Academic journal article ABA Banking Journal

Is Consolidation Over?

Academic journal article ABA Banking Journal

Is Consolidation Over?

Article excerpt

WILLIAM W. STREETER

NOT LIKELY. BUT THERE IS A BIG pause going on right now, and the events of the past two months are not the main reason. The reason relates more to the general downward trend in economic growth and the deflation of the economic hubris that accompanies boom times. In their place have come caution and a certain skepticism. As one analyst observed in this month's cover story, "the whole idea of expanding through mergers carries a heavy burden of proof these days."

It really always should. Not because it's a bad strategy, but because it's an easy strategy to engage in, yet one that is not at all easy to make work. Opportunistic moves can be very successful, but the companies that pull them off do so because their managements figured out ahead of time what they wanted to do and what the lines in the sand were that they would not cross in terms of terms, price, geography, lines of business, etc.

The cover story offers a summation of what the M&A environment is likely to be for the next six months at least. Contributing Editor Karen Holliday pulled the story together under difficult circumstances. She was close to finishing the original draft at the time of the Sept. 11 attacks. Needless to say, that event warranted some follow-up interviews to determine how things might change, which Karen was able to obtain and incorporate into the article.

As part of her article, Holliday arranged for a "sidebar" called "Seven deadly sins of bank M&A--plus one for good measure," authored by financial services analyst Tom Brown. It's always a pleasure to have Brown's pithy observations in our pages. In his usual pull-no-punches approach, leavened by wit, he opines on the sins that give M&A a bad name. Some of his points are ones he's hammered on for years, such as overreliance on expected economies of scale. …

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