Impact of Mergers and Acquisitions of Banks in Greece: Empirical Research Findings

By Lazaridis, Ioannis T. | Journal of Financial Management & Analysis, July-December 2003 | Go to article overview

Impact of Mergers and Acquisitions of Banks in Greece: Empirical Research Findings


Lazaridis, Ioannis T., Journal of Financial Management & Analysis


Introduction

Mergers refer to the compilation of two companies' share capital, whose size is, in most of the cases, almost the same, regardless of the fact that, after the merger, the new company might keep the name from one of the merged companies or obtain a new name. The difference between mergers and acquisitions is mainly psychological because the term "acquisition" defines winners and losers. The wide use of mergers ("merger mania" has been caused, since the 1980s, by three factors:

* the relative compression of the situation in the stock market, e.g., in 1981, Dow Jones was in the lower level since 1968,

* the inflation levels that prevailed during the 1970s, as well as the 1980s, and

* the implemented governments' decisions.

Bank Mergers in the U.S.A. and Europe

The biggest percentage of the realized deals concerned banks (almost 60 per cent worldwide). During the decade 1988-1997, only in the U.S.A., approximately 3200 bank mergers occurred. More specifically, some of the biggest mergers among American banks, such as the mergers of Citicorp Travelers, Bank One First Chicago, Bank America & Nationsbank, Northwest & Wells Fargo and UBS - Swiss Bank Corporation, were realized in 1998. So, it can be said that, during the 1990s, we had the most important increase in the number of bank mergers both in the U.S.A. and in Europe.

In the European Union, some major mergers took place during the 1990s. These mergers were (a) in Portugal (1996): the merger between Banco Commercial Portugues and BPA, (b) in Denmark (1990): the merger of Den Danske Bank with Copenhagen Handelsbank and Provinsbanken, (c) in Denmark, again (1999): the merger between Unibank and Trug Baltica - the biggest insurance company in Denmark, (d) in Great Britain (1995): the merger between Lloyds and group TSB, and (e) in Sweden (1997): the merger of Svenska Handelsbanken, which bought out the national bank Standhypotek. Finally, the first interstate buyout in Europe took place in 1998, when the French bank Societe Generale bought out the British Hamdros for 426 million Euros and so, the SG Hambros Bank and Trust was created. Of course, the merger of the Spanish banks Banco de Bilbao and Banco de Vizcaya was realized long before the above mergers (in October 1988). That merger resulted in the creation of Banco Bilbao y Vizcaya, the twelfth bank in Europe at that time.

Reasons for Bank Mergers

The reasons that led to these important bank mergers can be found in the major international alterations in the structure on the bank sector, as well as in the increased competition, caused mainly by the non-banking competitors and the newly created banks. They can also be found in the important legislative changes. For example, in the U.S.A., these changes have to do with the Riegle Neal Act (1994) and the GLB (1999), while in Europe, they are related to the alterations in the banking law - which were approved by the E.U. - and the entering of Euros in the European market. Moreover, we can also consider the improvement of technology as another important factor that led us to this new reality, since it contributed to the improvement of the product distribution and to the way that bank transactions are carried out through the PCs. Besides, one should keep in mind the major contribution of the new situation to the increase of the value of capital.

Bank Mergers in Greece

In Greece, bank mergers are regulated by the provisions of the Article 16 of the Law 2515/25.7.97, as this Article has been complemented by the Article 12 of the Law 2744/25.10.99 and by the provisions of Articles 68-80 of the C.Law 2190/1920. After the merger has been approved by the Bank of Greece, the secretary of Development passes the judgement of approval, according to the legislative provisions concerning S.A.

As for the realized mergers and acquisitions among the Greek banks, it should be mentioned that, during the period 1998-2001, there were 16 buyouts or/and mergers within the Greek territory. …

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