AN INVESTIGATION OF THE MOTIVE BEHIND MERGER AND ACQUISITION: A CASE STUDY OF THE BARCLAYS BANK OF SCOTLAND (UK

)

Submitted in partial fulfillment of the requirement of the degree of Masters in Business and Administration Of THE UNIVERSITY OF Wales Studied at Holborn College

Authors:

Acknowledgements
I would like to express profound gratitude to my supervisor, Dr Gordon Bowen, for his invaluable support, encouragement, supervision and useful suggestions throughout this research work. His moral support and continuous guidance enabled me to complete my work successfully. His student friendly approach and frankness in delivering suggestions boosted my confidence immensely and I could discuss smallest of the issues with him without any hesitations. One rarely comes across a supervisor who understands and accommodates student`s needs and requests in his own schedule, Dr Gordon Bowen is the one and I am highly obliged to him for that. Moreover, I would like to acknowledge all of my respondents who answered my questionnaires and interviews with patience. I am as ever, especially indebted to my parents, for their love and support throughout my life. I would also like to extend my gratitude to my brother Farooque for his support and understanding during my study.

PROPOSED RESEARCH TITLE: “AN INVESTIGATION OF THE MOTIVE BEHIND MERGER AND ACQUISITION: A CASE STUDY OF THE BARCLAYS BANK OF SCOTLAND (UK)”

OUTLINE OF THE PROPOSED RESEARCH: The research proposal is based on the case study of business concern called: Barclays Bank in connection with merger and acquisition of small banks policy adopted the Barclays bank. Economic turmoil in any business house increases the fear of merger into and acquisition by bigger businesses. The intention of this study is to identify the key factors behind (of) the motive leading to (behind) merger and acquisition.

RESEARCH BRIEF: This study is to evaluate motive behind merger and acquisition decision making, in financial instruments of banking company: Barclays Bank. The research will be conducted through investigative study comprising of: (i) literature reviews; (ii) interviews; (iii) analysis of companies’ datasets; (iv) analysis and findings; and recommendations.

ORGANIZATIONAL BACKGROUND Barclays bank was established back in 1690 in London which used the name of its founder James Barclay. During the period between 1905 and 1916, Barclays adopted an acquisition strategy to take over small English banks. In 1917, Barclays acquired London Provincials & South-Western Banks and merged with it. In 1919, Barclays Bank continued its acquisition policy by acquiring the British Linen Bank with a separate entity of board of directors. (http://www.aboutbarclays.com).

6bn in Absa Group Limited which was the biggest bank of South Africa in 2005. with the loss of 900 jobs (http://www. Barclays also took-over the Russia’s Expobank for £335mn in 2008. Barclays also expanded its activities in Pakistan with initial outlay of $100 million (http://www.com). Barclays bought out 54% share for £2. In the year 2006 Barclays took-over the HomEq Servicing Company for $457mn. The bank continued to adopt an acquisition strategy and in 2003 acquired Banco Zaragozano. However.Barclays took possession of Woolwich plc in 2000 and closed 177 branches in the United Kingdom in the year 2002. To strengthen the market position. re-named by Barclays Bank Delaware. Barclays took-over the credit card trademark Goldfish at £30mn and increased the number of customers to 1. which is (said to be) a Spanish bank. Barclays generated £5.aboutbarclays. The credit crunch caused Barclays shares to drop 9% in 2007.2bn in receivable in 2007. . Barclays pioneered the activity of sponsorship of the Premier League by Barclaycard in 2004 (http://www. Barclays borrowed from the Bank of England an amount of £1.6bn ($3.com).6 billion by an unconventional privileges subject in July 2008. The credit crisis caused difficulties for banks. and the loss of confidence caused daily inter bank trading to stop.com). Barclays bought Equifirst Company from Region Financial Company at a cost of $230mn in 2007.about barclays. Barclays Personal Investment Management in Peterborough was closed and moved to Glasgow.aboutbarclays. Barclays took over the credit card firm Juniper Bank of United States from Canadian Imperial Bank of Commerce in 2003.2bn) as a standby facility in 2007.7M as well as $4.

Some past research. company X and company Y as a result of the merger. GlaxoWellcome/ Smithkline and Beecham. and Astra/Zeneca mergers. This research intends to explore the profitability and value addition for the shareholders of two companies. different kinds of corporate merger will be analyzed. The potential benefits expected from mergers and acquisitions include the ability of the companies to cut costs and. of course. seems to paint a rather gloomy picture of mergers. Corporate executives and policy makers are aware of the fact that carrying out a merger strategy is a risky line to tow. a significant body of the past research indicates that the success rate of mergers and acquisitions. Since the early 1990’s. consolidate research departments to enhance efficiency and speed up the development of products. however.) Some of notable mergers and acquisitions (which) are Pfizer/Pharmacia. hence. pricing volatility. as such this . operating risk. find new products. financial risk. REASON FOR THE STUDY For the idea of this research. Investors( both individuals and corporate) need to make informed decisions when deciding on where to put their money. this is because these risks combine with the usual business uncertainties such as competition. product and technological obsolescence. Mergers and acquisitions happen to be one of the most complex areas of Corporate Finance. (increase. cut down costs of operations. and make better use of excess manufacturing capacity. America and the United Kingdom are countries which have seen increasing tendency of the mergers of giants. overpayment risk and.THE STATEMENT OF THE PROBLEM Globalization demands that companies merge to compete more effectively through consolidation. both domestic and cross-border is not very high.

since one of the aims of the company is to provide shareholders with increased value. and 3. To examine benefits and motives behind mergers and acquisition to firms. the researcher would look at the following issues: 1. To suggest recommendations to the Barclays bank on how to improve mergers and acquisition in business development. OBJECTIVES OF THE STUDY Primary Objective: To evaluate and investigate the pre and post merger financial and operational performance of Barclays bank.research will contribute to helping them better assess the performance of mergers through analysing the profitability and shareholder returns. Secondly. . Importantly. 2. 2. To re-evaluate the framework and theoretical models associated to mergers and acquisitions. This study seeks to achieve three main research objectives: Secondary Objectives 1. the research will also look at the extent to which shareholder value has been increased through the analysis of the company financial variables over past 10 years period.The company operational and financial performance using financial ratio analysis and correlation analysis to determine whether the merger enhanced the performance of the companies involved in the merger.

Does (the relationship correlated) any correlation exist between financial variables (costs of sale. Chapter 1 Introduction 1. How does Barclays Bank (measure) forecast to increase value creation in accessing merger and acquisition? The contents of this section should be in the Introduction chapter and thus the start of the dissertation will be chapter 1. Investors( both individuals and corporate) need to make informed decisions when deciding on where to put their money. What are the motives behind for Barclays Bank adopting mergers and acquisitions? 2. research approach and main findings from the research.RESEARCH QUESTIONS Research questions will be based on the objectives of the research study: 1. 1. The chapter gives an overview of the complete dissertation.1 Introduction Mergers and acquisitions happen to be one of the most complex areas of Corporate Finance in today’s world of globalisation. Before chapter 1 is the abstract: 300 words and include the aim/objective of the study. profits) and size of an organisation? 3. as such this research will contribute to helping them better assess the performance of mergers through analyzing the profitability and shareholder returns.2 Enquiry Overview The main purpose of the research is to analyse the performance of mergers through analyzing the profitability and shareholders returns by taking the case study of business . sales. The research will consider the case study of business concern known as Barclays Bank (UK).

concern called Barclays Bank (UK).3 The Statement of the Problem Globalisation demands that companies merge to compete more effectively through consolidation. The potential benefits expected from mergers and acquisitions include the ability of the companies to cut costs and. interviews. America and the United Kingdom are countries which have seen the mergers of giants increase. GlaxoWellcome/ Smithkline and Beecham.e. 1. literature review provides necessary literature data related to mergers and acquisitions involving an investigation of different theories analysed by various researchers and analysts in the similar topic. different techniques of data collection i. the strategy used and. Since the early 1990’s. Next chapter followed research methodology was data analysis which explained every question concluded via interviews and the analysis of the financial performance of the company before and after the merger period of the company It also included the pilot tests concluded through the research study and the data gathered was in the form of diagrams. The introduction chapter provides aims and objectives of the study along with the basic information related to significance of the study. Second chapter i. The final section carried out was to the discussion regarding the conclusions and recommendations for the management to improve the profitability of the organisation. Third chapter was research methodology which discussed the research paradigm selected to conduct the research. find new products. consolidate research departments . Some of mergers and acquisitions which are Pfizer/Pharmacia. The aim of the study was to investigate and evaluate the pre and post merger financial and operational performance of Barclays Bank. charts and graphs for easy understandability. The study also aimed to provide the research limitations and the prospects for future study. The purpose to carry out the literature data was to gather the knowledge to achieve main objectives of the research.e. hence. questionnaires and sampling techniques. There were three main objectives of the study out of which one was to provide the management of the companies with recommendations to increase the profitability of the firm based on the findings. and Astra/Zeneca mergers.

pricing volatility. Corporate executives and policy makers are aware of the fact that carrying out a merger strategy is a risky line to tow. companies. of course. company X and company Y as a result of the merger. research intends to explore the profitability and value created for the shareholders of two 1. seems to paint a rather gloomy picture of mergers. overpayment risk and. To re-evaluate the framework and theoretical models associated with mergers and acquisitions.to enhance efficiency and speed up the development of products.5 Background of the Study . Some past research.4 Aims and Objectives The study aimed to understand the motives behind adopting merger and acquisition strategy and analyse the performance of mergers through analyzing the profitability and shareholders returns. The key aims and objectives of the study were: • • • • To investigate and evaluate the pre and post merger financial and operational performance of Barclays bank. this is because these risks combine with the usual business uncertainties such as competition. and To suggest recommendations to the Barclays bank to increase the profitability of the firm. 1. both domestic and cross-border is not very high. To examine benefits and motives behind mergers and acquisition to firms. a significant body of research indicates that the success rate of mergers and acquisitions. and make better use of excess manufacturing capacity. product and technological This obsolescence. operating risk. however. financial risk. cut down costs of operations.

poor management plans. Mergers and acquisitions also faced problems to achieve economies of scale because their managements failed to integrate people. comprehensive integration plan. Thus overall to make M&A a success the mergers and acquisitions process should have clear goals. processes and systems (Honore and Maheia. 2003. Schraeder and Self. Mergers and acquisitions create value. and overvaluation of the targeted company. As economic turmoil increases the fear associated with merger and acquisition thus the intention of this study is to identify the key factors of the motives behind mergers and acquisitions. skilled and knowledgeable project team.The proposed research is based on the case study of a business concern called: Barclays bank (relative) related to its merger and acquisition strategy. Companies tend to achieve economies of scale. The main cause behind any merger is that two firms . Gomes et al. mergers and acquisitions failed because of wrong strategic rationale. It is possible to highlight the failure of mergers and acquisitions from the original investment perspectives. Galpin and Herndon (2000) and Nicholas (2004) cited that it becomes an issue for mergers and acquisitions to look for success. There is no certainty that mergers and acquisitions will be successful. DiGeorgio (2002) cited that mergers and acquisitions faced failure because of the inadequate due diligence and short of compelling strategic rationale. 2007). learning company. In short.. top management commitments and supports. 2003). Companies adopt rapid mergers and acquisitions and these can cause the business failures Jennings (1985) and Haransky (1999).. lack of sufficient analysis. 2000. Some companies faced (the) HR problems of staff conflict between corporate cultures within two or more companies and this created tension among staff. lack of knowledge in accessing risk investment. over valued targeted companies and overpaid the valuation. Firms having an intention to invest in any other country opt for mergers and acquisitions as a strategy to sail through the competitive market and generate profits for the company than any other investment strategy. Thus in today’s world of globalization mergers and acquisitions has been an utmost important method to expand any business or to get an entry to any foreign market. reasonable time frames. and managerial capabilities (Appelbaum et al. economies of scope and market power.

