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The effect of mergers and acquisitions on customer–company relationships:

Exploring employees’ perceptions in the Spanish banking sector

Article in International Journal of Bank Marketing · October 2019

DOI: 10.1108/IJBM-02-2019-0058

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Effect of M&A
The effect of mergers on customer–
and acquisitions on company
relationships
customer–company relationships
Exploring employees’ perceptions in
the Spanish banking sector Received 18 February 2019
Revised 23 July 2019
Paula Alvarez-González 21 August 2019
Accepted 22 August 2019
Universidade de Santiago de Compostela − Campus de Lugo, Lugo, Spain and
Ecobas Group,
Universidade de Vigo − Campus Lagoas Marcosende, Vigo, Spain, and
Carmen Otero-Neira
Ecobas Group,
Universidade de Vigo Facultad de Ciencias Economicas y Empresariales,
Vigo, Spain

Abstract
Purpose – The purpose of this paper is to explore employees’ perceptions about customers’ reactions to
mergers and acquisitions (M&A). In particular, the aim is to explore how M&A in the banking sector affects
the relationship between customers and the financial entity in a real-life context.
Design/methodology/approach – Using a case analysis methodology, this paper investigates the most
important cases of M&A that occurred between 54 retail banks and saving banks in the Spanish market
between 2009 and 2014. To do so, 36 face-to-face exploratory interviews were conducted amongst a sample of
employees selected through a purposive sampling technique.
Findings – The perceptions of the employees about the impact of the M&A on customer relationship
development suggest that financial M&A negatively affect prices, the location and closeness of the branches,
and the routines of the financial activity, and positively affect products and services offered after the M&A.
Research limitations/implications – Given that the objective is to explore perceptions rather than test
them, despite being insightful, the results of this study should be generalised with caution.
Originality/value – This paper explores customer responses and attitudes towards financial M&A from the
point of view of marketing. This paper considers the effect that M&A changes generate on consumer
satisfaction and bank−client long-term relationships.
Keywords Consumer behaviour, Mergers and acquisitions, Banking industry, Financial crisis, Global banking
Paper type Case study

Introduction
The global banking industry has undergone unprecedented changes in recent years, from
the modernisation and automation of banking operations to reconfiguration through bank
mergers and acquisitions (M&A) (Csikósová et al., 2016). Mergers refer to the
consolidation or unification of two organisations into one economic entity, whereas
acquisitions involve purchasing the assets and stock of the target company (Koi-Akrofi,
2016); both operations have substantially transformed the business landscape. The impact
of the financial crisis and the ensuing consolidation pressures caused a number of global
players to emerge through successive M&A (Amel et al., 2004; Farah, 2017a, b; Hoedl and
Ruiz-Cámara, 2011; Lambkin and Muzellec, 2008; Pérez-Montes, 2014; Urban and Pratt,
2000). Between 2007 and 2016, more than 14,000 M&A were recorded in the banking
industry worldwide (IMAA, 2017). International Journal of Bank
Marketing
Financial entities are primarily motivated by efficiencies, cost reductions, minimising © Emerald Publishing Limited
0265-2323
bureaucracies, strengthening margins and core business strengths, maintaining and DOI 10.1108/IJBM-02-2019-0058
IJBM enhancing their competitive advantage and/or enhancing their monetary stability (Akkus
et al., 2015; Farah, 2017a; Hoedl and Ruiz-Cámara, 2011; Swaminathan et al., 2008). The
financial process of consolidation has mainly occurred through horizontal, friendly and
domestic M&A (Colombo and Turati, 2014; Moschieri and Campa, 2009). That is, it is
characterised by M&A between banks more than by M&A between banks and other
financial institutions, such as insurance companies (Lambkin and Muzellec, 2008). The
majority are friendly or neutral, implying the approval of the administration or the board of
directors of the target company (Moschieri and Campa, 2009). M&A have affected a large
number of countries such as Italy (Colombo and Turati, 2014), Portugal (Machado et al.,
2012), Malaysia (Sufian et al., 2012), India (Monika, 2014), Greece (Konstantopoulos et al.,
2009) and Spain (Pérez-Montes, 2014).
M&A have the potential to benefit all parties involved. They can enhance banks’
efficiency, allow for greater value creation through cost and revenue synergies (economies
of scale and scope and/or market power) and better management of assets (DeYoung et al.,
2009; Farah, 2017a; Focarelli and Panetta, 2003; Sufian et al., 2012). In addition, M&A may
benefit customers since the cost savings may be reflected in lower or more favourable prices
(Focarelli and Panetta, 2003; Kim and Finkelstein, 2009), whilst customers may also benefit
further via receiving more services or an improvement in service delivery (Urban and Pratt,
2000). However, as DeYoung et al. (2009, p. 88) suggest:
Despite general agreement on the broad forces driving consolidation and M&A in the financial
sector, there is little consensus regarding this consolidation on industry performance. For example,
the extant literature provides no consistent evidence regarding whether, on average, the
participating financial firms benefit from M&A, whether the customers of these firms benefit, or
whether societal risks have increased or decreased as a result of this activity.

