Press detail

Münster/Frankfurt, 29 April 2010 – Credit institutions can only maintain and strengthen their position among the top banks world-wide in the long term if they boost growth through regular mergers and acquisitions. The success of mergers depends on the specific, individual framework including aspects such as the business model, the bank’s own size and the transaction’s volume. In particular, universal banks can position themselves well in major transactions. In spite of the business complexity of international strategies, the capital market especially rewards the exploitation of international market opportunities. The number of mergers in absolute terms alone, however, does not guarantee success. Identifiable requirements for successful integration rather are strong attention by the top management and professional integration management. Concentrating on these success factors contributes to shifting the focus on business success rather than on the short-term promises of the capital market.

Those are the most important findings of the first international M&A study for the banking sector carried out by zeb/, a leading management consultancy in the financial industry. The study examines mergers and acquisitions of banks listed world-wide and analyses 2,400 transactions from 1987 to 2007. It looks into the success rates and performance development of acquiring banks up to the onset of the world-wide financial crises in late 2007.

Lars Gehner, Partner at zeb/ with responsibility for large banks, who co-ordinated the M&A study, says: “M&A activities are a significant factor for the successful positioning of banks — according to our findings, organic growth alone is not sufficient. When you look at the top 20 banks by size from 1987 to 2007, you can see that 15 out 20 banks implemented more than ten transactions and that all the banks achieved at least part of their growth through mergers and acquisitions.” All in all, only two banks were able to stay among the top 20 throughout the period covered by the study: Deutsche Bank from Germany and Banco Santander from Spain.

Frank zur Nieden, Head of zeb/’s Competence Team “Merger and Integration Management”, who had operative responsibility for the study, explains: “The success rates show that M&As are a challenge for the banks in terms of business management. After all, only 42% to 43% of the transactions are successful in that respect. The assessment of the capital market is much more positive; they consider almost 50% of the transactions to be successful.”

These figures, however, only illustrate one of the two relevant perspectives and suggest that refraining from M&As might be the right option. When you look at the mean performance of all transactions, the picture is inverted: the average for all acquiring banks shows that their total shareholder return (+5%) and return on equity (+3.7%) significantly outperforms the market. This indicates that:

• M&A activities are attractive and necessary for banks to position themselves successfully in the market, and
• banks which master the challenges of integration can disproportionately improve their market valuation and profitability if they take account of the success factors of integration.

Jens Uwe Holthaus, Senior Manager and project manager in numerous integration projects implemented by zeb/, states: “In our experience, two success factors are decisive for smooth integration. First, the integration of the acquired enterprise should receive utmost attention from the board. This ensures that effective countermeasures are taken in a timely fashion if negative developments should occur.” This top management attention for M&A projects was common practice at banks with fewer transactions. “Top management attention typically diminishes as the number of integrations grows because the board’s capacity does not suffice for a multitude of projects," stresses Holthaus. Even under such framework conditions, a high success rate could be achieved, but this required professional and standardised integration management with clear processes and responsibilities. Holthaus concludes: “According to our findings, however, the necessary level of professionalism is frequently only reached after a very high number of transactions.”

zeb/rolfes.schierenbeck.associates is a management and IT consultancy specialising in the financial services sector with twelve offices in Germany, Austria, Switzerland, Poland, the Czech Republic, Ukraine and Hungary. With more than 650 employees and several subsidiaries, zeb/ is among the leading consulting firms for banks, insurance companies and other financial service providers.

zeb/ publishes further details on the company in the annual zeb/Report that is accessible at www.zeb.de or dispatched to you upon request.

Contact:
Dr. Anne Täubert
Corporate Communications
Tel: +49.251.97128.220
Fax: +49.251.97128.110
E-mail: ataeubert@zeb.de