Eu Banking M & A Process, Motivation And Performance Evaluation

With the development of economic and financial globalization, the fierce competition in the finance industry, the relaxation of strict control as well as the progress of modern technology, the global banking industry has formed the fifth M&A tide since the 1990s. In the end of the 20^th century, EU banking industry reached the zenith of M&A, which was ascribed to the internal pressures and external motives. On one hand, due to the limited EU areas and intense competition, EU banking industry tended to expand and realize cross-board M&A; on the other hand, external environment supplied good opportunities for the M&A of EU banking industry, such as the construction of single financial market, the introduction of the Euro circular, the globalization of finance. Through a series of M&A, EU banking industry is featured with the pan-European bank, the international bank, the universal bank and the majority-owned bank.In order to test the efficiency of EU banking M&A during the period between 2004 and 2007 which is a new M&A tide, this paper makes use of the profit function by the method of Panel Data in a sample of 77 EU banks which were associated with M&A from 2004 to 2007. The results indicate that the newest EU banking M&A tide produce positive effects. In the context of the current financial crisis, though EU banking industry has been influenced, it is a great chance for EU banks to merge and acquire the banks in the other countries. As for the next wave of EU banking M&A, for one thing, combination among strong ones is an obvious character, especially the banking syndicate; for other thing, EU banks will reduce the number of M&A in the eastern European countries and pay more attention to the other merging market such as Asia.EU financial system is predominated by the banks and indirect investment, which is similar with the Chinese financial system for a long time. Through many years of reform, China banking industry has been possessed with modern banking characteristics and international competitive power, but lots of serious problems still exist in China banking industry. Effective banking M&A is the useful way not only for the losing banks to withdraw from the market but also for the banks which have a competitive advantage to expand market share as well as realize the scale economy and scope economy. Therefore, proper M&A strategy is the impetus for the reform of China banking industry.