Accordingly, the main objective of this research is to provide evidence of the effect of M&A
on customers within the financial sector.
The topic of M&A and consumers’ reactions has attracted the attention of
marketing researchers who have based their investigations on frameworks such as the
resource-based view (Homburg and Bucerius, 2005), balance and information processing
theories (Andrews, 2008) and the theory of planned behaviour (Farah, 2017a, b).
These investigations suggest that, in the context of M&A, there is a need to consider the
marketing perspective (Christofi et al., 2017; Rahman and Lambkin, 2015; Yu, 2013), not
least with respect to retaining clients and measuring their reactions to M&A (Dalziel, 2007;
Degbey, 2015; Farah, 2017a; McLelland et al., 2014; Thozhur et al., 2007; Zollo and
Meier, 2008). However, there is still insufficient research in this domain (Börjeson and
Pettersson, 2009). As noted by Christofi et al. (2017, p. 630): “A more grounded
understanding of the M&A concept in the marketing and consumer behaviour disciplines
is, therefore, clearly needed in the interests of academic knowledge and marketing
practices”. Therefore, and particularly in the context of financial institutions (Farah,
2017a; Focarelli and Panetta, 2003; Urban and Pratt, 2000), understandings of how
changes in customer–company relationships are affected by the integration process after
an M&A is limited (DeYoung et al., 2009), and marketing researchers can address this.
In particular, the relational marketing approach (Berry, 1983) might help to better
understanding the impact of M&A on long-term relationships in service industries, such
us the banking sector.
The concept of relationship marketing emerged in the 1980s and represents a paradigm
shift in marketing (Olavarría-Jaraba et al., 2018). Marketing from a relational perspective
requires firms to offer more resources and activities than a core product to satisfy their
customers (Grönroos, 1997). It includes marketing strategies and tactics designed to gain
customers’ share of wallet (Sheth, 2017). From a business point of view, this implies that all
the activities and strategies that the company designs, including the marketing mix, seek to Effect of M&A
achieve and influence the satisfaction and loyalty of clients. on customer–
The process of M&A involves three main phases: the precombination phase when a deal company
is conceived and negotiated by executives and then legally approved by shareholders and
regulators; the integration or combination phase when combined company planning ensues relationships
and integration decisions are made that enable companies to consolidate and the
postcombination phase when implementation occurs and people settle into their new roles
(Marks and Mirvis, 2015).
These ideas provide the basis to understand how any change in the marketing mix
offered by companies, such as those related to the integration of companies in a M&A, will
influence the satisfaction and, as a consequence, reaction of consumers that ultimately
will affect M&A success (Mittal and Jain, 2012; Zollo and Meier, 2008).
Findings from research on relational marketing and M&A are markedly heterogenous
(Degbey, 2015; Farah, 2017a, b; Kato and Schoenberg, 2014; Machado et al., 2012; McLelland
and Goldsmith, 2014; McLelland et al., 2014; Öberg, 2014; Thorbjørnsen and Dahlén, 2011).
Despite the potential of M&A, some research based on anecdotal and empirical evidence
suggests that consumers tend to react negatively to M&A, manifested through increasing
their intentions to switch brands (Thorbjørnsen and Dahlén, 2011). Other studies suggest
that consumers have different reactions, ranging from positive to negative, depending on
factors such as the valence (positive or negative) of the merging brands (McLelland et al.,
2014; Jaju et al., 2006), attitude towards the business (Farah, 2017a) and perceived control
over their behaviour (Farah, 2017b). Finally, some research indicates that sales revenues
grow after an M&A (Rahman and Lambkin, 2015).
In summary, to better understand the effect of M&A on consumers, and considering the
view of relational marketing, we focus on the banking industry, a very active sector in terms
of M&A phenomena and processes. This paper aims to improve the knowledge base on
this issue by analysing the effect of an M&A considering different marketing aspects:
products and services, prices, sales channels and brands. As far as we know, previous
research in this domain has only focussed on analysing one marketing aspect at a time, such
as brands ( Jaju et al., 2006; Lambkin and Muzellec, 2008; Liu et al., 2018; McLelland et al.,
2014; Ettenson and Knowles, 2006), prices (Focarelli and Panetta, 2003) or sales channels
(Palmatier et al., 2007). Moreover, this research is carried out on real cases with post hoc
information, which increases the credibility and reliability of the data.
In what follows, a review of the relational marketing literature in the context of M&A is
put forward and the research questions are derived. Then we present the methodology
section and the main findings. Finally, some practical implications and future research
directions are presented.

Literature review
Relationship marketing and M&A
Relationship marketing should become the basis of banks’ marketing strategies
(Olavarría-Jaraba et al., 2018; Turnbull and Gibbs, 1987). From the relational marketing
point of view:
Marketing is a customer focus that permeates organisational functions and processes and is geared
towards making promises through value proposition, enabling the fulfilment of individual
expectations created by such promises and fulfilling such expectations through support to
customers’ value-generating processes, thereby supporting value creation in the firm’s as well as its
customers’ and other stakeholders’ processes. (Grönroos, 2006, p. 407)
In this process, only when customers decide whether they have or want to have a
relationship with a firm (Grönroos, 2006), companies and customers commit resources such
IJBM as time, money and capabilities to establish a relationship of interdependence between both
parties (Sheth, 2017).
M&A are critical moments in the relationships between companies and their customers i.e.
the process not only influences the relationship between the companies involved (Anderson
et al., 2003; Havila and Salmi, 2000). The nature (positive or negative) of the impact of the
M&A on the relationship between the company and its clients will depend on the scale and
scope of the changes that occur in the integration phase (Havila and Salmi, 2000).
The customer’s reaction to these changes may be positive or negative (Bocconcelli et al.,
2006) and cause their relationship with the company to change, not change, be dissolved or
be created (Öberg, 2008). Therefore, depending on their degree of satisfaction with the
changes that occur during the M&A, clients can react and support the M&A or, by contrast,
they might not be interested in maintaining a relationship with the new party (Öberg, 2014).
On the one hand, M&A has significant potential to benefit customers. For example, M&A
bring a natural opportunity to re-evaluate and even improve the overall customer experience
(Miles and Rouse, 2011), possibly and plausibly providing customers with a better and wider
range of services (Majumdar et al., 2013), which can enhance the firm’s reputation and provide
added convenience to customers, e.g. “one-stop shopping” (Kim and Finkelstein, 2009, p. 628),
and even lead to more favourable prices for consumers (Focarelli and Panetta, 2003).
On the other hand, studies suggest that M&A can upset consumers and cause them to
react negatively (Homburg and Bucerius, 2005; Öberg, 2008, 2012; Sikora, 2005; Thorbjørnsen
and Dahlén, 2011). For instance, changes can cause clients to lose their trust, loyalty and
commitment and, finally, discontinue their relationship with the company (Öberg, 2008;
Thorbjørnsen and Dahlén, 2011). Authors such as Bekier and Shelton (2002) report that there
is a considerable risk of losing consumers in M&A which thus poses a serious problem for
merging institutions due to the potential increase in costs and the negative influence on
revenues (Farah, 2017a, b). In the financial sector, evidence suggests that M&A do not benefit
customers. For example, Miles and Rouse (2011) stated that the acquisition of CoreStates
Financial by First Union Bank resulted in losing 20 per cent of its customer base in the first
year. Further, Thornton et al. (2004) noted that the purchase of First Chicago NBD Corp. by
Banc One entailed the loss of clients due to the closing of dozens of branches, weakened ability
of bank tellers to solve customers’ problems and failure to adequately integrate the two bank’s
computer systems. In the context of Spain, Carbó Valverde et al. (2011) suggested that after the
reorganisation of the banking sector, the probability of customers switching financial entities
increased by 3 per cent. Additionally, a report by J.D. Power and Associates (2009) showed
that the likelihood of customers switching to other financial institutions increases by up to
three times after a merger takes place because acquiring institutions are far less focussed on
customer interests and personal service than their previous bank. Along the same line,
Deloitte (2010) indicated that 17 per cent of customers switched banks directly after a merger,
while another 31 per cent expressed a tendency to switch within one year following the
merger. Furthermore, based on a sample of 1,002 consumers, Sikora (2005) found that overall,
52 per cent of consumers believe that they do not benefit from M&A; just focusing on the
banking sector, 69 per cent of consumers felt this way because post-merger effects (e.g. closing
branches, cutting jobs and changing brands) are highly visible for consumers.
Thus, understanding how M&A impact consumers is important because negative reactions
to M&A may affect integration realisation and could contribute to explaining the low rates of
success and the underperformance of firms following the M&A (Christofi et al., 2017; Miles and
Rouse, 2011; Mittal and Jain, 2012; Öberg, 2008; Thorbjørnsen and Dahlén, 2011).

Effect of M&A on company–customer relationships

In the banking sector we understand that customers have a relationship with the supplier of
financial services and they sign contracts to secure those services. The customer relationship
is based in the firm proposition that includes the products, ideas, services, information or any Effect of M&A
type of solution, delivered to customers. on customer–
In the M&A context, the integration phase allows companies to reconfigure their company
product/service mix, their sales offices and distribution channels or their brands in a
more effective way. Particularly in horizontal M&A (combining companies within the relationships
same industry) (Rahman and Lambkin, 2015), it is likely that similarities between banks
generate redundancies (Mitchell and Shaver, 2003). Consequently, M&A could involve
changes in variables that are related to the customer such as the number of purchase
alternatives (Narver, 1969); the breadth and depth of the product/service portfolio
(extended vs limited); prices, commissions and rates (increased vs favourable) (Anderson
et al., 2003; Mittal and Jain, 2012); the routines of financial activities (schedules, reducing
or changing personnel); and the number of sales channels (extended vs limited) (Focarelli
and Panetta, 2003; Homburg and Bucerius, 2005). Thus, the attributes from which
customers evaluate the quality of the financial product are modified and affect the basis of
the initial company–customer relationship.
Based on the foregoing, our first research question is as follows:
RQ1. Do M&A in the financial sector affect company–customer relationships?

Banks’ products and services

The offer and availability of a full range of products and services (mutual funds,
international payments and so on) is one of the decision criteria that clients use to select a
financial institution (Focarelli and Panetta, 2003; Javalgi, 1992) and to evaluate its quality
(García de los Salmones et al., 2009). The M&A integration phase may result in an increase
in the breadth or an extension of the product/service portfolio (Urban and Pratt, 2000;
Anderson et al., 2001; Hoberg and Phillips, 2010; Kato and Schoenberg, 2012; Kato, 2012).
In addition, when two banks with different portfolios merge, the combined entity could put
forward a more comprehensive product/service offering that not only improves the
reputation but could also simplify the purchasing process for those clients who previously
did business with both companies (Anderson et al., 2003; Focarelli and Panetta, 2003;
Kim and Finkelstein, 2009). By increasing the customer’s choice or simplifying his/her
purchases, integration of products/services could potentially result in improved overall
quality of the product line, positively influencing customer satisfaction and loyalty and
increasing the firm’s incomes (Capron and Hulland, 1999; Swaminathan et al., 2008).
However, firm consolidation could also result in diminished product/service availability
(Waddock and Graves, 2006), limiting the client’s choices, rendering the company less
attractive and eliciting a negative reaction (Anderson et al., 2003; Homburg and Bucerius,
2005). These considerations motivate the second research question posited in this study:
RQ2. Do consumers’ reactions to M&A, favourable or unfavourable, change according to
the availability of financial products/services after the M&A?