an objective study. 1. The limitations for the study were mainly the time frame i.e. Enquiry Overview needs references.combining their operations together could gain better efficiencies than as compared to the firms operating separately. the time utilised to conduct the interviews and more over.7 Conclusion This research was based on the business expansion strategy adopted by a firm to grow by taking the reference as the case of the business concern i. the time.6 The Scope and Limitations of study Flaws in scope are inherent in any study so for this study. the interviewers gave to conduct the interviews and their personal interest in finding out the overall result of the study i. 1. Lower success rates of the strategy were outlined related to the objectives and the case produced efficient recommendations for the management to improve its performance after the merger to increase the profitability of the organisation and that of the stakeholders of the company. to conduct an analytical research carrying much of numerical data to be presented in graphical form. Barclays Bank. Following this chapter is literature review which offers the study with necessary literature data related to mergers and acquisitions involving an investigation of different theories analysed by various researchers and analysts in the similar topic. The study was carried out by taking into consideration the quantitative perspective of research i. that could be a reasoning for not achieving the objectives of the research clearly. the data collection method was the most time consuming and tough part of the research which can be biased as the responses collected through interviews could detain the respondents from providing accurate information related to the actual issue due to bindings related to legal perspectives of the company. .e.e.e.

1999). A merger is defined as the use of a common fund of money and interest to combine two or more companies into a new enterprise (Pike and Neale. 2002). Acquisition is defined an action or process to takeover full control of a company by other company (Hornby et al. A merger comprises combining assets of two or more companies which are merged in one entity in order to build a new legal entity (Buckley and Ghauri. 1999). 2002) and acquisition is a control of assets which is transferred from one company to another company (Buckley and Ghauri. 2.2 Definition of Mergers and Acquisitions Merger is defined as two or more commercial companies combining into a larger organisation (Hornby et al. 2006) .Chapter 2: Literature review 2. 2006) and acquisition is defined as a take over of one or more companies in exchange for cash (Pike and Neale. which is to analyse historical mergers and acquisitions. The aims of this chapter are to collect literature data and analyse them into specific areas in order to design a list of questions and make recommendations to the management.1 Introduction This chapter reviews the literature data that is relevant to the research objectives. Literature data is derived from a pool of previous reports of researchers who have investigated similar topics and have narrowed down the research into specific areas.

Companies adopting mergers and acquisitions are also trying to access the technology or market research which can help companies to achieve a dominant position. In the market. Merger often refers to absorption merger or establishment merger (Chen and Findlay. which are called horizontal mergers and acquisitions. There has been an increase in horizontal mergers and acquisitions in recent years from different sectors such as pharmaceutical. automobile and petroleum. A-Horizontal Merger A horizontal mergers and acquisitions are said to be a combination of companies which sell substitutable products. A company also tends to use mergers and acquisitions to increase the market share. Companies tend to adopt mergers and acquisitions in order to achieve economies of scale and economies of scope. Nakamura. vertical mergers and acquisitions.3 Types of mergers and acquisitions Mergers and acquisitions are business strategies which aim to eliminate rival companies in the competitive market. there are three types of mergers and acquisitions. and conglomerate mergers and acquisition (Gaughan. A horizontal merger and acquisition can also prevent new entrants from entering the market and so reduce rivalry in the market. 2003. purchase surplus capacity and increase profits. 2003). A company adopts a horizontal merger and acquisition in order to eliminate an acquired company as a competitor in the market.2. and usually they are in direct competition within the same characteristic market location. 2002. Chen and Findlay. for example Time and Warner. A good example of a horizontal merger and acquisition was . 2005). Companies hope that through mergers and acquisition they can create economies of scope which allow market diversification. A merger and acquisition is also a response to the advantage of technology change and liberalization in the global market (Chen and Findlay. There are several motives that encourage companies to adopt merger and acquisition activities. 2003).

2000). B-Vertical Merger Vertical mergers and acquisitions are the combination of companies which have a common (referred to) client-supplier or buyer-seller relationship. Unlike a horizontal merger and acquisition. However. particularly when two companies combine with new technologies which can generate more sales (Carey. A company adopts a vertical merger and acquisition strategy so that the company can develop in different stages of a production process (Gaughan. this type of merger and acquisition needs an effective value chain to achieve the economies of scope. 2007).Glaxo and SmithKline Beecham which consisted of a US $76 billion transaction (MANDA. there are two common types of vertical mergers: (a) backward or upstream vertical integration and (b) forward or downstream vertical integration. Backward or upstream vertical integration is the primary motive in which a company tends to seek a dependable source of supply in the market. A vertical merger and acquisition can reduce ambiguity and transaction costs through the business upstream and downstream linkages (Chen and Findly. 2002). An efficient timely delivery system can increase the level of company efficiency which delivers their products in order to be more reliable (Coyle. Dependability can be justified through the terms of supply availability as well as through quality maintenance and timely delivery considerations. It is believed that a horizontal merger and acquisition can increase sales. It also adds the profits of the acquired business to that of the mergerer’s. 2003). Downstream vertical integration creates safe outlets for selling products and services (Coyle. . who might be other industrial users or the general public. However. In case the acquired business is also a raw material supplier to a competitor then it eliminates the competition. vertical integrated companies may not have the direct motive to prevent a new entrant entering the market. However. the forward downstream vertical integration is more a primary type of merger motive. However. Downstream vertical integration aims to move toward the end users. 2000). 2000). it might consider restricting new entrants entering into the market. A company seeks a merger and acquisition in order to strengthen buyer-seller relationships.

It showed that number of deals in mergers and acquisitions increased from 9617 deals in 1983-1986 to 31. This type of merger is formed between two or more companies but in different geographical locations. which might reduce financial risks (Gaughan. Time Warner-TCI. learning effects and resource reallocation in the post merger business environment (Williamson.1 showed that the number of merger waves in US industry is increasing and this will be continued. 1968. Product extension. A conglomerate merger and acquisition refers to two or more companies which do not have related products. This also showed that the total amounts . for example. It is easier to use the static trade off model in measuring horizontal mergers and acquisitions. However. In principle. This involves the analysis of the scale effect. The ‘allocatable’ efficiency refers to the merger related losses and the market power with the merger-related profits in managing cost efficiency. market extension. The most common deals of conglomerate mergers and acquisitions recently are AOL-Time Warner. 1990). the model is also applied to conglomerate mergers and acquisitions and vertical mergers and acquisitions.e.C-Conglomerate Merger A conglomerate merger and acquisition is rather different to a horizontal merger and acquisition or a vertical merger and acquisition in the market. this model creates only referring measures and monopoly. Table 2. Product extension refers to trade in non competing products and intends to make use of the related marketing channels to promote its products and services. Pepsico-Pizza Hut. Farell and Shapiro.4 Assessing the impact of mergers and acquisitions A static trade off model is used to compare efficiency. A conglomerate merger and acquisition has the advantage of increasing a company’s chance to enter into a new business environment. 2002). and pure product are types of conglomerate mergers and acquisitions. In addition the merger and acquisition strategy tends not to encourage the management to invest its business in the same industry.152 deals from 1997-2000 i. The notion of merger waves is continuing in the global market. they increased more than 300%. 2. However market extension refers to companies manufacturing the same products or services but in different territorial markets. Phillip MorrisKraft.

In some cases. mergers and acquisitions were funded by loans and the deals are investigated by managers. 2002). 164.152 periods billion 1898-1902 6.’s merger and acquisition deal which was US $75. etc. and Shell Transport & Trading Co. Royal Dutch Petroleum Co.2 shows the top largest mergers and acquisition in the global market since 2000.3 1966-1969 46 236 1983-1986 618 NA 1997-2000 4500 4500 Source: derived from merger and acquisition. and Glaxo Wellcome Plc and SmithKline Beecham Plc.3 69. in Picot 2002).559 million.9 136 1926-1939 7. Mergers and acquisitions near the end of the 19th century had a high frequency development. Target Value ( in Million US$) 1 2 Time Warner SmithKline Beecham Plc. (AOL) Glaxo Wellcome Plc.961 .1 Merger waves in the US industry Merger wave Current $ amount in billion Constant (2000) in Number of deals 3012 4828 NA 9617 31. Table 2.of mergers and acquisitions increased from US $618 billion 1983-1986 to US $4500 billions in 1997-2000. However.747 75. 2000 Mergers and acquisitions have different motives (Jansen.961 million in 2000. 2002. mergers and acquisitions can be expensive and this results in some managers of companies finding it difficult to find lenders (Gaughan.’s merger and acquisition deal was US $74. Table 2. The two highest deals during 2000 were AOL and Time Warner which was US $164.747 million. Table 2.2: Ten largest M&A deals worldwide since 2000 Transaction Rank Year Acquirer 200 0 200 0 Merger: America Online Inc.

3 showed the scale of financing of merger and acquisition of the UK companies by the UK companies. Pending: E. Comcast Corporation Sanofi-Synthelabo SA Spin-off: Nortel Transport & Trading Co.266 Chase & Co.974 59.244 Cash (%) 37 NA 70 86 63 Ordinary shares (%) 62 NA 27 9 33 Fixed interest (%) 1 NA 3 5 4 Source: www.243 Networks Corporation Pfizer Inc.3: The scale of financing of mergers and acquisition of UK firms by UK firms Year 2000 2001 2002 2003 2004 Number acquired 587 492 430 558 694 Outlay (£M) 106.761 56.3 4 5 6 7 8 9 10 200 4 200 6 200 1 200 4 200 0 200 2 200 4 200 6 Royal Dutch Petroleum Shell Co.gov.uk .994 25.515 58.041 60. Table 2. Merger: JP Pharmacia Corporation Morgan Bank Corporation Endesa SA One 59.236 18. BellSouth Corporation AT&T Broadband & Internet Svcs Aventis SA 74.559 72. Recent mergers and acquisitions were looking at financial economy aspects and restructuring unprofitable companies and empowering managers to deliver cash flow in order to create value in the companies (Doyle.679 31. Acquisitions and Alliances Research – MANDA (2007) The latest wave of mergers and acquisition in 2000 is likely to be differentiated by the amount of expenditure rather than by analysing how many deals have been done. Table 2.671 72.on AG Source: Institute of Mergers. AT&T Inc.statistic .916 28. These mergers and acquisitions were large. 1994).

