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Essay / Research Paper Abstract
This 12 page paper looks at the push and pull factors for diversification as well as merger and acquisition in the banking industry. The paper considers the way in which these strategies may increase value in the companies and looks at how this may, or may not, occur. The bibliography cites 13 sources.
Page Count:
12 pages (~225 words per page)
File: TS14_TEbankmrg.rtf
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Unformatted sample text from the term paper:
profit which benefits the shareholder by potentially increasing the dividends, but more importantly increasing the value of the company and supporting the share price. If this is considered in the
banking there are different ways in which this can occur. Diversification is limited, but many companies are entering into related markets, such as insurance and stock broking, either directly or
as agents for other companies. However as the industry is maturing there is increasing merger and acquisition activities. The current economic climate
is difficult for banks, for community banks in the US it is diversification that is seen as one of the best ways in which to increase and support growth. With
the passing of the Gramm-Leach-Bliley Act in 1999 has increased the potential for the diversification as well as mergers and acquisitions between the different types of financial institutions (Shean, 2003).
Resource Bank of Virginia is one such bank, but it is not the only one, in the United States 200 transactions that
involved insurance companies were declared, of these the 70 were acquisition by banks, this indicates a very strong trend (Shean, 2003). In a survey that was undertaken by Grant Thornton,
of 518 community banks, it was found that the ability to find new sources of revenue was the send greatest concern (Shean, 2003). This does appear to be a good
solution, especially when it is considered that in 2002 the revenue created by bank insurance was $11.5 million, this was 28% more than in 2001, however the 2003 figures is
expected to be in excess of $13.5 million (Shean, 2003). As such it is possible to see the potential for increased value by undertaking diversification and making an acquisition
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