Prices, rates and commissions

The integration of firms after an M&A usually involves adjusting prices/rates of the
offered products/services pursuant of harmonisation (Focarelli and Panetta, 2003). In the
banking sector, changes in prices could reflect effects of improved efficiency (Prager and
Hannan, 1998). In this way, the reduction in costs could be passed on to customers in the
form of lower prices for the offered products and services, improving the perceived
value while attracting more customers (Fee and Thomas, 2004; Kim and Finkelstein, 2009).
However, the literature shows that after the M&A, the prices of products/services
tend to increase (Anderson et al., 2001, 2003; Dalziel, 2007; Focarelli and Panetta, 2003;
IJBM Havila and Salmi, 2000; Prager and Hannan, 1998; Urban and Pratt, 2000). In this regard,
Ashenfelter and Hosken (2008) found that four of five analysed mergers resulted in
increases in consumer prices between 3 and 7 per cent. The perception of an increase in
prices and rates has been identified as a potential source of dissatisfaction that could lead
to the defection of customers in the banking sector (Gerrard and Cunningham, 2004;
Vazifedoost et al., 2013). These arguments are considered in the next research question:
RQ3. Do consumers’ reactions to the M&A, favourable or unfavourable, change
according to the prices of financial products/services after the M&A?

Sales channels
Banks’ coverage of their respective local markets, with their office networks, is an important
factor related to the quality of the services they offer (Focarelli and Panetta, 2003). M&A
offer the companies involved an opportunity to review tactical, operational and strategic
decisions related to the management of sales channels (Palmatier et al., 2007).
One way of enhancing customer value by M&A is through broader market coverage
(Capron and Hulland, 1999). On the other hand, during M&A, the closing of overlapping
offices and the transfer of affected clients to the closest branch is an important means of cost
cutting (Focarelli and Panetta, 2003). This change in the location of the client’s usual branch
may have a negative effect, since the location and proximity of the bank to home and/or
work is a major determinant of bank choice, as well as one of the most important
determinants of banking service quality (Focarelli and Panetta, 2003; Lewis, 1991). If the
M&A negatively affects these two variables (location and proximity), service quality may
also be affected and, consequently, cause a negative reaction by the consumer. These
considerations motivate the specification of the fourth research question:
RQ4. Do consumers’ reactions to M&A, favourable or unfavourable, change according to
the location and proximity of their nearest bank branch after the M&A?
The quality of banking services also depends on the routines of financial activities. The
amount of time it takes customers to perform bank operations ( from the time they enter the
branch until the time they leave) is an important determinant of service quality (Focarelli
and Panetta, 2003).
M&A could offer high value to consumers through quicker service and better quality by
virtue of an extensive branch network or a large number of staff (Focarelli and Panetta,
2003). However, closing branches and reducing the number of employees per branch after
M&A could increase queues and waiting times, consequently causing a negative reaction by
the consumer. These arguments lead to formulation of the following research question:
RQ5. Do consumers’ reactions to the M&A, favourable or unfavourable, change
according to routines of the financial activity after the M&A?

Brands
Financial entities that have decided to be involved in an M&A face the task of realigning their
brands (Lambkin and Muzellec, 2008) and must decide which brand name to adopt to
represent the combined company. The banking restructuring process has led to the emergence
of new brands that integrate different cultures and subcultures (Bravo et al., 2012).
There are different strategies for branding in M&A contexts, each of them has some
potential to benefit customers (Ettenson and Knowles, 2006). For example, customers of the
target firm may enjoy benefits of dealing with a larger company, when brand strategy after
the M&A retains a connection with the familiar and establishes a new beginning with a new
symbol, for example, it heightens expectations of something nascent and different, as the Effect of M&A
best of both merged companies. on customer–
Changing a brand name suggests the loss of all the values of the old name; in addition, it company
potentially nullifies all the years of effort expended in the construction of the brand and the
identity of the entity, and therefore, “could damage or even destroy their equity” (Muzellec relationships
and Lambkin, 2006, p. 804). Furthermore, brand strategy should emphasise the continuity
and connection of the company with its external environment and maintain an emotional
link, a positive feeling and the identification between the company and the client. If the
brand integration strategy eliminates that brand, it runs the risk of losing that link
(Ettenson and Knowles, 2006; Mishra, 2018).
Summarising these ideas yields the sixth and final research question:
RQ6. Do consumers’ reactions to the M&A, favourable or unfavourable, change according
to the rebranding strategy after the M&A?
In summary, there appears to be a compelling need for research into various facets of M&A
processes and phenomena from a marketing perspective. M&A might have both negative
and positive outcomes on marketing-related issues such as products and services, prices,
sales channels (location and proximity and routines) and brand strategy (Figure 1).