Similarly when British pound got up valued there was a wave of acquisition of American companies by British companies or vice versa. These valuable assets appear to be independent of any interest in economics of scale or monopoly profits in order to be successful in this special market (Manne.3. As a result.statistic . Table 2.g.815 In Europe. Laxmi Mittals acquisitions of steel companies were triggered coinciding with up valuation of rupee (INR) vis-à-vis dollar.uk foreign companies Number Value 557 181. mergers and acquisitions were used to aim at an internationalisation strategy.285 371 41.756 278 20. there was huge increase in production. Shri.618 24. One very important factor appears slipped out here and it is that the cross-border mergers have its roots in currency ratio revaluation between currencies of the respective countries.The cross border mergers and acquisitions are also increasingly important. The numbers of mergers and acquisitions from years 2000 to 2004 is shown in Table 2. mergers and acquisitions have been treated as a well known business strategy tool for companies.gov.473 262 26. In the 1920s. 1996). for developing the market (Ensico & Garcia. E. Similarly whenever protected economies open out to the world trade FDIs try to either buy-out the competitors in opened out economy or enjoy sheer volume profits of .321 Value 64. There was an increase in cross border mergers and acquisitions in the UK. One of the aims of mergers and acquisitions is to control valuable assets in a corporation. In 1980s. In 1960s. The latest wave of mergers and acquisitions is because of a common currency.382 17. mergers and acquisitions were probably intended to achieve benefits from cost efficiency strategy.626 243 29. Euro. 1965).4 Cross-border acquisition UK companies acquired by foreign UK companies acquisition of companies Year Number 2000 227 2001 162 2002 117 2003 129 2004 171 Source: www.798 9.309 29. the aim of mergers and acquisitions was to develop corporate controls.

than in the market as a whole.5 shows the effect of lost value from mergers and acquisitions. Several key issues are required to select the stock market process (Hughes. This was mainly to create monopoly type situations. increasing the market stock assessment and encouraging mergers and acquisitions (Bishop and Kay. the analysis showed that an average loss was -5. I refers to income or sales and r is rate of return. Mergers and acquisitions may form a two-fold-aspect as shown in the following formula C=I/r. Mergers and acquisitions increased by an average of 42% yearly during the period 1980 to 1999 and this figure was equivalent to 3% of world GDP in 1980 and 8% in 1999 (UNCTAD. Table 2. 1990). A company may apply a lower discount rate to the assets which can generate better returns. C refers to the value of capital. . 2000). 1993). Top-down management influences an increase in the encouragement of mergers and acquisitions in the global market mechanism. They tend to seek growth maximization in a company at all costs and at a lower discount rate enjoying high volume of business advantage. (ii) management performance. Some countries such as the US and the UK use the distinctly “AngloSaxon” phenomenon that forms a free market. Sale can be improved if the company leads with superior marketing techniques (Kindleberger.(Early bird gets the worm) China and India are two best examples of this situation. 1969). Investors intend to adopt mergers and acquisitions in both domestic and foreign markets. Mergers and acquisition may be influenced by managers who wish to empire build. and Fagan and Le Heron.5% in a year. This helped investors in two ways. Increasing the speed of privatisation and the concept of de-regulation increases the number of merger and acquisition deals.that economy. Firstly they increased their volume of overall profit and secondly they eliminated the competition to some extent. and (iii) the payoff in developing the business. 1993) such as: (i) share price should be related to profitability of a firm. Both global financial advisers and transactional banks have played an important role to increase merger and acquisition deals (Fagan 1990. This may be given a thought and included wherever it can fit. According to Jensen and Ruback (1983).

85 168 128 (-1.78 -2. 1960 and Dicken.0) (day. Case studies analysts such as Sirower (1994). Asquith et al (1987).+5) -3. Bradley et al (1988). Byrd and Hickman (1992).3 -1. mergers and acquisitions are likely only to refer to larger companies in a given geographical location.3 -0. The purpose of using merger and acquisition strategy is to increase the company competitive advantage and core competency (UNCTAD.0) (day. Jenings and Mozzeo (1991). 1998).+1) (-1.9 -0.+1) (-5. Morck et al (1990). However.35 -1.0) (closing) (-1.2 acquire Owen (1992) Jenings and 1979-1985 Mozzeo (1991) Sevaes (1991) 1981-1987 Morck et al 1980-1987 (1990) Bradley et al 1981-1984 (1988 Asquith et al 1973-1983 (1987) . It is believed that larger companies have experience in understanding of geographical location and global economic activities (McNee. Varaiya and Ferris (1987). Table2.0) Ave.8 -3. Banerjee and Owen (1992). 2000). Sevaes (1991). and You et al (1986) have analysed different sample periods of mergers and acquisitions.Mergers and acquisitions refer to a company which acquires one or more other companies’ assets. The average of cumulative abnormal return from mergers and acquisitions were negative points. CARь -2.5 Stock market reaction to acquirers during 1980s Case study Sample period Sample size Event window Ώ Sirower (1994) 1979-1990 Byrd and 1980-1987 Hickman (1992) Banerjee and 1978-1987 57 352 366 172 52 342 (-1.

This has increased the numbers of mergers and acquisitions in the USA (Yoshida.5 before and after announcement CAR cumulative abnormal return Source: Sirower.5 Investment in merger and acquisition development Mergers and acquisitions were interpreted differently by different researchers. The implementation . Another factor that attracts investors to form merger and acquisition strategy is location. and (iii) integration (Picot. 1988). Planning refers to the stage where operational. 2. 1977 Mergers and acquisitions become strategic tools for companies to develop their business. managerial and legal techniques and optimization are undertaken.Varaiya and 1974-1983 96 (-1. For example: The market becomes more liberal for businesses in the USA and this becomes the favourite factor encouraging investors to invest in the country (Nukazawi. 1999).+1) -1. The building of regional blocs such as the European Union has increased the function of interdependencies between the building of economic and political organisations (Dent. Location becomes an important issue for investor investment decision making.0) -2. 2000).15 Ferris (1987) You (1986) Ώ Day et al 1975-1984 133 (-1. This encourages more multinational companies to adopt cross-border mergers and acquisitions (Dermine. More and more privatisation and free trade policy is attracting companies which tend to go with cross-border mergers and acquisitions. Many multinational companies invest in other countries as governments tend to give more attractive incentive and taxation policies to attract more investors. 1987). mergers and acquisitions have three stages of process: (i) planning. The creation of merger and acquisition is also influenced by government strategies. (ii) implementation. They can do this because of political stability. and Phelps. 2002). However.

Integration refers to post integration of the future business development. These are the stages of business strategic principles. companies which adopt a mergers and acquisitions strategy may cause disinvestment and redeployment of resources (Caption et al. Many experts have different opinions upon the objectives and motives behind mergers and acquisitions.6 Motives for Mergers and Acquisitions Various studies have been performed to find out the motives behind mergers and acquisitions of firms. the model divides in to five smaller stages. According to Gaphin and Herndon (2000) who introduced the Watson Wyatt Deal Flow Model. large companies adopt merger and acquisition strategies in order to restructure their organisation to be more effective and to improve commercial performance (Gregory and Cooper. Researchers such as Letto-Gilles et al.stage refers to activities that involve non-disclosure agreements. Furthermore. The literature on merger motives generally draws the distinction between financial or value-maximisation and managerial or non- . companies may employ more staff and increase the space of the company. 2000. Chapman (1999). an analysis of market seeking behaviour is one of the factors that encourage companies to adopt mergers and acquisitions. It is necessary to look at Watson Wyatt model to analyse the pre mergers and acquisition analysis to fit the strategic plan of an organisation. Companies may hope that they can be successful and secure access to the technology provided. However.. 1998). 2. which consist of formulate. Companies tend to look at incremental expansion for their market extension. (2000). negotiate and integrate. The first three stages are related to the pre-deal phase. and Dunning (1997) identified that mergers and acquisitions are encouraged by the opportunity to enhance market access as their principle motivation. letters of intent and conditions of deal closure. locate. To do this.. Companies that are merged may need to change the company’s structure in order to grow the operation. p.9) According to Watts (1980) and Green (1980). (The Watson Wyatt model – Galpin and Herndon. markets and other assets which are acquired. 2000). investigate.

. which provide a positive NPV value. Managers are looking for profit maximisation and benefits for shareholders. A merger and acquisition strategy can increase the size of an organisation and managers expect that through mergers and acquisitions. Companies adopt merger and acquisition strategies in order to increase economic growth. Managers expect to exploit economies of scale through mergers and acquisitions. It is suggested that merger and acquisition motives fall under a range of theories and it is also believed that managers are influenced by synergy and valuation. However there is a lack of information and indication of both practice and research in relating to the motives. It is believed that companies increase their size through mergers and acquisitions and this may be able to create a lower cost of capital. companies can increase their expertise to produce different products and enable access to different market segments. 1990). managers also believed that mergers and acquisition should be on a lower basis than its true value. Companies hope that if they put their investments in an investment project in order to increase investment return. They may think that adopting a merger and acquisition strategy is the faster way to achieve business expansion. According to Gaughan (2002). the new merged companies may enjoy success with its superior management skills in targeting their business development. 2006). managers will not avoid the exploitation of value creating opportunities. Managers also hope that they can enter to a new market. The managers’ motives for adopting merger and acquisitions strategies are shown in table 2. 1989). they can generate more production economies (Pike Neale. However. This is because through mergers and acquisition. Managers also hope to obtain synergy to gain benefits. Companies adopt mergers and acquisition by introducing new interest and sub-cultures within companies.6. Hence.value-maximising motives (Napier. in both economies of scale and economies of scope. Managers also believed that the merger and acquisition can increase monopoly power in the market (Trautwein. for instance finance costs. However it is difficult to distinguish the explanation of mergers and acquisitions. They hope to gain benefits through the combination of resources. merger and acquisition motives are to increase the growth of the company rapidly.

