The Merger Of Banks
A mental picture that is simple to formulate is the look on the
neighborhood mortgage banker's face if a would-be customer walked in
without warning and without proof of having any financial worth himself,
and proceeded to announce that he had found a property without any great
distinction, that may be somewhat structurally weak, possessed only
questionable appeal, was not in the greatest of neighborhoods. And for all
that great value and “exposure,” he wanted to offer only three or four
times its market value? Oh yes, he also wants to repeat the process the
following month with a different property.
The commercial, private or mortgage banker would summarily dismiss
the deranged soul, ...
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on a budget and within our means, they can always increase
their revenues simply by tapping their customers on their collective
shoulder for more input into their businesses to help pay for their
purchases while we also finance their business activities.
Sheshunoff Information Services reported that between July and
September, 1997, $23.2 billion was committed by banks and thrift companies
for the purpose of acquiring some of their competitors. During the spring
quarter, the bank acquisition budget was limited to $7.8 billion (Elstein,
1997). While banking certainly is not the only industry indulging in the
mad merger race, it does appear to be the largest in the country by most
estimates.
Houlihan Lokey Mergerstat of Los Angeles says that the total spent
by the financial sector alone for mergers and acquisitions for the first
nine months of 1997 totaled $145 billion, meaning that the first quarter
total was around was in the neighborhood of $114 billion. That $145
billion ...
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the earnings potential of some of these banks that
are so frequently being sold. Purchasers have still been paying an average
of 17.4 times more for the financial institution they are buying than they
can expect to receive in earnings. In 1996, that factor was 14.4 time
annual earnings (Elstein, 1997).
Of what causes the waves of activity in the bank merger arena, one
investment banker says that “You need a catalyst. Once one bank sells,
that usually triggers others in the area to make deals, too” (Elstein,
1997; p. 1). The banker's observation seems to hold true. When Wachovia
Corp. of Winston-Salem, N.C., announced that it was planning to buy a
matched pair of Virginia-based ...
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"The Merger Of Banks." Essayworld.com. August 18, 2006. Accessed April 20, 2024. http://www.essayworld.com/essays/The-Merger-Of-Banks/50979.
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