Methodology
The research methodology employed takes into account that M&A dynamics are a function
of the country, industry and time period considered (see e.g. Amel et al., 2004; Kim and
Finkelstein, 2009). As such, herein, focus is placed on one country, Spain; one industry, the
banking sector; and the wave of M&A that took place between 2009 and 2014. In this period,
54 Spanish banks were involved in 12 restructuring processes (Table I).
In view of the complexities and contingencies surrounding M&A and marketing, we
devised a qualitative methodology employing semi-structured interviews to collect data
(Farah, 2017b). The number of interviews should be large enough to identify patterns but at
the same time should be small enough to be administrated by the researchers considering
required time and cost (Kato, 2012). Ergo, we opted to undertake at least two interviews for
each 1 of the 12 M&A processes. The criteria for interviewees’ selection included willingness
to participate in the study, salient knowledge and understanding (regarding processes and
dynamics associated with M&A integration) and they must be in contact with customers.
After approaching bank employees using a purposive sampling technique, a total of
36 face-to-face interviews were conducted with, specifically, a CEO (1), office managers (19)
and assistants (16). This is consistent with Angwin et al. (2016) wherein it is suggested that

Company–customer relationship

Products and services (RQ2)

Prices, rates and commissions (RQ3) Location and

M&A closeness (RQ4)
integration
Sales channels Figure 1.
A conceptual
framework of
Brand strategy (RQ6 ) Routines (RQ5) company−customer
relationship in M&A
IJBM M&A Entities

BBVA BBVA; UNNIM (Caixa Sabadell, Caixa Terrassa, Caixa Manlleu); Catalunya Banc (Caixa
Catalunya, Caixa Tarragona, Caixa Manresa)
Santander Banco Santander; Banesto; Banif
Caixabank La Caixa; Caixa Girona; Cajasol (Cajasol, Caja Guadalajara): Banca Cívica (Caja Navarra,
Caja Burgos, Caja Canarias); Banco de Valencia
Bankia Caja Madrid; Bancaja; C. Insular de Canarias; Caixa Laietana; Caja Ávila; Caja Segovia
ABANCA NovaGalicia Banco (Caixanova, Caixa Galicia); Banco Etcheverría
Banco Sabadell Banco Sabadell; Banco Guipuzcoano; CAM; Banco Gallego
Banco Popular Banco Popular; Banco Pastor
Unicaja Banco Unicaja (Unicaja, Caja Jaén); Banco CEISS (Caja España, Caja Duero)
Kutxabank Cajasur; BBK; Kutxa; Vital Kutxa
Table I. BMN Caja Murcia; Caixa Penedés; Caja Granada; Sa Nostra
Spanish M&A Ibercaja Banco Banco Caja 3 (Caja Inmaculada de Aragón, Caja Círculo de Burgos, Caja de Badajoz); Ibercaja
(2009−2014) Liberbank CCM; Cajastur; Caja de Extremadura; Caja Cantabria

interviewing staff from various functions allows for an assessment of the situation from a
broader perspective. In total, 22 of the interviewees had been working for the company for
more than 15 years whilst 13 had tenure lengths between 5 and 15 years. All interviewees
had been directly involved in their bank’s M&A experience. We collect information from
both viewpoints, i.e. the acquiring (33 per cent of interviewees) and acquired companies
(67 per cent of interviewees). The interviews were conducted in the following Spanish
regions: Galicia, Extremadura, Comunidad Valenciana, Cataluña, Castilla and León over a
period of five months (December 2014–May 2015).
All interviews commenced with a presentation to explain the purpose of the study and
confirm interviewees’ consent to participate. Throughout the research process, from the
choice of topic through to the development of the interviews, we acted in accordance with
prevailing ethical principles to protect the rights and well-being of those investigated.
Respondents were assured confidentiality and anonymity with a guarantee that their
personal information would not be attributed to any quotes (Angwin et al., 2016). They were
also clearly informed of the use that would be made of the data they supplied (Myers, 2013).
After the presentation, a semi-structured interview protocol was devised based on the
M&A and the marketing literature (Christofi et al., 2017; Yu, 2013) and the study of human
capital in M&A developed by Pisón et al. (2001), was followed. Following Yin (2003), the
protocol was drawn up to maximise reliability, i.e. to ensure that the operations and
procedures of the study could be replicated and the same results would be obtained. This
protocol delineates the research design as well as the rules to be followed throughout the
data collection. First, some preliminary questions were asked to capture employees’
knowledge of M&A integration in general. The respondents were then encouraged to openly
discuss the following questions: what do you believe are the reasons why the M&A occurred
in the case of your bank? How has M&A integration affected you? How do you believe the
M&A has affected customers? Do you consider that bank managers take customers into
account when making decisions? What do you believe are the marketing variables (brands,
products, prices and sales channels) that have been affected by the integration and how?
How have customers reacted to the M&A from your point of view?
Taking into account the fact that the desired information refers to a past time, the
research was developed retrospectively (Kato and Schoenberg, 2014). When it was possible,
the interviews were recorded with the consent of the interviewees. The duration of
the interviews varied between 30 and 60 min, and digital recordings were transcribed by the
authors and analysed thematically by research question. The data were coded
systematically and, to avoid common method bias problems, data triangulation was
employed (Yin, 2003) by collecting data from two separate sources to reduce the need for Effect of M&A
statistical remedies (Podsakoff et al., 2003): secondary data on what the companies did on customer–
(news, press releases, corporate websites, annual reports of the banks involved and company
companies’ announcements) and primary data collected through the interviews with the
companies’ personnel. relationships

Findings
In what follows, we have opted for joint analysis of cases in which entities names are
switched for randomly assigned numbers. This guarantees anonymity of the surveyed
employees and analysis of the most interesting information pursuant of representative
understandings of empirical realities (Yin, 2003).