2001). It is also believed that merger and acquisition companies tend to increase monopoly market structure for their business development. According to Maskell (2001). Of course. raider theory. mergers that substantially reduce competition in the market may be challenged by the US Department of Justice or Federal Trade Commission on antitrust grounds (Ross et al. 2007). empire building theory/ agency theory. Mergers and acquisitions also aim to create wealth from customers. Managers tend to find out data information. 1999). mergers and acquisitions can use the internal competitive advantages and increase core competency of the company in the global market (Maskell. monopoly theory. However. 2007).There are several theories which refer to mergers and acquisitions. which are: efficiency theory. Mergers and acquisitions are also the key for companies to become agents of economic change. Valuation theory/ Investment theory. 1998). According to the Raider theory. By increasing marketing power and market share. technology and knowledge before making investment decisions (Dunning. 1992). Mergers and acquisitions also target on benefit gains on private information. They expect their investment to generate a much higher investment return (Pike and Neale. Increasing cross border mergers and acquisitions creates numbers of economic geographers in distributing of economic activities (Martin. Mergers and acquisitions also aim to increase profits. Managers hope that mergers and acquisitions can generate greater profits. some mergers and acquisitions are based on rational choices in the market. investors are seeking potential investments. investors will generate fund transfer to bid merger and acquisition deals in order to gain their investment values and capability of their business development. Investors are looking for much higher investment returns. profits can be unenhanced through diminishing competition and increasing prices for customers. However. Mergers and acquisitions aim to receive wealth from shareholders in order to invest in more profitable investment projects. the theories for the motives behind mergers and acquisition are different from one deal to another. Companies hope to expand their business development into the global market (Amin and Thriff. and process theory. To sum up. Managers prefer more localised knowledge (Mackinnon et .

which showed that mergers and acquisitions bring the synergy of economies of scale or economies of scope. create economies of scope. Weston and Mansinghka (1971). Lewellen (1971). 2.. There were some with negative investment returns within a range of -1% to -3% from a case study. Lintner (1971). there are researchers who have cited that conglomerate mergers and acquisitions create financial synergies in business development (Levy and Sarnat (1970). However. Amihud and Levi (1981). 1990). It can also increase company capacities by adopting new technology (Zander. Another case study showed that there was positive investment returns within the range about 1% to 7%. . Mergers and acquisitions enable a company to enlarge its size. Stapleton (1982). 1997). The fact is that there is no consensus in explaining mergers and acquisitions. Mergers and acquisitions. create economies of scale and vertical mergers and acquisitions. Companies use merger and acquisition strategies in order to survive and be successful. However. Melnik and Pollatschek (1973). But.al.7 Outcome from mergers and acquisitions Mergers and acquisitions continue to be used as a strategic alternative for business development. 2002) from specific information data (Birkinshaw and Hood. Inconclusive data showed that investment returns on mergers and acquisitions were not good. Dodd and Weinstein (1986)). An estimated figure of positive investment return is around 10% to 30%. especially horizontal mergers and acquisitions. in competing with their rivals in the market. and Amihud. Williamson (1975). the merger and acquisition process may be influenced by the company decision making and political related issues which may restrict processing capacities. there was another case study which was examined by Trautwein 1990. conglomerate mergers and acquisitions lack theoretical evidence of value creation. But the actual investment return through mergers and acquisitions are mixed. 2000). However. Disturbance theory explains the valuation process of the merger and acquisition which may be caused by environment uncertainty and this may change individual expectations (Trautwein.

and conglomerate mergers and acquisitions do not create financial synergies. Hence. There agency problem can take place where managers who are employed to act on behalf of shareholders. Jensen and Murphy. For managers. Ravenscraft and Scherer (1989) investigated company . 2006). However. managers tend to adopt mergers and acquisition strategies in order to increase the size of companies by using shareholder wealth. The analysis found that horizontal and vertical mergers and acquisitions create real operating savings and create much more wealth gain. 1986). However. Mergers and acquisitions also lead companies to diversify their businesses. Palepu and Ruback (1992). Murphy. especially conglomerate mergers and acquisitions which believe that they can create better business segments. 1988. conflict can be created between shareholders and managers. managers are seeking a much larger empire for their business development (Jensen. Megginson and Nail (1998) examined wealth changes around stock-for-stock mergers during the period of 1963 to 1996. a number of studies involved in merger which are based on accounting performance of companies were carried out by Ravenscraft and Scherer (1989) and Healy. Through mergers and acquisitions. will operate in a way that is designed to maximize their own benefits (Atrill. however. 1990). manager job security is improved and financial risks are reduced. Jensen. An analysis was examined by Delong (2001) about bank mergers which were based on the issues of geography and investment returns activity and found that the mergers of two banks in the same region and the same activity create value by 2% to 3% more compared with other types of bank mergers.Mergers and acquisitions also create a better position to borrow at lower rates. Shareholders are seeking higher investment returns. Mergers and acquisition reduce the weighted average cost of capital. Managers also create a better cash flow position and create a less risky cash flow through mergers and acquisitions. agency theory showed in particular that in conglomerate mergers and acquisitions. Maquieria. size is the fundamental issue that determines executive compensation (Baker. This is because their businesses increase the cash flow from the combination of companies. Mergers and acquisitions also generate tax treatment issues (Madj and Meyers 1987).

In fact. Salter and Weinhold (1979) examined the issues of the strategic relationship and acquiring companies and targeted companies. and the premium risks will be used to calculate capital structure.profitability by business lines. marketing and distribution. etc. This means that mergers and acquisitions do not create better value. 2. Mergers and acquisition involve cash and securities. Every company generates cash flows which are the basis of valuation. Conglomerate mergers and acquisitions may be able to achieve some benefits which imply short term market value disequilibrium exists. and the cash flow will be discounted and the expected value will be defined. They came to the conclusion that mergers and acquisitions tend to have better industry adjusted performance. and to exploit relatedness criteria. market covariance. Healy. . The investigation examines three years before and after mergers and acquisitions.8 Strategy planning. Palepu and Ruback (1992) also investigated with a combined industry adjusted operating performance for the fifty largest merger and acquisitions during the period of 1979 to 1984. inflation. A short term demand and supply conditions may influence the market value of a company. The overall criterion of relatedness is to lay out the key success factor of merger and acquisition companies. A discounted rate is a function of risk free interest rate structure. extreme value potential. They found that the relatedness creates the transferring functional skills between businesses. to adopt similar production technology. mergers and acquisitions create business diversification strategy with aims: to provide goods and services in a similar market in similar distribution channels. production. They found that there is an increase of industryadjusted performance during the post-merger and acquisition period. Functional skills are the elements such as research and development. tactics and valuation It is possible to come out with various valuation outcomes in mergers and acquisition process. The market value might be determined by a high and low or equal to the rational expectation equilibrium value. They found that there was a decline in profitability post mergers and acquisitions.

skills and resources of company is the concept of developing and effectively exploiting of a core competence. Companies adopt rapid mergers and acquisitions and these can cause the business failures Jennings (1985) and Haransky (1999). (ii) Companies also tended to use the financial aspects to analyse the value of the deal. (i) Companies did not have sufficient data to investigate the risk assessment in investment of target. It is possible to highlight the failure of mergers and acquisitions from the original investment perspectives. 1980. Resource and the fixed input need to combine with the types of activities to produce them as goods and services. They believe that such market incumbents may create greater profits and may also prevent (avoid) new entrants entering into the market (Cave. (v) Managers also did not have enough experience in building integration on new companies. Galpin and Herndon (2000) and Nicholas (2004) cited that it becomes an issue for mergers and acquisitions to look for success. Mandelker. It is because of the pressures from the management board. Asquisth. economies of scope and market power.According to Rumelt (1974). Mergers and acquisitions create positive changes through a combination of wealth companies (Halpern. (iii) Some companies paid high premiums for takeover deals. Companies adopt mergers and acquisitions in order to enter into concentrated product markets. (iv) Mergers and acquisitions also were treated as an outdated strategic plan. Desai and Kim. 1983). Bradley. .9 Success and failure factors for mergers and acquisitions Mergers and acquisitions create value. 1974. Dodd. Mergers and acquisitions create value and value can be created through reinforcement of skills. There is no certainty that mergers and acquisitions will be successful. Companies tend to achieve economies of scale. 1981). 1973. Haransky (1999) cited that there are five factors that cause the failure of mergers and acquisitions. 2. 1959). 1983. A resource-based perspective refers to the chosen business activities and the internal resource positions which are factors that investors are looking for (Penrose.

(ii) Companies adopting mergers and acquisitions overpaid for the mergers and acquisitions. lack of sufficient analysis. However. DiGeorgio (2002) cited that. (2001) also identified five causes that made merger and acquisition failures. with . (iii) Companies adopting mergers and acquisitions did not have sufficient knowledge to implement an integration planning and execution. (i) Managers have poor understanding on the issues of strategic level. over valued companies and overpaid the valuation. p. (iv) Some companies faced the problems of staff conflict between corporate cultures within two or more companies and this created tension among staff. He also recommended that company should focus on comprehensive analysis and focus on more financial growth and than invest in managing the integration process. and (iii) Overvaluation of the targeted company.37) cited that locations is important in the planning stage. lack of knowledge in accessing risk investment. “Planning an acquisition strategy can help avoid a takeover marked by poorly matched partners and maximize the potential for success”. Jennings (1985. mergers and acquisitions failed because of wrong strategic rationale. Mergers and acquisitions also faced problems to achieve economies of scale because their managements failed to integrate people. poor management plans. In short. processes and systems (Honore and Maheia. Jennings (1985) also cited that successful mergers and acquisitions in the acquiring company process should be well-structured.Gadiesh et al. (v) Companies face the problem of cultural mismatch. 2003). Company should always take into consideration (from) warning signs of unsuccessful acquisitions. (iv) Companies face lack of effective leaderships and strategic communication. This is just a quip “ When Merger and Acquisition fails they call it Murder and Assassination” from the point of view of Investors. (i) Mergers and acquisitions faced failure because of the inadequate due diligence and (ii) Short of compelling strategic rationale.

(e)connecting the vision. which are: (a) setting rationale. etc. Gadiesh et al. top management commitments and supports of both the sides. (b) deal structure. Mergers and acquisitions process should have clear goals. and integration success.P. and exemplifies (the) those factors These rules have been used for an extensive research of the merger and acquisition between J. The successful outcome aims to: achieve objectives and goals by selecting the capable leadership. and (f) external influencing factors. and plan detailed communication. comprehensive integration plan. 2007). The acquiring company should make a subsequent comprehensive plan in all functional areas and planed responsibilities and timing for an integration phase. Where as Epstein (2005) cited six rules of mergers and acquisition success which are (a) strategic vision and fit. learning company. 2003. and proactive person identification and contact. and (f) managing integration. (d) keeping customers in the forefront. 2003) divided the success of mergers and acquisitions into two stages which were: front-end success. (d) pre-merger and acquisition planning and (e) post merger and acquisition integration..comprehensive acquisition criteria and should adopt comprehensive analysis of factors or areas. Morgan and Chase Manhattan Bank which was in 2000. However. 2000. Galpin and Herndon (2000) suggested recommendations in building a successful merger which was faster and smoother integration for mergers and acquisitions. skilled and knowledgeable project team. mergers and acquisition analysis tools.. DiGeorgio (2002. and people issue. Schraeder and Self. (2001) creates six “golden rules” or guidelines of the acquiring target companies to make merger and acquisition a success. understanding culture and company structure. the stakeholder team’s facilitating climate. time and resources available. integration. . (c) due diligence. (c)(fasting) execution of plan at full speed. reasonable time frames. not all recommendations face prior to deal closure. (b)giving ‘why’ inform ‘how’. and managerial capabilities (Appelbaum et al. skilled and knowledgeable integration team members. Gomes et al. The front-end success selected the right target for mergers and acquisition that comprised: characteristic of leaderships.

