Consolidation and Bank Performance

Compare and contrast today’s structure versus historical structures. Why has consolidation occurred and who will experience benefits and losses – customers, the institutions, etc. Why have bank failures occurred? Are there any consequences of consolidation and failure in the industry?

In this chapter, we first provide coverage of expansion through corporate takeovers and an overview of the consolidation process. Then we present the acquisition method of accounting for business combinations followed by limited coverage of the purchase method and pooling of interests provided in a separate sections.

The purpose of this research is to review the impact of mergers and acquisitions on credit unions as it applies to the principles of money and banking. Specifically we will review the impact of the merger between E & A Credit Union and First Community Federal Credit Union. Mergers and acquisitions are very common in today’s financial environment. According to the Glenn Christensen (2015), there has been an increase in approved mergers again this year, June 2015 over June 2014. Not only are there more and more mergers, the size of the merger is growing as well (Christensen, 2015). As we look at the history of financial institutions over the years, mergers and acquisitions are very common. Mergers and acquisitions have had a significant impact in the decline of the number of banks since 1985 (Mishkin, 2016). Over the past few decades, thousands of banks merged (Wilcox & Dopico, 2011). Credit unions have seen significant numbers in terms of mergers and acquisitions spanning over many years. In 1969 there were 23,866 credit unions with assets totaling $16 billion (Wilcox & Dopico, 2011). This number dropped dramatically by 2010 to only 7,491 credit unions (Wilcox & Dopico, 2011). The assets grew to $927 billion equaling 7.6% of bank assets in comparison to the only 3% held during 1969 (Wilcox & Dopico, 2011). Although there was a 70% reduction in the number of credit unions, credit unions grew in their share of the market..

The largest banking merger in Australia happened by Westpac merging with St. George Bank limited in 2008,which was dramatically decrease impact of the global recession on Westpac’s balance sheet. St. George Bank was one part of Westpac divisions. Furthermore, Westpac turned to be one of authorized deposit-taking institution (ADI) in 2010 (Westpac, n.d.).

This consolidation move, according to the company representatives, will help the company gain competitiveness to face the government attempt

A merger is basically a deal that unites two existing companies into one company. This is usually done to expand a company’s reach, expansion into new segments or simply to gain market share. There are different types of mergers that exist as a result of the different reasons that companies might have to merge. The 5 main types include:

Consolidation: any industry consolidates when one of the steps in the commodity chain becomes controlled by a finite number of producers. In the beef industry consolidation would be at the slaughterhouse and meat packing level. One company would consolidate the steps of production into one facility. Also companies would consolidate the market by only having a small amount of corporations controlling the slaughterhouses and meat packing. Currently, four companies control 87% of the meat production.

What is a merger? Most people would think that it is some sort of combination of two or more companies to be one. A simple synonym describing this noun would be a: combination, fusion, integration, confederacy or even an incorporation. Common small business approach of a merger is to make all work efficient and at a reduced cost to promote new products and services within another venture doing roughly the same ratio of productivity. Within the mergers concept, there is often a term used as discounted cash flow (DCF). This logic is strictly for assessment of the companies. There are both advantages and disadvantages for DCF. The advantages of this model allow for changes in cash flows in the future. Cash flows are estimated based on their value

In the late nineteenth century, there was a sharp increasing in the number of mergers happening in the United States, peaking in 1899. Over 1,800 companies became a part of consolidations, many of which had a significant market share in their respective industries. Seventy-two of the consolidations controlled at least 40% of the market, as well as forty-two controlling at least 70% of the market. These consolidations had a lasting effect on the country, with a number of them being ranked among the nation’s largest 100 companies half a century later. Naomi Lamoreaux analyzes this merger movement, as well as its causes and effects in The Great Merger Movement in American Business, 1895-1904. There were many scholarly articles written both for

extracted from the combination of the two businesses. For example, such a consolidation would allow

Here the basis for consolidation focuses on control, irrespective of the form of investee. An investor has control over investee when it has rights to variable returns from its involvement with investee and has the ability to affect those returns through its power over the investee.

The mix of at least two organizations into another organization, where every one of the organizations lose their character is named as a merger through consolidation.Here, the gained organization exchanges its advantages, liabilities and shares to the procuring organization in return of money or shares.

Bank mergers have increased rapidly in the past few years. Many wonder are so many mergers really necessary. The consolidation of two large banks could affect the relationship between the community, customer and the employee. Along with the merging of the two industries comes change for everyone involved. There is a lot of competition in the banking industry, which is the main reason for so many bank mergers. Bank mergers can improve competition and can be beneficial to the community if both financial institutions are in agreement with doing what is best for everyone involved. Banks should consider other options before taking a chance on losing good customers, loyal employees and trust in the community.

In merger: The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stocks. Two companies become one, decison is mutual. They are not idependent anymore

Foremost among the global trends in the world’s financial industry are consolidation and convergence. These two encompass financially driven mergers within domestic market.