Mergers & Acquisitions of Banks in the USA

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Introduction The trend of Bank Mergers in the U.S. Banking Industry The trend of Bank mergers took a hike in the United States of America since the 1980s. The banks merged at the rate of 1.75 per business working day since these past two decades. Research suggests that around 8200 unassisted mergers and 1600 assisted mergers occurred in the banking industry of USA in these last two decades. The 25 largest banks in USA hold around 70% of the major assets in the financial industry however with this increasing wave of mergers, these banks are most likely to get hold over 85% of the assets till the next decade. The need for mergers and acquisitions is increasing due to the changing nature of the banking industry and the market forces are actually guiding these changes in the industry. If the banks do not consolidate with other banks in USA, they will be unable to compete with the other big giants that are giving intensive competition in the banking industry globally (Dymski, 2000). However, with these mergers gaining popularity in the industry, it is also creating many problems, like managerial issues and corporate control problems, value destruction for acquired firm shareholders etc. Many argue that the primary motive of a bank merger is mainly to get the major hold over the territory, in this case industry. There are many interpretations done that also suggest that mergers on the whole increase the operating efficiency of the banking industry and enhance the value of the banks. Reasons behind the increasing trend of Bank mergers The banking distress in the 1980s basically gave a start to the mergers and acquisitions trend in the banking industry. And further, the changing nature of the world also had an impact on thi... ... middle of paper ... ...cgi?article=1011&context=lawreview&sei-redir=1&referer=http%3A%2F%2Fscholar.google.com.pk%2Fscholar%3Fq%3Dbank%2Bof%2Bamerica%2Band%2Bmerrill%2Blynch%2Bmerger%2Bstory%26btnG%3D%26hl%3Den%26as_sdt%3D1%252C5#search=%22bank%20america%20merrill%20lynch%20merger%20story%22 Money.cnn.com (2013). HSBC to buy Republic National for $10.3B - May 10, 1999. Data retrieved from: http://money.cnn.com/1999/05/10/worldbiz/hsbc/ Rhoades, S. (1997). The efficiency effects of bank mergers: An overview of case studies of nine mergers. Journal of Banking & Finance, 22 pp. 273-291. Data retrieved from http://faculty.ksu.edu.sa/mahmoud/DocLib7/Rhoades%201998,%20The%20efficiency%20effects%20of%20b Skorkin, A. (2008). Lehman files for Bankruptcy. NYTimes.com. Date retrieved from http://www.utexas.edu/law/journals/tlr/sources/Volume%2092/Issue%201/Anabtawi/DSB/Anabtawi.fn255.1.SB.pdf

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