Bank M&A in theory and practice

The main aim of this thesis is to introduce the banking sector when it comes to M&A. Banking is an extraordinary industry which has to be analyzed in detail because the process of M&A differs a lot from the procedure of analysis of other companies. The main parts in which banks are somewhat exceptional are financial statements, risks, and accounting rules. The sector also differentiates in the amount of regulation imposed on it. Additionally, there is a large distinction in valuation approaches as well. Nowadays, the banking sector still has not recovered from the last financial crisis. The valuation changed significantly as a result of the current environment. Compared to the multiples on which banks used to be sold, the investors’ appetite is currently much lower. In the view of the present economic situation influenced by geographical uncertainty, low interest rate, and slow economic growth, the opportunities on reasonable investments arise. The analyzed transaction of Merrill Lynch and Bank of America shows that the promises given to the shareholders by the management were not sincere. Many important facts were hidden. In the end, this resulted in huge expenses in the next years. Due to the high premium paid for the bank, the deal barely accomplished any of the set goals and did not create any value for the owners of Bank of America. In conclusion, based on the qualitative analysis, a transaction of a bank in a distressed situation requires a deep understanding of the target before any decision is made, mainly about the deal value.