M&A and company–customer relationships

The documentary review and the data garnered from the interviews indicate that the
Spanish financial landscape has undergone an unprecedented change. One of the main
effects has been the concentration of entities. Although M&A have served to address the
excessive fragmentation of the sector, the main effect on customers is the restriction of
choice alternatives: “[b]efore they had many more banks to go to hire a service”.
In addition, these processes have resulted in the elimination of a type of financial
institution, the savings banks. Respondents detailed the M&A process and its effects,
such as:
From the Banco de España[1] it was said that the Spanish banking sector should be integrated by
bigger banks resulting in less of the small saving banks. It was intended that there would be
entities which were more powerful but fewer in number and that the saving banks should merge
[…] to create large banks. In theory, this would be better for the client, because the resulting banks
would be more solvent.
Savings banks had been set up to promote and protect savings and facilitate access to credit
for the most disadvantaged in society. They were entities that operated with lower margins
and were not subject to short-term pressures of the capital market and its shareholders. The
simplicity of their business and their roots in the local community gave them an important
role in social development and in the fight against social exclusion. Then, through M&A
“new entities were created with different objectives from the previous ones”. “Clients (of the
savings banks) had to move from a small entity to a new one”, however, “this was an
imposed decision in which clients of the integrated entities were not asked if they wanted to
be part of that new entity”.
Banking integration has not affected all entities or their clients equally. Indeed, two
main groups can be distinguished in this respect: the absorbing/acquiring entity and
absorbed/acquired/non-core entities. The former are those that contribute, in most cases, to
the culture, the operating systems and the way of working of the resulting entity. While
the latter are those that “suffer” the changes and must adapt and integrate into the former.
One interviewee stated that “the buyer’s policy was followed”. Another noted that a merger
was framed as being “between equals, but in reality one entity contributed most to the group
and predominated”. Also, another interviewee declared that the integration process
“includes the consolidation and the development of the commercial management model,
processes, quality policies and tools of the main entity in the offices of the integrated
entities”. In another case, the purchasing entity has imposed its philosophy of “a single
entity, large, strong and unified”. Another interviewee stated that “there have been no
changes, the rest of the entities have had to integrate and adapt to it”.
In terms of our RQ1, the similarity between firms’ strategies, operatives and offers in
terms of the customer needs that they satisfy has caused numerous changes in
IJBM bank–customer relationships. The case analysis clearly indicates that M&A in the financial
sector and their subsequent changes have affected all customers. In addition, in terms of the
customers of non-core entities in the M&A, the effect of the concentration is even greater
since these customers have had to adapt their way of working and interact with the bank
with respect to new guidelines.

M&A and banks’ products and services

The integration of products/services implies making decisions about which products are
maintained/eliminated or modified after the M&A. As was anticipated in RQ2, consumers’
reactions to the M&A differ depending on what decisions were taken. Respondents
indicated that customers of absorbed entities have noticed changes: products/services,
contracted conditions or “the nomenclatures in the bankbooks were different”. However, “[t]
he process of change was made automatically and transparently for the client, where the
entity was responsible for changing the direct debit of the receipts”. “Customers did not
have to do anything”.
In general, employees perceive that integration has been beneficial for the clients of the
integrated entities, because clients now have “more diverse, innovative and modern
products, more security, more personalised customer support, a greater emphasis on the
quality of customer services and better schedules”. Moreover, it was indicated that
the integration meant “the cross-selling of new products and options to be contracted with
the collaborating entities of the Group, greater offers in terms of debit and credit cards and
new programs”.

M&A and banks’ prices, rates and commissions

In terms of RQ3, based on the evidence from the interviews, customers’ reactions are
contingent on the prices of financial products/services after the M&A. In general, the
integrated entities have undergone changes in prices to adapt to the main entities.
However, price changes “have not been abrupt”, but have been “gradual” for the previous
clients. For new clients, all the conditions were grouped into one (prices, commissions and
rates). In comparison to before the M&A, “some commissions have increased, new ones have
appeared that were hitherto not there, others were maintained and others disappeared”.
The objective was that all “commissions, prices and rates were homogenised during the
integration process until reaching a single offer”. The increase in commissions and expenses
“generated customer complaints, since they are very sensitive to price changes” and
customers perceived that “the increase in commissions did not justify the potential
improvement in the conditions of the products or services”.
Price changes have a greater impact on consumer reactions than changes in other
variables. For example, one of the interviewees pointed out that a client had said that “as
long as the commissions do not change, I do not care if the bank’s name changes”.

M&A and banks’ sales channels

Based on the evidence collected herein, the RQ4 related to location and closeness has
been explored. The processes of bank M&A have been accompanied by a rationalisation of
the presence of the entities, due mainly to the coexistence, duplicity or even triplicity of
bank offices. This is particularly salient in the regional context while in the case of M&A
between entities that operated in “different areas of Spain, the closing of offices has not been
so great”.
The closure of offices has not only been imposed for reasons of the M&A but also as an
obligation imposed by Brussels[2]. To obtain public financial assistance, entities had to
reduce their investments and offices and focus on their areas of origin. Thus, all the cases
analysed reveal a reduction in the number of bank offices in terms of both the main Effect of M&A
and the absorbed firms. Between 2009 and 2015, more than 20,000 bank branches closed on customer–
(55 per cent) (Editorial Maestre Ediban, 2019). company
The decision as to which offices are to be closed is based on three principal
considerations: “size, location and costs”. In this way, aspects such as “the ownership or relationships
rental of the office or the useful surface by number of clients” have prevailed in the choices
made. These offices disappear or are “merged with the nearest office, in which workers from
the previous entities coexist” and to which “clients from the previous office” are transferred.
This has affected customers in a negative way. As indicated by one interviewee
“customers have been affected by the closure of offices. Many customers have left,
especially older people who were used to going to the office almost every day. Young
people who are more prone to using telephone banking and online banking have not been
impacted to the same extent”. In another case, an interviewee stated that “many clients
have left, especially older people who have transferred their accounts to the office below
his/her house”. That is, the closure of offices after the M&A has resulted in “the loss of
proximity for clients” in terms of them no longer having access to an outlet near their
home, workplace and so on. Another of the respondents spoke of “financial exclusion that
has meant the closure of offices where the objective is no longer to serve customers but the
income statement”.
Regarding routines of the financial activity, the number of clients per office has increased
and this has also negatively affected customers who after the M&A “suffer delays, queues,
worse attention”. One respondent indicated “[y]ou have more offices and clients but fewer
employees, so attention is sometimes difficult”. In another interview, an employee stated “we
do not have time to serve customers; we cannot offer the quality they want”. Also, in another
case “there are now fewer employees but the workload does not decrease”.
Although several offices have been closed and in some cases this has affected customers,
“the number of offices of each global entity has increased”, since the integration allows “all
customers to have the same products and services of the entire network of offices”. That is,
“the reduction in the number of offices of some entity is complemented by the possibility of
carrying out operations in the offices of other entities without commissions or expenses”.