Brickley and Netter (1988). Some literatures show that while bidders earn on an average zero or negative abnormal returns during acquisition announcements. use it to invest in negative net present value (npv) projects. 2. Roll (1986) predicts that acquisition announcements should have a zero combined abnormal return. then a company may engage in a merger and acquisition to ensure competitive parity. (i) gain in specific areas. and 2003) concerned the front end success and the integration success and target on a company business structure which include the top management. The strategy literature recognizes that a company capability or competencies can be a source of competitive advantage. Jensen (1986) predicts that the combined abnormal return should be negative as managers. (iii) excellent fit.Digeorgio (2002. Jarrell. instead of paying out the excess cash.10 Valuation. as acquisitions would be only a transfer of wealth from bidder’s shareholders to target’s shareholders. If all the major competitors are becoming bigger through these transactions. They are: objectives. stakeholders’ relationships. (iii) analysis of performance. skill and experience. time nature. learning mechanism. process investigation. and cultural suitability. Rockwell (1968) cited another six factors to be considered for mergers and acquisitions: (i) the involvement of top management. (iv) early stage problems identification. Mergers and acquisition should adopt four “must do factors”. (v) early stage right movement. and Andrade. strategies and implementations The motive of a merger and acquisition may be to ensure survival. and (vi) human investment and involvement. However. The evidence indicating that transfers of control generate a combined positive abnormal return is clearly against their predictions. resources. (ii) definition of business. . and mergers and acquisition tool. targets obtain positive excess returns (Jensen and Ruback (1983). (ii) the ability of management and. Mitchell and Stafford (2001).

Smit (2001) emphasizes that the importance of strategic interactions in corporate acquisitions as firms rarely have monopoly rights over the acquisition. Acquisitions will take place in industry and for this industry the output price will fluctuate over time so as to clear the market according to the following function: Pi(t) = Xi(t)D[Q(t)] with Pi ¸ 0. 2002) in several respects. the acquiring firm in this game obtains zero expected gain no matter what type of the industry characteristics. in equilibrium. Where ‘Q’ is the quantity supplied at time ‘t’. which would be consistent with economic motives. and Morellec. Divestitures are also events that on average have positive combined abnormal returns. In the model. and X(t) represents external random shocks in demand. the fact that restructuring activity occurs in waves and with industry clustering is evidence that firms respond efficiently to changes in the underlying political. (Alexander. which is assumed differentiable with D0(Q) < 0. financial. 1984). The current theoretical literature is dealing with dynamic models of acquisitions (Lambrecht. 2000). 2001. According to Weston (2002). Hite. that this possibility increases dramatically when investors cannot exercise their real options optimally due to competition. The calculation of simulation exercises. They report that a few industries concentrate a high percentage of takeover activity. In an efficiency improvement for the economy. firms with standard ability should earn a normal economic profit during acquisitions Grenadier (2002) analyzes the effects of competition on the likelihood of investment values falling below their initial cost. 1985. Jain. acquisitions are expected to create wealth. ‘D’corresponds to the deterministic part of the inverse demand function. and Mulherin and Boone. cultural and economic environment.1987. Mitchell and Mulherin (1996) report from their survey in the 1980s that takeovers and restructuring activities cluster in industries that experience shocks of the greatest magnitude. They also point out that this industry clustering is a characteristic of acquisitions during 1980s as these patterns are not observed in earlier . If business unit is undervalued. Owers and Rogers. Benson and Kampmeyer.Evidence also based on stock price reaction at the announcement dates strongly indicates that on average. acquisitions and divestitures are modelled as an industry phenomenon.

The credit crunch caused Barclays shares to drop 9% in 2007. Barclays Bank continued its acquisition policy by acquiring the British Linen Bank with a separate entity of board of directors. In 1919.periods.6bn ($3. Barclays took over the credit card firm Juniper Bank of United States from Canadian Imperial Bank of Commerce in 2003. Barclays generated £5. Barclays bought Equifirst Company from Region Financial Company at $230mn in 2007. re-named by Barclays Bank Delaware. the model also predicts that shocks reducing the cost of acquisitions could also induce restructuring activity 2.2bn) as a standby facility in 2007. Barclays adopted an acquisition strategy to take over small English banks. However.6bn in Absa Group Limited which was the biggest bank of South Africa in 2005. Barclays pioneered the activity of sponsorship of the Premier League by Barclaycard in 2004. The bank continues to adopt an acquisition strategy and acquired Banco Zaragozano. then unexpected industry shocks are probably the cause of the takeover activity. which is said to be Spanish bank in 2003 (http://www.com). Barclays merged with London Provincials & South-Western Banks. The credit crisis caused difficulties for banks. In the year 2006 Barclays took-over the HomEq Servicing Company for $457mn. During the period between 1905 and 1916. Barclays saw the possession of Woolwich plc in 2000 and closed 177 branches in the United Kingdom in the year 2002. Andrade. In the model the sunk costs of acquisitions must be understood as internal as well as external costs imposed by financing availability. etc. and the loss of confidence caused daily inter bank trading to stop. Barclays Personal Investment Management in Peterborough was closed and moved to Glasgow with the loss of 900 jobs. Barclays borrowed from the Bank of England an amount of £1.11 Organisational Literature Barclays bank was established back in 1690 in London which used the name of James Barclay.6 billion by an unconventional privileges subject in . Thus. Mitchell and Stafford (2001) argue that if each takeover wave is different in terms of industry composition. regulations. In 1917. Barclays bought of a 54% share for £2.aboutbarclays.

2bn in receivable in 2007. Several key issues are required to select the stock market process (Hughes. the most sought after mode for business expansion within the country or cross-border expansion (or a method of entry in a foreign market) is by mergers and acquisitions. The three main types mergers and acquisitions are horizontal mergers and acquisitions. learning effects and resource reallocation in the post merger business environment are undertaken (Williamson. the companies prefer mergers as a smart way of cross border investment than other investment options. 2000). [“The entire text above is the repetition of earlier text. But along with the growing importance of M&As their success rate has been declining due to various reasons of which mainly are motives other than maximisation of shareholders wealth. it is always seen that the success and failures in mergers and acquisition motives are uncertainty. attaining synergy.7M as well as $4. Thus a merger and acquisition can be said as a .July 2008. Barclays also expanded its activities in Pakistan with initial outlay of $100 million. and conglomerate mergers and acquisition (Gaughan. Barclays also took-over the Russia’s Expobank for £335mn in 2008. 1968. vertical mergers and acquisitions. increase their market position. 2002.com) 2. The same corporate strategy has been always adopted for its business expansion.aboutbarclays. The importance of mergers and acquisitions in business expansion has been increasing continuously as mergers and acquisitions increased on an average of 42% yearly during the period of 1980 to 1999 and this figure was equivalent to 3% of world GDP in 1980 to 8% in 1999 (UNCTAD.http://www. Farell and Shapiro. 2003). 1993). To strengthen the market position. 1990). reducing total costs and achieve economies of scale and of scope and. However.And as seen from above data and the organisational literature it (is proved) can be concluded that in today’s world of globalization. The utility of repetition may be examined”] (Source: Official website of Barclays Bank . poor integration of all the business areas after the deal and not considering synergy in realistic terms. Due to specific reasons such as.12 Conclusion Literature review has revealed a lot of useful data. Barclays took-over the credit card trademark Goldfish at £30mn and increased the number of customers to 1. Analysis of arising the scale effect. Chen and Findlay.

Literature data was carried on for analysis in discussion section (chapter 4) to examine distinctive factors that advised for the company to implement their mergers and acquisitions and was also used for designing questions for conducting interviews. (ii) research approach. The next chapter is the methodology which the research examines a suitable research method for research development process. The research is based on mainly a qualitative research approach and some numeric data calculations which involves assumptions (Saunders et al. The research process includes: (i) research paradigm. The discussions on analysis of methodology is aimed to find a suitable research methodology in terms of cost saving and time specific. 2007) and calculations their financial performance merger and acquisition.(response) reactive action to the advantages of technology change and liberalization in the global market (Chen and Findlay. Both model research methodology and research philosophy are correlated in developing (a) the research process. Chapter 3: The methodology 3. This chapter contains analysis of important issues for research development in relation to a case study of Barclays Bank policy of Mergers and Acquisitions. which can achieve the result from the use(d) of other research method.1 Introduction The methodology is referred to the methods of study principles in particular areas. (iii) . 2003).

In addition.3 Research paradigm Paradigm means the process of scientific practices using human philosophies and assumptions which relate to nature of knowledge around the world. They are: (i) positivistic paradigm. (v) questionnaires. and (ii) phenomenological paradigm. and skills and experiences. (viii) strengths and weaknesses of the research method. A positivistic paradigm adopts an independent and exiting reality from involvement within participants which is based on objective views. A positivistic paradigm is a type of a quantitative research method. There are two research paradigms which are commonly used by students.2 The objective of the methodology The objective of using the methodology analysis is to identify the strengths and weaknesses of the method. A positivistic paradigm can be used for cross sectional studies in different contexts which have same constraints. To find a suitable research method. 3. (vi) pilot study. The concept of positivistic paradigm contains the belief of human behaviour that should investigate in the same way as the natur(e)al sciences have been conducted in the studies. Positivistic paradigms approach contain an analysis of the facts or causes that are based on social phenomena. 3. the researcher has carried out investigation and evaluation for research development in order to achieve better results by giving a period of time and cost availability.qualitative and qualitative approach. Data collection is done in a short time and analysis will be conducted based on the data collection. A positivistic paradigm is not a subjective view. The researcher sets the research methodology objective that is to find a suitable research method for building research process. A positivistic research paradigm is to examine the research nature . (iv) interviews. A positivistic paradigm is an experimental study in which a research is conducted in a laboratory or in a systematic way. (vii) validity and reliability. the research has also accounted other feasibilities which include: access availability. Positivistic paradigm is based on natural sciences. risk involved.

1997). A positivistic paradigm has high reliability characteristic. A positivistic paradigm aims to use hypothesis testing.4 The research approach The purpose of this research is to achieve better results from the data collection in relation to a merger and acquisition. A phenomenological research paradigm is suitable for business and management research topics. The data aspects of human activity by targeting based on meaning of social phenomena rather than scientific calculation of measurement and the social phenomena is dependent on human mind. phenomenological paradigm refers to a process of analysis that people make sense of a phenomena which surround the world (Saundra et al. A deductive is mainly for a quantitative research approach (Saunders et al. 3. A phenomenological paradigm (is) mainly focuses on the interview data and a positivistic research paradigm is based on the scientific calculations to define the results 3. analysis of inductive and deductive approaches are carried out for investigation. conceptual and empirical evidences. It is related to understanding human behaviour from an involvement of own reference. 2003). However. To do this. It is assumed that a phenomenological research paradigm that is a qualitative research phenomena.5 The qualitative method and quantitative method . 2003.problem. This research contained both positivistic and phenomenological research paradigms. A phenomenological paradigm is more subjective in reality and the data is rich. A phenomenology research paradigm is usually referred to conceptual analysis which relates to theoretical. phenomenological is a fact that causes in question A (Allen. An inductive approach refers to the understanding of process in research contact and it is likely suitable for a qualitative research method.

