Advanced Bank Merger Analysis Software Helps Executives Deal with Complex Mergers

By Northup, Christopher K. | American Banker, October 30, 1984 | Go to article overview

Advanced Bank Merger Analysis Software Helps Executives Deal with Complex Mergers


Northup, Christopher K., American Banker


Many banking institutions, economists, lawyers, and investment bankers are using their personal computers and today's advanced merger analysis software to plan -- and win agency approval of -- bigger and more complex mergers. And some government agencies are using similar software to analyze these same transactions. These activities, unknown as recently as six months ago, rank among the most exciting new uses of personal computers in the banking field.

Before any merger transaction can be consummated, it must be approved by federal regulatory agencies. In almost every case, agency approval depends on a favorable evaluation of the level of competition in each of the merging banks' markets.

Just within the last few years it has become possible to program microcomputers to make them a powerful tool for preparing these competitive analyses and, ultimately, for winning approval of larger mergers. This has been made possible by the regulatory agencies' adoption of more precise and quantitative merger guidelines, on the one hand, and the rapid evolution of microcomputer hardware and software, on the other. A properly equipped microcomputer can greatly enhance the executive's or attorney's ability to deal with and gain approval of today's larger and more complex bank mergers. "Fudge Factors"

The Department of Justice's Merger Guidelines and the Federal Reserve Board's Potential Competition Guidelines provide quantitative standards a merger must meeting before it receives agency approval. Prior to these guidelines, the use of "fudge factors" and "guesstimates" was common in the approval process.

With the current guidelines, the merging institutions can determine with reasonable certainty whether their merger will be approved and, if not, how much of the merged entity would have to be divested to make it acceptable. For example, under the Department of Justice's Merger Guidelines, a transaction producing a postmerger Herfindahl-Hirschman Index (HHI) of 1470 and an HHI increase of 163 points cannot be approved unless the parties agree to divest at least 63 points of market share. The FRB's Potential Competition Guidelines often require even more complex calculations.

Another consideration that has recently become important in competitive analysis is the impact of thrift institutions in banking services markets. The deregulation of thrifts has led them to provide new services to businesses, and, in some areas, thrifts have become almost functionally equivalent to banks.

Various federal agencies have recognized this and have become willing to give some (but not full) competitive weight to thrifts in some market areas. The amount of weight given to thrifts can vary from case to case, state to state, and even from market to market. As a result, it has become necessary to calculate precisely the effect of including thrifts at various levels in a competitive analysis, say, at 20%, 30%, or 50% of their deposits. This variation increases the complexity of a competitive analysis still further. Complex Calculations

The complex and time-consuming calculations required for a competitive analysis can be done efficiently on a microcomputer; however, a microcomputer is useless without proper software -- the instructions that guide the machine in a particular application.

Years ago, when only programming languages such as BASIC and FOR-TRAN were available for microcomputers, learning one of these languages was necessary to do even the most rudimentary portion of a competitive analysis such as a market share table. Generally, executives and attorneys are not and do not aspire to become programmers. But the development of spreadsheet software gives these individuals increased access to the power and flexibility of the computer without the need to learn advanced programming skills. Using some simple BASIC programs and spreadsheet software, one can dramatically increase the accuracy of simple competitive analyses and decrease the time required to prepare them. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Advanced Bank Merger Analysis Software Helps Executives Deal with Complex Mergers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.