M&A and banks’ brands

In terms of RQ6, post-M&A brand strategy differs between cases. Evidence shows
divergent strategies in regard to the emotional connections between clients and brands.
There are two main strategies use of a single brand integration strategy for the entire
territory or use of various brand integration strategies depending on the territory (zone of
origin/core vs expansion zone). In addition, in one of the cases, after the M&A, the brands of
the absorbed entities were retained but accompanied by the image/logo of the principal
entity. This is an intermediate strategy that favours a gradual trajectory towards total
integration. Also, in another case the integration phase gave rise to a new name “own, easy,
direct and dynamic”, which would identify the entity throughout the territory. To reach it,
“at the beginning each brand was retained for a short period with the new brand, the logos
were maintained […] until its full integration”. “The logo of the absorbed entity did not
disappear straight away, the change was much later”. “It was a gradual process; it took one
year”. The elimination of the initial brands caused dissatisfaction amongst employees and
clients: “[t]he brand has disappeared, the identification of the person with the entity, and
people got very upset, many clients left”.
Another interviewee indicated that the creation of a new name:
[…] has affected the image and corporate culture of the company. For many customers who were
very identified or trusted in the entity, this has meant a decrease in the valuation of the image.
IJBM Other interviewees offered the following opinions:
“[c]ustomers are identified with the absorbed entity, so it is good to keep the brand so that
customers and employees feel integrated in the merger”; “[t]he previous brand is a reference here,
therefore, I do not think they will change it. The customers recognise the new brand but they
remain identified with the previous brand”; “[i]n the historic areas of the entity the brand has not
been changed, they know that a change in it could mean a loss of confidence”.
In sum, most brands have changed after the M&A and lots of them have disappeared.
In other cases, the emotional connection between brands and clients influenced the brand
strategy. Entities use the brands of the banks that were part of the group together with the
logo of the acquiring entity in their territories of origin for the “roots, history, significance,
contribution” and to respect the “commitment with its traditional customers, with the
families and companies of its territory”. After different acquisitions, in one case, the main
brand coexists with joint brands created after the integration of the different entities
according to the area in which the previous entities operated: “[t]he objective of this strategy
is to link with the traditional territory and maintain the differentiated personality of the
acquired banks”. In another case, after the merger of both entities, it was decided to keep the
commercial brand of the absorbed entity “for its positioning and importance”.

Discussion
This study was designed to examine reactions of customers to M&A situations from the
perspective of employees. Following the line of previous research (Farah, 2017b) by
addressing the impact of M&A on customers in real M&A banking contexts, this research
contributes to increasing knowledge regarding the M&A integration process and
customers’ reactions after the M&A through the analysis of different marketing variables.
The focus and timing of the study were carefully chosen to be salient in terms of the
realisation of M&A processes and phenomena. The study distils the results of 36 face-to-
face interviews with companies’ personnel to avail of primary information and data on
their strategic thinking at the time of 12 bank mergers that took place in Spain between
2009 and 2014.
Results reveal several interesting trends. As banks and financial markets move
through periods of stability and crisis, financial institutions restructure themselves
through M&A and consumers change their behaviour and attitudes. In line with previous
studies (Christofi et al., 2017), our results show both negative and positive outcomes of
M&A on marketing-related issues. As pointed out by Swaminathan et al. (2008), horizontal
M&A enable merged firms to eliminate less efficient management, achieve economies of
scale, charge higher prices, achieve higher distribution clout, offer greater product variety
and reduce competitive activities. This is beneficial for the company, but often, not so
much for the customers.
The results indicate that financial M&A have caused a negative impact on competition in
the sector. Horizontal bank mergers remove competition between companies by taking over
another company that produces and sells the same or similar products in the same
geographical area. From the point of view of customers, this is negative because this limits
their choice alternatives. In addition, consistent with previous research (Focarelli and
Panetta, 2003), results herein suggest that M&A have negatively affected prices. Sales
channels have also been negatively affected. The number of branches has been reduced by
more than 50 per cent, affecting the location and proximity of branches to customers. With
the closure of offices, M&A led to the dismissal of staff and the number of clients per office
increased. All have had negative impacts on financial activity routines.
In general, and in line with previous research (Capron and Hulland, 1999; Swaminathan
et al., 2008), our results show that financial entities try to capture value in the M&A through
their portfolio by offering more and better products and services after the M&A. Finally, in Effect of M&A
those cases where emotional connection between customers and brands were considered on customer–
while making branding decisions, customers benefited via better reputation and maintained company
their confidence and commitment (Ettenson and Knowles, 2006), and firms could thus
enhance the value of the deal (Lambkin and Muzellec, 2008). relationships