Some researchers take the terms of phenomenological paradigm as a qualitative research method and take the term of positivistic paradigm as a quantitative research method. However. The research is based on a qualitative research approach. The interview data is made through making (m)notes. 2002). However. A qualitative research method allows a small sample to define the results. The researcher has limited time to collect the data. the data collection mainly expresses through words (Saunders et al. Smith (1986) cited that a quantitative method needs a longer time to collect the data. Smith (1986) also cited that using a qualitative method approach can obtain same results as the use of quantitative research. The purpose of not to focus on a quantitative method is a quantitative method may need a large sample to represent the whole population. A qualitative research method uses interviews to collect the data from consultants and managers. (ii) projective techniques. A qualitative approach may use historical data to analyse the data. The advantage of using a qualitative research approach is that a qualitative can start the research is an early stage. They are experienced in mergers and acquisitions. 1997). 3. A qualitative research approach adopts the techniques such as: (i) in-depth interviewing. A qualitative research may have disadvantage to achieve high level of reliability data. A quantitative method is based on information of numbers. and (iii) a case study. The scientific calculation part is based on the ratio analysis of the motive behind of Barclays Bank through the use of merger and acquisition strategy. 2007).6 A case study . The advantage of using quantitative method is that the data can be quantified based on scientific calculation to prove it reliability. Hence. The research is concentrated on a qualitative research method which the data consists of human experience in everyday life. But it may contain a high level of validity (Hussey and Hussey. and figures to analyse the data. The data collection comprises in writing records by observing behaviour which can be examined qualitatively (Bordens and Abott. the quantitative method is not taken as a major part in this research.

‘why/’ and ‘how?’. (such) like (as) ‘what?’. 3. All interviews are (based on) either face to face interviews (and) or one to one interview.The research study is based on a case study of Barclays bank in relation to the motive behind the bank’s policy of merger and acquisition. A case study may use unstructured and may use informal discussions with a key informant. it is advantageous to use theory development and to use questions. . Hence. the researcher uses semi structured interview in order to collect the interview data. some questions may (use) be directional close ended questions in order to get definite answer. to get more appropriate answers. it may reduce the level of validity of the research. It is believed that face to face interview can achieve a high response rate (Zikmund. (ii) documents. Hence. which are: (i) interviews. The research begins with specific questions to conduct interviews and it may also allow interviewees (their thought which) express whatever they feel is correct according to their belief. The purpose of using semi structure interview is to familiarise the respondent’s informant’s perspective on the issue which can identify the insight and information in order to analyse the gap of the research. A case study is suitable for an explanatory research study. However. Each interview (takes) took about (an estimate) 20 minutes. 2003).7 Interview data collection Interview is part of the data collection for this research. However. A case study adopts three sources of evidence. (they want. A case study research is suitable for a business and management research topic (Saunders et al. A case study is defined as an investigation on a real life context which is in between the situation of current phenomenon and unclear context. Each interview is made with an earlier appointment.) The interview is carefully designed. and (iii) observation. history studies are needed to get broader knowledge on a particular context. There are ten questions all together. This is a single case study in relation to a merger and acquisition performance. In this case. if a research focuses on few key informants. 2000).

Interview data plays an important part in the research process development. There are ten questions all together for this research and all the questions are referred to the research (Bryman and Bell. There are two females and three males. The researcher uses walk-in approach to the Barclays managers. Questions have been amended for few times because of the structure.10 The questions The research is mainly based on a qualitative research method to define the results. Five managers are chosen from Barclays bank. The analysis is based on last eight years merger and acquisition financial statements. the main target of designing the questionnaires is to provide clear and simple questions but they need experienced and knowledgeable person to answer the questions.3. . This group is recommended by a friend working as a security officer in Barclays. The research aims to find the gap between the theories and empirical evidence finding. There are all mixed genders. (old). 3. He recommended other managers (for) to agree for conducting interviews. The ratio analysis is particularly used for analysing the company financial statement in order to identify the company performance.9 The company data Barclays company data is based on the financial statements. 3. All interviewees of age (are) between 29 to 55 years. However. Every interview uses the same set of questions to conduct the interview(s).8 The sampling A sample (consists) size is 5. (of) Five managers are selected for interviews. 2007). A qualitative research allows a small sample to define the results. This part is an empirical evidence research. All managers have knowledge of mergers and acquisitions. There are in all ten questions that are designed for conducting interviews. especially the consultants who have experience(d) in merger and acquisition projects.

Composed data would be based on two main data which are literature data interview data. This proposed study is based on a quantitative research method. financial econometrics perspectives. The analysis data will be based on: (i) descriptive statistics such as measures of norm and measure of range. First. This has been proposed in this research study that a quantitative method will be utilized for the case study. and (ii) rational statistics such as regression and correlation. The data will use statistical tools such as graphs. The procedures will be used as a guideline in order to (minimum) minimise research problems. This may also need to include the results which are . The research will analyze the characteristics of the research method and develop them into procedures. pie charts and percentage based measures.DATA ANALYSIS PLAN The research will be carefully designed based on a quantitative research method to classify the outcome. The research will be based on finance theory. bar charts. The data collection will be carried out to analyse precise regions to define the results. ANTICIPATED ANALYSIS AND FINDINGS The research will be design in expecting to find answers to the research questions outlined. Quantitative analysis comprises of the study of information which relates to arithmetical measurement. A grounded theory. The approach would be utilized to analyse the data and for identifying the concepts and categories driving to the empirical data. the researcher will identify the research methodology method. SPSS software will be used to analyse the correlation risk assessments based on the Barclays data. content analysis and discourse analysis are not used for this proposed research because they are more likely to qualitative research method. This analysis of literature data will be based on a library data to examine previous researchers’ works. A discussion segment will be worked out to analyzing the data. These would be then used to suggest recommendations based on the specific areas. and the theory of financial management and its applications.

it is important to have a proper structure of research development process. This reduces to many broader questions. Only specific areas will be used for recommendations 3.anticipated to reflect the theoretical models and instances found in the literature data along with more information within the realm of this topic. A pilot study is used to reduce any bias which may cause the problem of data collection. 2003). This research also aims to target some specific areas in relation to mergers and acquisitions. The research is carefully designed in order to get much accurate results. The scientific calculations may contain a high level of reliability. The researcher very much concern(s)ed about the process of designing questionnaires.13 Bias The research process development is aimed to reduce any bias. reliability and ethnic issues are important for the research.12 The pilot test Before conducting interviews. Hence.14 Validity. 3. reliability and ethnic issues High validity. all questions are used a test and re-test approach in order to provide clear questions (Saunders et al. The purpose of doing this is to minimise the problem of interview. All questions are designed in using plain English approach. The researcher aims to make sure that all questions are understood by all interviewees. 3. Questions are both open and close ended questions. The pilot study is based on a test-and-retest and using . A quantitative method contains a high level of validity. The research is based on theoretical framework which may contain high validity and reliability.

17 Conclusions .internal consistency approaches (Mitchell. interviewees may feel easier to understand the questions and this may achieve a high response rate with more accurate answers. It is believed that the human knowledge and experience in their every way of life are more accurate because of the macro environmental factors. All managers and consultants have knowledge of mergers and acquisitions. A qualitative research method is based on the fact of human knowledge and experience in every day life. Both phenomenological and positivistic paradigms are undertaken for analysis. All appointments are made in early so that managers can provide available times for interviews. The researcher also aims to complete the dissertation at specific time. The strength(s) of this methodology is to focus on a case study in relating to a merger and acquisition. This means that not all scientific calculations are very accurate. The researcher tends to use open ended and close ended questions in order to achieve unexpected answers and specific answers from interviewees. At the same. Ratio analysis is used to strengthen the data collection for examining specific areas which can be used for recommendations. The face to face interview approach can achieve a high level of respondent rate. 3. This increases the validity and reliability of the research. The research also can manage the time and cost constraint. This can be more relevant to what is happens in reality.15 The strengths of the research methodology This research is properly designed in order to achieve better results for recommendations. A pilot study approach by using test and re-test method is aimed to reduce bias. This also increases the validity and reliability. This increases the ethnic issue. 3. The supervisor and teachers are very helpful to give advises in order to collect more accurate answers. 1996). The researcher always prepares himself to accept any cancellation of appointment for another date. This may also increase its validity. The research is careful designed in order to achieve more accurate answers.

An efficient method can achieve both cost and time saving. CHAPTER 4 – ANALYSIS & FINDINGS Give this chapter a proper introduction A list of questionnaires Strongly-Agree 1 Agree 2 No-View 3 Disagree Strongly-Disagree 4 5 1) Merger and acquisition is aimed to increase size of an organisation Answer: 1 2 3 4 5 2) A horizontal merger and acquisition is aimed to increase sales and profits . However. There are five interviewees selected for interviewees and 10 questions are designed for interviews.The methodology is used to identify a suitable research process development in order the researcher can achieve better results in collecting the data. A pilot study and a test and re-test approach are used in order all interviewees understand the meanings of the questions. Each interview takes about 20 minutes. ratio analysis is also used to examine specific areas that might be useful for recommendations. The research tends to use a qualitative research method for collecting data. The following chapter is the finding and analysis. The research approaches use both inductive and deductive approach for developing the research.

Answer: 1 2 3 4 5 3) Mergers and acquisitions create cultural conflict Answer: 1 2 3 4 5 4) Mergers and acquisitions can create value Answer: 1 2 3 4 5 5) Training programme can gain the knowledge and experience for seniors to solve the problem of cultural conflict between staff Answer: 1 2 3 4 5 6) The management should not over-estimate the valuation of an acquired company Answer: 1 2 3 4 5 7) Mergers and acquisitions can increase market shares. Answer: 1 2 3 4 5 8) Management should restructure the organisation by implementing an integrated system between parent and subsidiary companies Answer: 1 2 3 4 5 9) Increasing market share is the reason for post merger and acquisition success Answer: 1 2 3 4 5 10) Losses in financial performance are the failure for mergers and acquisitions Answer: 1 2 3 4 11) The fear of losses from mergers and acquisitions is important Answer: 1 2 3 4 .

The sampling technique was purposive sampling in order to provide valuable inputs in the research. Strongly-Agree 1 Agree 2 No-View 3 Disagree Strongly-Disagree 4 5 .Data findings and analysis In total 21 managers were selected from different branches of Barclays bank in London. The primary data collected is presented as follows using statistical presentations. In purposive sampling researcher chooses information rich cases that would provide information required to reach the aims and objectives of the report.

Q1) What is your profession in Barclays bank? 1) Customer services 3) Investments and Planning 2) Pensions and retirement plans 4) Personal accounts manager 5) Derivative investments 7) Mortgage advisor 6) Business accounts consultant 8) Loan officer .

Too many managers from the same departments or area may have similar opinions. This questionnaire was administered along with the semi structured interviews in which researcher sought for justifications behind their choices and provided clarifications.L oanofficer Mortg e ad ag visor 13% 12% 18% 14% 11% 15% 5% 10% 15% 20% Bu ess accou con sin nts P erson Accou ts Mg al n r Derivative In vestmen ts P ension & retirem s ent In vestm ts & P en lann g in C stomer services u 0% This particular question was designed to ensure that researcher does not select high percentage of managers from one particular section which may influence the outcome of the findings. . An approximately equal proportion of respondents was selected for answering the questionnaire.

