BANKERS, MARicETS & INVESTORS

- 1 JAN. 2010

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WHAT ARE THE REAL REASONS
FOR MERGERS A N D ACQUISITIONS IN THE BANKING SECTOR? g S H ^ ^

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PASCAL GRANDIN* Professor Université Lille Nord de France, LSMRC

DHAFER SAIDANE** Professor Université Lille Nord de France, LSMRC, EQUIPPE

growing share of global merger and acquisition (M&A) activities now relates to thefinancialservices industry. Whether mergers involving total integration or only acquisitions of parts of target companies, banking M&A transactions are at the centre of attention throughout the world. The changes to the banking business model we are witnessing today will boost the M&A process in the banking industry. In the course ofthe iggos, mergers and acquisitions in the globalfinancialsector (banks, insurance companies, investment companies) have increased substantially. Their number has multiplied by 5 and the total volume of such transactions has risen ii-fold\ During this period, the value of banking M&A represented 70% ofthe total value of transactions in the financial sector and 20% of global concentration moves across all sectors. In contrast, the early 2000s, with the bursting ofthe Internet bubble, mark a lull - indeed, a fall - in M&A within the European Union (EU) including the banking sector. At the end of 2007, the total volume of global M&A activities in the financial sector was close to 730 billion dollars, increasing only by 29.1% compared with 2006, when growth was 48.6% over 2005. ^ The financial sector was the most active in terms of M&A volume. It represented r6% of global M&A activity, totalling more than 4500 billion dollars.

Source: "Report on Consolidation in the Financial Sector". Group of Ten - Bank far intérnûtionûl Settlements {2001, p. 34). Tliese are transactions amounting'to sums in " excess o f one billion dollars and involving as targets financial institutions in one ofthe