as
communication skill, analytical skills, research skills and many other. So that these can be used
to develop the future and to acquire benefits in personal and professional career. On the other
hand, in terms of professional perspective the current research would provide edge to the
researcher in which they can manage their future researches in more appropriate manner.

CHAPTER 2: LITERATURE REVIEW
What factors are leading financial service sector towards increasing trend of Merger and
Acquisition in recent years?
According to the view point of Ahmed, Manwani and Ahmed, (2018), this can be
analysed that the trend of acquisition and merger is increasing day by day which means that
businesses are including various opportunities for succession. Merger and acquisition is also the
form of foreign investment so that businesses use these methods in order to maximise their
business boundaries and to manage success. The reason of merger and acquisition is related with
invention of financial products and merger f regional financial system. Markets and industries
are highly competitive which leads the business to acquire several business strategies so that to
deal with issues of the business. There are different other factors which leads the financial
service sector towards increasing trend of merger and acquisition and these are elaborated as
under:
Asset and wealth management: Asset and wealth management is the major reason for which
businesses of current age use merger and acquisition as their business strategy. Sometimes the
financial performance of the organisation is weaker which leads the businesses to minimise their
capitalising options so that with the help of merger and acquisition this would be easier for the
businesses that to grab different marketing opportunities (Nelson, 2018). With the help of merger
and acquisition strong investment decision can be taken which are helping the business to attract
positive financial position. In the current time the businesses are working to attain longer
business objectives and this is the reason that they are needed to inhale different business
opportunities. So this can be said that merger and acquisition is related with increasing
opportunities for asset and wealth management so that the business may grow and enhance their
market asset.
Foreign investment: The foreign investment is the other option which helps the business to
develop their existence into global market. This means that with the help of foreign investment
an organisation may unleash different marketing opportunities and increase their market range as
well. Merger and acquisition is one of the major foreign investment strategy which can be used
by the businesses so that to acquire success and to enter into foreign market. In the context of
financial service industry this can be said that as the industry is growing within the current state

the organisations are needed to build up their market identity so that they can grab higher
customer base.
To pre-empt rivals: For every organisation position of their rivals are essentially to be
examined so that several business opportunities can be inhaled and at the same time they can get
separate market edge. In this manner with the help of acquisition and merger the organisation can
deal with their rivals and reach out to their business strategies. Using merger as a strategy to deal
with rivals this would be easier for the business to acquire larger customers and to reach out to
market depth as well (Wewege, Lee and Thomsett, 2020). Using merger and acquisition as a
business may get market growth opportunities and in the same manner these growth
opportunities can be inhaled for the purpose of reaching out with higher customer range.
To gain new capabilities and competencies: For an organisation this is mandatory as they
acquire different capabilities and competencies within the market so that they may develop their
unique identity within the market and capture lager audience. In this manner using merger and
acquisition an organisation can acquire new competencies and capabilities within the market
which would be helpful in attaining new market edge and customer attention as well. When an
organisation is having uniqueness in their business offerings then this would lead the business
into attracting new customers and retain them for longer period of time. Using merger and
acquisition as the business strategy this would be easier for the organisation to reach out to their
potential customers and manage profitability.
To access new marketing and distribution channels: For an organisation decision related with
marketing and distribution channel is highly essential as this will help them to reach out to their
audience and attain business objectives. Using merger and acquisition as the business strategy
the organisation may get to learn regarding different channels of new marketing channels and
distribution channels. This would be helpful in reaching out to potential customers and
conveying organisational message to them. Marketing and distribution channel hold high degree
of importance as this will enable the organisation that to convey their organisational offering
message to potential customers and to persuade them as well.
From the above discussion this can be concluded that merger and acquisition are
considered as the major business strategy which helps the business to reach out to new customers
and to manage business succession opportunities as well. This can be said that there are various
reasons due to which merger and acquisitions are performed by the organisation and in this

manner reaching out to new customer base is considered as major. Using merger and acquisition
the organisation may intensify their communication channels and reach out to their potential
customers in easy manner. On the other hand, with the help of merger and acquisition the
organisation can include different competencies and capabilities in their business functions so
that using the same business objectives can be attained and at the same time separate edge can be
attained in comparison of rivals (Farquhar and Meidan, 2017). Besides this, merger and
acquisition would bring newness into the business as business processes of an organisation is
adopted by another organisation which helps the business to grow and reach to new market
abilities.

REFERENCES
Books and journals
Ahmed, F., Manwani, A. and Ahmed, S., 2018. Merger & acquisition strategy for growth,
improved performance and survival in the financial sector. Jurnal Perspektif
Pembiayaan Dan Pembangunan Daerah, 5(4), pp.196-214.
Alhenawi, Y. and Stilwell, M.L., 2019. Toward a complete definition of relatedness in merger
and acquisition transactions. Review of Quantitative Finance and Accounting, 53(2),
pp.351-396.
Farquhar, J. and Meidan, A., 2017. Marketing financial services. Bloomsbury Publishing.
Gadzo, S.G., Kportorgbi, H.K. and Gatsi, J.G., 2019. Credit risk and operational risk on financial
performance of universal banks in Ghana: A partial least squared structural equation
model (PLS SEM) approach. Cogent Economics & Finance, 7(1), p.1589406.
Nelson, T., 2018. Mergers and Acquisitions from A to Z. Amacom.
Sinthupundaja, J., Chiadamrong, N. and Kohda, Y., 2019. Internal capabilities, external
cooperation and proactive CSR on financial performance. The Service Industries
Journal, 39(15-16), pp.1099-1122.
Wewege, L., Lee, J. and Thomsett, M.C., 2020. Disruptions and digital banking trends. Journal
of Applied Finance and Banking, 10(6), pp.15-56.
Yusuf, M. and Ichsan, R.N., 2021. Analysis of banking performance in the aftermath of the
merger of bank syariah indonesia in Covid 19. International Journal of Science,
Technology & Management, 2(2), pp.472-478.