Q3) A horizontal merger and acquisition is aimed to increase sales and profits Answer: 1 2 3 4 5 . Majority of them agreed that these techniques are used to expand the organization. these respondents latter justified that there could be many more reasons behind merging or acquiring an organization and expansion does not necessarily be the only reason.Q2) Merger and acquisition is aimed to increase size of an organization Answer: 1 2 3 4 5 8% 17% 7% 47% 21% s trong ag ly ree Ag ree No view D ag is ree S trong D ag ly is ree This question opened the subject and probed into the view that the respondents are carrying in their minds about mergers and acquision. latter in the interview these respondents provided clarification that there could be many more reasons behind adopting these techniques but the resulting outcome is certainly an expansion of the organization. Remaining 25% of the respondents who disagreed with the statement made by the researcher also justified stating that expansion is not the only reason but it is often carried out for achieving complex objectives. 68% agreed response was a majority. 7% of the respondents did not give their opinions.

This magnified Barclays span of customers and its profits and sales indeed.8% 6% 5% 37% 44% S trong ag ly ree Ag ree No V iew D ag is ree S trong dis ree ly ag A horizontal merger takes place when two competing companies in a market join together. Such mergers are generally carried out with a pure intention of magnification of profits and sales volumes. The justification they provided behind their agreement to this was just an example of Barclays with the Woolwich Plc. technology and market share. Q4) Mergers and acquisitions in Barclays created cultural conflict amongst employees Answer: 1 2 3 4 5 . Majority of the respondents agreed that horizontal mergers are aimed at increasing the profits and sales volume. This way the companies share their resources. Another example that was used by some of the respondents was of Juniper Bank of USA acquired by Barclays that helped them diversify into American continent resulting in the increased volume of sales. The responses indicated the same as discussed earlier in the literature review.

Only 42% of the managers agreed that the M&A activities did in fact impact the cultural balance in the employees. While 46% of the respondents did not choose to express their opinion and justified as the cultural balance was neither disturbed nor enhanced. 12% respondents disagreed to the statement and justified as the M&A activities have been a success in terms of enhancing the cultural balance and activities. This saved any kind of conflicts within the employees. Q5) Mergers and acquisitions created financial and operational value at the workplace Answer: 1 2 3 4 5 . This question was intended to detect impact of mergers and acquisitions in Barclays onto the internal customers i.9% 3% 46% 23% 19% S trong a ree ly g Ag ree No view D a ree is g S trong dis g ly a re A mixed bag of response was received in this question. They also suggested that even though there have been mergers and acquisitions Barclays never laid off the actual staff but instead simply kept the previous staff and trained them to Barclays policies. employees.e.

35% 30% 25% 20% 15% 10% 5% 0% S trong ly ag ree Agree No View Disag ree 19% 20% 18% 11% Opinion% 32% S trong ly Disag ree This question was posed in support of the previous question where a cultural conflict was discussed. 49% of the respondents either disagreed or did not give any opinions. Q6) Pre M&A Training program can help seniors to avoid the problems of cultural conflict between staff Answer: 1 2 3 4 5 . financial as well as operational was questioned. Their justification mainly stressed on the failures that Barclays had to endure after acquiring certain toxic assets in America and Spain. Researcher intended to focus on post merger activities where creation of value. 51% respondents agreed that M& A activities of Barclays indeed created financial and operational value for the company. This was further translated as cross cultural mergers enhanced the functioning of the internal sections and helped improved the total customer service experience for the people.

S trong dis ree ly ag D ag is ree No view Ag ree S trong ag ly ree 0% 5% 9% 11% 42% 33% 10% 20% 30% 40% 50% Opinion % This question focused on pre M&A activities. A majority of the respondents agreed that a pre training program would certainly avoid any kind of conflicts that may spark amongst the employees. employee welfare etc would help formulate a strategy that can be designed to adapt to the current conditions of the organization. Q7) The management should not over-estimate the valuation of an acquired company Answer: 1 2 3 4 5 . The respondents justified the same by sharing experiences of Woolwich Plc. Those respondents who disagreed that training may not be able to avoid any sort of cultural conflicts insisted that the training program designed might not consider all the possibilities and minutest of the details. operational procedures. Development of a comprehensive training program that involves detailed study of the organization to be merged with or acquired its culture. financial analysis.

There may be tendency to show overvaluation of the company under acquisition in order to please the shareholders or the owners of the acquiring company. Then they feel that it may be acquisition for the acquired company but for them it is not acquisition but assassination of the shareholders/owners. Q8) Mergers and acquisitions can increase market shares.29% 22% 49% S trong a ree ly g Ag ree No view D g isa ree S trong disa ree ly g It is obvious that the acquired company increases the assets as well as liabilities of the acquirer company. The bubble may burst any time and the shareholders or owners may feel cheated when they realise that their ROR has diminished beyond limits. Answer: 1 2 3 4 5 .

Answers to this question confirm the basic motive of the M&A practice. Whether it is aimed to eliminate the competitors or expand business joining the competitors or ensure raw materials or spare-parts supplies .one thing is certain the M&A increases and stops loss of market share. Q9) Management should restructure the organisation by implementing an integrated system between parent and subsidiary companies Answer: 1 2 3 4 5 .11% 13% 17% S trong a ree ly g Ag ree No v iew 27% 32% D a ree is g S teong D a ree ly is g The strong agreement to the above question proves that if the market share cannot increase no one will go in for M&A.

In fact both the partners should be able to continue their activities. HRD never agrees for identity merger. This helps in reaping the advantages of M&A keeping individuality aspect unaffected. it remains identifiably separate. The merged companies then separate. However their individuality does not get dissolved. Both the partners maintain this arrangement scrupulously. Q10) Increasing market share is the reason for post merger and acquisition success Answer: 1 2 3 4 5 . It can be concluded that restructuring is not an essentiality. which hitherto they were conducting independently. In fact there umpteen instances that show that M&A operations undertaken were just for some specific purpose and the joining companies parted ways as soon as the purpose was achieved. they agree to do the same jointly under a separate banner. The system integration is always done without restructuring.13% 11% 17% 27% 32% S trong ag ly ree Ag ree No view D ag is ree S teong Dis ree ly ag The concept of the M&A operation is not amalgamation. On the other hand it should be avoided.

Acquisition success is also important because the managers are responsible to respective groups of share holders. Acquisition success follows.17% 11% 28% 19% 25% S trong a ree ly g Ag ree No view D a ree is g S teong D g ly isa ree Many times increasing market share is given prime importance than the making of profits. They may agree for lesser returns for some time but will not accept failureThe researcher is of the view that broadening the market base is the basis of all M&A operations. Q11) Losses in financial performance are the failure for mergers and acquisitions Answer: 1 2 3 4 . Profits can be managed later on when the operations become steady.

6% 12% 29% 18%
S trong a ree ly g Ag ree No view D a ree is g S teong D g ly isa ree

35%

The managers have almost equivocally opined that if financial loss is the outcome of the M&A it can be taken as the failure of the M&A. It is also observed from the past that such cases occur when it is a case of conglomeration which means that it is a working arrangement with the historical competitors. This arrangement comes in force to protect every partner’s area of coverage. In such case there may be some pricing restrictions imposed willingly by all for all. In such cases the loss is inevitable. But in most other cases especially horizontal and vertical M&A the gains are either in %ages or in volume of profits. As a corollary to above it is generally taken as a failure of M&A if the company suffers financial loss.

Q12) The fear of losses from mergers and acquisitions is important Answer: 1 2 3 4

8%

1% 3% 79%

9%

S trong a ree ly g

Ag ree

No View

D g isa ree

S trong D ag ly is ree

The answers show that the opinion is divided and in that a balance division of it. However, in the opinion of the researcher it is not so. There may be some initial period of losses till the matter settles and the teething troubles are over. When he M&A arrangement is finally accepted by the planners, the managers, change of culture by the staff, patient shareholders/owners of both sides and then the union starts paying off. The fear of losses is no doubt is always there; but it is the planning that needs to be almost perfect. Half hazard planning may result in losses. In view of the above discussion the researcher ventures in making following recommendations. A few are general recommendation for all the companies but few are specifically for the Barclays’ bank All diagrams need to state source ie. From Study. Label diagrams 4.1 etc You need to have a section ‘Discussion’ and use the objectives as headings and relate each objective to the primary findings and also to the literature.

Chapter No. 5 RECOMMENDATIONS Part A: General Recommendations

A-1: There are some checks before we actually start negotiations. These can be summarized as follows. 1. Set Expectations. Ensure that employees, the press, and investors perceive the merger as successful. 2. Resolve Differences in Management Style. Understand the business culture of the acquired company and allow it to coexist with your company culture. 3. Assess cultural compatibility along with organizational vision. and motivational Tone. 4. Orient New Employees GOAL: Quell rumors, forestall an exodus, and build enthusiasm for the new organization. The orientation of employees should be on these points. The employees should be aware of the strategic reasoning behind merger. The history of the target company. Line of authority of the target and combined merged company. Further opportunities. 5. Realign and Restructure. : Quickly shed duplicate overhead and position for future growth. 6. Integrate the Computing Infrastructure. Make certain the entire organization can communicate and collaborate .

A-2: Each and every concern intending to operate M&A has to be careful in
planning the merger or takeover. The concern has to follow general rules for planning these can be summarized as follows, 1. Do your homework beforehand. 2. Set realistic expectations 3. Decide whether to “go first.” 4.Give yourself maneuvering room. 5.Manage the price concession process. . Manage the nonprice concession process, too. 6.Create and sustain credibility throughout the negotiation. 7.Keep time on your side. 8.Negotiate until the contract is signed.

positive change in the target’s recent revenue or inventory 4. It should be stopped then and there. Unreasonable Preconditions.Musical Chairs. 3.Most of the target firm’s revenues come from a business you don’t understand. Generally the entire deal is supposed to be a confidential matter till it is decided by both the parties. it should sound an alert and the negotiator may decide to call it a day.Quit while you’re ahead. 2. A-3: There are signs which can predict that the M&A operation can be a risky operation.The target firm has a radically different corporate culture.The buyout will create instant millionaires out of employees who hold founder’s stock. The deals areconfidential matters and have to be in the knowledge of only a few persons from each side. Any un reasonable precondition put forth by the target at any time indicates that the target is no more desirous to go ahead with negotiations.9. Any vital information may be to shareholders or media or to political VIPs if is published or gossiped. If the target is found to cause inexplicable delays in the timetable set for negotiating the deal. Frequent and sudden changes in negotiating team of target indicate that the deal may not go through. Strategic Leaks. 4. A-4: Negotiating a M&A operation is an art. Part B: Specific Recommendations for Barclay’s bank . It is some times observed that the target negotiating team is often changed without viable explanation. it is an indication that the deal may not be completed in time causing loss to the M&A operator. 5.The target’s management seems desperate to go forward.Delay Tactics. 3. The negotiator must be alert and watchful to ensure that he is not leading his party in some “trap” Following are the tell tale signs to be watched 1. While the negotiator has to in watching and avoiding the pitfalls he also has to ensure that there is no possibility of ‘Sudden Death’ of the negotiations. He will ensure to keep away dear killers. 1.A sudden. 2.

