Banking merger 2000

Abstract

This paper deals with the issue of mergers and acquisitions in banking. It views the issue of M&A in the light of the current wave of strategic restructuring ushered by the integration of the European market, and presents a qualitative approach to decision making. A starting point for the discussion is to articulate the purpose for the existence of the financial intermediary as an alternative to the capital market. This analysis draws on the Coase classical conception on the origin and the nature of the firm and applies it to the financial services sector.

Further, the paper considers the main evolutionary trends in the financial intermediation process as it dictates the institutional structure of the financial firm and gives what Coase calls ` meaning to the question what do we mean by saying that the firm gets larger or smaller'. In this manner the M&A issue is approached from organizational perspective. This approach is articulated in a client-product-arena organizational model which views M&A as a global strategic positioning.

One major advantage of this model is that it puts focus on adaptability and is suited to long term strategic decision making. Such approach suits the objectives of management planning as it copes with the changing global market environment. The model's organizationally oriented structure accommodates for the changing nature of the banking industry as it heads towards the new millennium. The paper illustrates the usefulness of the client-area- product matrix as a management tool by applying it in the discussion of the merger between the Swedish SEB and the Danish Codan bank. It argues that this cross border venture can serve as a typical example of management thinking in cross border expansion for the coming decade.