Limitations and future research

This study is not without its limitations. A key limitation of the approach is recognised to be
the imperfect sample (in terms of size and the methodology for sampling interviewees)
which reduces the ability to generalise the findings. Further, the temporalities and
subjectivities of the data collection method – based on interviewees’ retrospective memories
with potential issues because of the influence of social desirability bias – are not
unproblematic. However, this is an issue that affects face-to-face interviews more generally
(Farah, 2017b) rather than being specific to this study.
Despite these limitations, it is expected that the findings and interpretations offered in
this study provide useful insights on those variables that affect customers after the M&A.
Until now, M&A have not been a particular focus of marketing scholars (Christofi et al.,
2017) and marketing is not the first functional area to enter managers’ mind when they think
of M&A deals (Yu, 2013) despite the importance of marketing-related issues for M&A
performance (Homburg and Bucerius, 2005; Thorbjørnsen and Dahlén, 2011).
M&A cause changes in business networks in the financial sector. It would be interesting
to compare these results with other sectors to investigate whether and the extent to which
identified trends are valid in cross-sectoral terms. Other sectors to consider include electric
power (Kwoka and Pollitt, 2010), higher education (Pinheiro et al., 2016) and food retailing
(Wood, 2013).
Future research should focus more on the ways marketing could minimise the negative
consequences that occur from M&A activities (Christofi et al., 2017). Knowing how to manage
the different marketing aspects in the post-acquisition phase is key for understanding
customers’ reactions and to predict their behaviour.
The focus of this research was on banking entities in a single country, Spain. However, in
future research, multi-country, multi-dimensional comparative studies are warranted to test
whether cultural and other environmental factors affect M&A in a marketing perspective
and in what ways (Christofi et al., 2017). Finally, future research could incorporate
consideration of additional marketing variables such as image and even relate this to the
loyalty of consumers after the M&A.

Implications
Our findings have interesting implications for those managers responsible for M&A
integration processes, especially in financial entities since, as far as we know, there are a
dearth of studies available which have investigated various marketing aspects from a
customer orientation in real M&A contexts (Christofi et al., 2017; Farah, 2017a, b).
In general, integration plans must involve the entire organisation and be articulated
around various challenges such as thinking of the client. As Öberg (2008, p. 2) noted,
“whereas M&A is an activity that is not made in interaction with customers, it may well be
made with customers in mind”. Marketing variables have an effect on customers and on
their relationship with the bank and, consequently, have an effect on the fundamental
objectives of the entity: survival, profitability and growth. Given that M&A have potential
to affect customers’ relationships with firms, the co-analysis of marketing, customers and
M&A is very important.
Managers must ensure that the integration process is sensitive to the company’s
relationships with customers. Thus, in the decision-making process, the bank must pay
IJBM greater attention to these marketing aspects. It must avoid, at all times, a possible worsening
in them, derived from searching for cost savings and obtaining synergies too fast (without
the necessary planning or analysis of the potential impacts on consumers), because it will
have a negative effect on customers.
The role of “trust transmitted by employees was the key during the process”. Arguments
such as the “mix of employees, so customers continue to see familiar faces after M&A helps
change”, or that “many clients left because they were not happy with the M&A, those who
stayed did so because the staff remained and continued to serve them” reinforce the
importance of the role of trust. Retaining staff of the entity with which the customers were
happy, or with which they had a long-standing relationship, suggests that the entity is not
only focussed on reducing costs, but on maintaining value after the M&A.
It is also suggested that the reduction of offices with the consequent reduction in the
number of employees is compensated with an improvement in the service, in better
products, better prices or the improvement of online banking and the reduction in time
waiting in queues. In addition, as the extant literature has affirmed, communication is also
key during every stage of the M&A process to minimise uncertainty with regard to issues
that directly impact people (Chakravorty, 2012). In the cases analysed, respondents agree
that “[a]ll customers were notified during the process and about the things that would be
affected”. However, it is “massive information, not personalised, that most customers do not
read”. “Although consumers have been informed through mailings and letters, customers do
not feel that they have been well informed”.

Notes
1. Banco de España is the national central bank of Spain and, within the framework of the Single
Supervisory Mechanism, this entity oversees the Spanish banking system along with the
European Central Bank.
2. A memorandum of understanding on financial-sector policy conditionality details the policy
conditions as embedded in a Council Decision which was formally adopted on 23 July 2012 on
specific measures to reinforce financial stability in Spain.

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About the authors

Paula Alvarez-González (PhD) is Marketing Professor at the Faculty of Business Administration at the
University of Santiago de Compostela and Member of the ECOBAS research group (Economics and
Business Administration for Society). Her research areas include bank marketing, marketing and
packaging strategies, and employability; but her main line of research focuses on the analysis of
the impact of the processes of mergers and acquisitions on consumers in the banking sector. On this
subject she has published several articles and papers in international and national conferences.
Paula Alvarez-González is the corresponding author and can be contacted at: p.alvarez.gonzalez@usc.es
Carmen Otero-Neira (PhD) is Marketing Professor at the Faculty of Economics and Business at the
University of Vigo and Member of the ECOBAS research group. Her main areas of research include
competitive strategy, new products, service marketing and tourism, as well as sales management. In
this area, in addition to participating in research projects, she is the author of publications in journals
and congresses. Most recent research has been published in journals such as International Journal of
Contemporary Hospitality Management (2015), Leadership & Organization Development Journal (2016),
Journal of Business & Industrial Marketing (2016) and Journal of Business-to-Business Marketing (2017),
amongst other.

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