The Barclay’s bank may repeat history. B-3: The Barclay’s bank should also have another ‘Market Watch Dog’ unit. Now however here should be a separate unit that can deal with culture clash amongst joining units. from its inception in the year 1609till 1905. This line of business is a paying business. The more is the credit more is the activity and more money flows in. The bank can separate mercantile activities from other banking activities. The second M&A spree was from year 2000 till 2008.History: The Barclay’s bank had worked silently for a period of almost three hundred years i.e. This expertise can be n the market for the nedy companies. Conclusion: . The Barclay’s bank has handled M&A well whenever it got opportunity to acquire banks on European soil when their currency was falling. The two periods signify the type of M&A operations. The Barclay’s bank has experience of House equipment credit systems and it can as a first step venture into that segment of US market. The situation is apt for entering credit market of US and other North American countries. May be in the passage of time the Barclay’s bank has revived it. Thereafter for a period of eighty years it was silent again.The first period was taking over banks from British soil only while in the second it crossed its borders to execute M&A and acquired foreign banks and concerns mostly on European soil. Especially mercantile banks should be its next targets. The first phase can be considered as from 1905 to 1919. Following recommendations are made taking into considerations above two phases B-1: The Barclay’s bank can now look towards west and take advantage of the falling US dollar currency vis-à-vis British pound or Euro currency. B-2: The Barclay’s bank had closed its HR units. Further M&A operations may be conducted through that mercantile wing. Thereafter it conducted M&A spree in two phases. This unit shall maintain a continuous watch on the shares of other banks and on their credit ratings.

as this is a case study and especially about a bank that has a history of around 400 years of successful management. Appendix (after the list of references) copy of questionnaire and a completed questionnaire.There cannot be a specific conclusion. This need be taken care of. . And future research i. However it can be concluded that future M&A operations are not going to be limited within a specific country but due to globalization and spreading of trade and business net all over the world the process is going to be more complicated. Recommendations – 2/3 based on primary research findings and link to the literature. Internationalisation of trading has made negotiations and execution of the M&A process an expert’s job.e. The watchdog units have to maneuver with an expert team on political environments in which the target is situated and then only the M&A operations can be a success. Structure of last chapter: Conclusion based on summary of main findings and link to the literature. It will have to adapt to international trading practice along with the political changes. how the research can be expanded or developed. Research limitations.

.

and Bell. Mergers & Acquisitions. J (2000).122-141. (1992). (1986) Merger Returns and the form of financing. (1981). P. T. New York. J. no. (2002) A portfolio of Decision Processes: Rationality in Capital Investment Under Perception of Risk and Uncertainty. vol..323-329. Journal of Financial Economic. A. pp.R. “Global R & D and UK Competitiveness in M. E. (2006) Entrepreneurship Successfully Launching New Ventures. Strategic Management Journal. Asquith. M. H. E. A and Hodson C (1992). 3. Casson ( ed”) . Barringer. pp.” Unpublished Working Paper. “The Risk And Return Of Venture Capital. M. and Kay. New York: John Wiley & Sons Cantwell J. Wiley & Sons Bryman. Oxford: Oxford University Press Cafarelli. Working Paper.R. Oxford: Blackwell Cochrane. Asquith. pp. (2007) The Little Book Of Value Investing. Cooke.References and Bibliography Alessandri. D. 2nd edit.F and Mullins. (1993) European Mergers and Acquisitions policy.67-84. Pinches. Browne. D. 76.. V. R. D. London: Basil Blackwell Ltd Datta. Harvard University. Global Research Strategy & International Competitiveness. G & Narayaran. American Economic Review. T. NJ: John. W. R. Developing New Products And Repositioning Mature Brands –A Risk-Reduction System That Produces Investment Alternatives. NJ: Pearson Prentice Hall Bishop. May. P. (1987). and Ireland. . Oxford University Press Inc. B.. Chicago: University of Chicago. Chapel Hill: The University of North Carolina. vol. “Factors influencing wealth creation from Mergers and Acquisitions: A Meta analysis”.12. R.13. (1983) “The gains to bidding firms from Merger”. C. Brunner. (2007) Business Research Methods. vol.

vol.. (2006). Accounting Firm Reputation and Company Valuation Pratices: The UK Evidence. Graham. 2. C (2001). A (2000). Financial Accounting and Reporting 2001-2002. Comments and Discussion. “Building Theories Form Case Study Research”.624-642. P. London: Kogan Page Day. J.F.S (1992). K and Mitchell.532-550 Elliot. M (1966). M (1989).The Importance of M & A for an Increase in Shareholder Value”. J (2002). “An Economic Disturbance Theory of Mergers”. Exeter: University of Exeter Healy. iss.S. New York: Harper Collins Goffin. vol.3. Financial Times Prentice Hall. E. New York: Oxford University Press Hopkins.5. J (2000). pp. How To Win As A Stock Market Speculator.A. Mergers and Acquisitions: A Guide to Creating Value for Stakeholders. Quarterly Journal of Economics.G and Rubak. no. R (2005). May/Jun.. D. Palepu. Fazzari. “Does Corporate Performance Improve After Mergers?”. Journal of Financial Economics Hitt. & Elliot. R. 83. Pharma 2000 Eisenhardt. 187. Financing Constraints and Corporate Investment. R and Harvey. P (1991). New York: Palgrave Macmillan Gort. K.60.M. p. (1986).14. pp. A. (1999) Cross-border Mergers & Acquisitions: global and regional perspectives. “Pharmaceutical Companies in a fever of Merger. Academy of Management Review.” Journal Of Financial Economics. Inc. Iss. pp. Washington Gaughan. Amsterdam Gregory. Brooking Papers on Economic Activity. (2001). 2001. J. Mergers and Acquisitions. Vol. Journal of International Management. B.L (1988). Autumn. Accounting and Business Research. Publishers.207-239 . M. 1986 Duelli. “The Theory and Practice of Corporate Finance: Evidence From The Field. “The Use of Annual Reports By UK Investment Analysis”... K.4.Davidson. Innovation Management Strategy And Implementation Using The Pentathlon Framework.

(2002). A Survey of The Valuation Practices of Professional Accounting Firm. Journal of Financial Intermediation. J. D (2007). 8th edit. Exit Strategy Planning: “Growing Your Business For Sale and succession. Amsterdam Johnson. Practical And Theoretical Consideration In Quality Decision Making – Report By Study Group “How Statistical Method Could Contribute To Building Quality Into The Product”. Jones. G and Scholes. Project Management. pp. Exploring Corporate Strategy. Hampshire: Gower Magenheim M (1998) read as Hitt. N and Scoar. (1992). December 2006. Vol. (2006). C. Niemi. (2003). International Journal of Production Economics. Keane. Financial Times Prentice Hall..A. (2002).7. 2003. NY: Wiley Kaplan N S. Mergers and Acquisitions: A Guide to Creating Value for Stakeholders.. no. S. Market Report 2006: Road Haulage. “Acquisitions as a Means of Restructuring”. T.255.81/82. Earning Management And Conservatism In The Transition Between Private And Public Ownership: The Role of Private Equity Sponsors. T and Liddle. (1993). The Success of Acqusitions: Evidence from Divestitures. 240. S." Unpublished Working Paper. Investments Analysis And Management. “An Approach To Link Customer Characteristics To Inventory Decision Making”. P. p. and Mooradian. University Of Chicago Katz. Middlesex: The Key Note Limited Koliopulos.S Kidd. 47. 11 January. New York: Oxford University Press . Oxford University Press. P and Pirtilla. I. S. Columbia University Kay. K. (2002). Journal of Finance. J. A. J.107-139. (2001). p. S (2006). J. M. R.” Aldershot: Gower Huiskonen. Kaplan.L Törnblom. and Wachter.C. E. R.Hotchkiss.and Weiback M S (1992). (1984). Houtman. vol.1. “Private Equity Returns: Persistence And Capital Flows. Project Finance International Yearbook 2007. M. D. Vol.A.F. (2000). (2002). The European Organization For Quality Control Howkey.. (1998). 8th edit. Foundations of Corporate Success: Distinctive capabilities. London: Thompson Lock. A.

M.. Research Methods For Business Students. T And Vissing-Jorgensen. R. Vol. N. Professional Wealth Management. (2005).. Guide to Business Modelling. R and Sikota. M And Piga. 6352 Shirreff (2004). (1988). 2nd edit. Corporate Finance And Investment Decision And Strategies. Essex: Pearson Scharfstein.Malgarini. A. (2003) “Research Methods for Business Studies Students” 3rd edit. 4th edit. ‘Focus on: Emerging Asset Classes – Introduction – Moving from the fringes into the mainstream’. R and Neale. London: Profile Book Ltd Shleifer. Corporate Finance And Investment Decision And Strategies. (1994). The Dark Side Of Internal Capital Markets II: Evidence From Diversified Inefficient Investment. G (2006). Essex: Prentice Hall Moskowitz. Productivity And Growth. B (2007). New-York: . F (2007). A (2007). K and Birks. NBER Working Paper No. P. Marketing Research An Applied Research. M. (1998). 3rd European Edit. London . Capital Accumulation. New York: Palgrave Malhotra. L.Essex: Prentice Hall Saunders. Rock. and Vishny. A (2002).. M. E. 4th edit. J. “Management Buyouts as a Response to Market Pressure.1. D. Saunders. B (2003). and Friend. and Thornhill. The Mergers & Acquisitions Handbook. Cooperative Decision-Making Under Risk. D. 5th edit. G. pp. Lewis.) Mergers and Acquisitions. Essex: Pearson Education Pike. Essex: Pearson Education Rock.745 – 778 Pike. J.McGraw-Hill. Massachusetts: Kluwer Academic Publisher Tennent.. p. (2006). A.92. London: Profile Books Limited Trovato... Chicago: University of Chicago Press Suijs. R and Neale. “The Return to Entrepreneurial Investment: A Private Equity Premium Puzzle?” American Economic Review. M. (2000). 1 June 2006. Lewes. Dealing With Financial Risk. P and Thornhill.in A” Auerbach (ed.

(2007) “How Consumers Help Build A Brand’s DNA”. Adweek.48. 6th edit. L. Cambridge Voight. L. Vol.” Journal of American Academy Of Business.Tseng. vol. and Lai.com. W.237-243. 1. New York. Stanford University Zikmund. (2001) Growth Option and Investment Under Uncertainty.16. W. J. 5.aboutbarclays. p. J.11. Weng. Retrieved on 19 April 2009 .. Iss. 29 January 2007. C. Orlando: Harcourt Web links http://www. W. (2000) Business Research Methods. pg. March 2007. G. (2007) “ABC Joint Products Decision With Multiple Resource Constraints. Iss.

Sign up to vote on this title
UsefulNot useful