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Financial Services Firms: Governance, Regulations, Valuations, Mergers, and Acquisitions, 3rd Edition by Zabihollah Rezaee

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Chapter Five

Overview of Mergers and Acquisitions

Introduction

Mergers and acquisitions (M&A) are occurring at a record pace in almost every industry, especially in the financial services industry. Falling regulatory and geographic barriers (e.g., interstate and even global banking, the passage of the Financial Services Modernization Act of 1999 [Gramm-Leach-Bliley (GLB) Act]) along with banks' unprecedented performance and levels of private equity, are contributing to this increased M&A activity at the turn of the twenty-first century. It is expected that the recent economic recovery and resulting improvements in the financial and credit markets in the post 2007–2009 financial crisis led to increased M&A transactions across all industries—particularly healthcare, energy, natural resources and financial services industries. The objective of this chapter is to present a basic understanding of the M&A process from the standpoints of both the target and the acquirer. This chapter provides a generic discussion of M&A transactions that can be used by all entities wishing to grow through business combinations. More in-depth discussion of M&A transactions for financial institutions is presented in Chapters 14 and 15. M&A deals typically are viewed by both the acquirer and the target as an important means of achieving economies of scale, especially in a multiple-product market such as the financial services industry. The wave of M&A activities and the determinants of their behavior in ...

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