Impact and Effectiveness of Bank Mergers and Acquisition

Impact and Effectiveness of Bank Mergers and Acquisition

Nurul Hidayah Ab Rahman, Student, Degree in Finance, Faculty of Business Management, Universiti Teknologi MARA, Malaysia


The effect of a worst financial crisis in 1997, there has been an increase in the number of corporate takeovers and mergers. The beginning of merger and acquisition process increases the chances for an individual bank to become an acquisition target. Most bank employees consider merger and acquisition as a risk to their jobs, since shareholders often demand limitations in the number of employed staff. Besides that, in terms performance of efficiency before and after the commercial bank merged. After merged, automatic that all the management and skills change, so it has many positive effect to the bank such as banks are becoming more focused on their intermediation activities to generate high net interest income.


      Merger and acquisition are a big part of corporate finance world. Merger is the combination of the assets and liabilities of two firms to form a single business entity. In everyday language, the term acquisition tends to be used when a larger firm absorbs a smaller firm, and merger tends to be used when the combination is portrayed to be between equals.

      One plus one makes three, this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies. This rational is particularly appealing to companies when times are tough. Strong companies will act to buy other companies to create a more competitive and cost-efficient company. The companies will come together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot...