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Houston & Ryngaert, 1994 Lend Support To Prior Research That Cannot ...

Houston & Ryngaert, 1994 lend support to prior research that cannot distinguish any significant cost reductions from large bank consolidations, after undertaking a study explicitly focusing on gains from large bank M&As based on data concerning acquisitions of publicly traded banks in the US market during 1985-91.
The possible motives for acquisitions in the Banking sector, or in any industry, are numerous and will needed to be presented in detail. For the most comprehensive review of this subject see Gaughan, 2002. The main thread running through all the research is that while the motives for acquisitions (and mergers) are numerous, the outcome for the shareholders of the companies is that for most target companies the economic value added or increase in return on the assets they own is significant(Amit, Livnat & Zarowin, ????). For those firms acquiring a company the gains are far less obvious. If it is a horizontal acquisition with geographical overlap and in a country where cost-cutting is acceptable, then there are some gains to be made. However, a large body of literature exists that tells us that for the acquiring firms shareholders the benefits in terms of improvement in profitability are hard to ascertain (Souder & Chakrabrarti, 1984; Katz, Simanek & Townsend, 1997). The desire to prove this
Hence, it is important that if conducting a successful acquisition is the aim for UK banking, careful attention must be paid to the motives for that acquisition and the strategic reasons for targeting a particular company. The only way to truly know the motives of an executive or management team is to ask them, but we must be very careful and specific how we go about it. Our main guide is previous European cross-border acquisitions and US inter-state (by that we mean in acquisitions made in different states) as a guide to potential acquisitions. This approach involves asking the right questions and verifying those answers against the statistical data, because often what managers say or intended to do can be at opposite end of the spectrum. The answers from past acquisitions will then give us a clue as to future intentions and allow us to assess their potential success.

(4) Problems
The Research Problem / The proposal should analyse the problem very well.
The main question of this study is:
The first problem is the small sample size in the UK. The scope to conduct any sort of quantitative empirical study, compared to for example a similar study made in the US (Banning, 1999), where there are hundreds of banks or in say Italy (Focarelli, Panetta & Salleo, 2002; Chionsini, Foglia & Reedtz, 2003), is very limited. In fact, it should be noted that nearly all the literature deals with the US banking M&A activity and hardly any in Europe, with exception of the two mentioned already in Italy and Vennet (1996) and Cybo-Ottone and Murgia (2000).


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