The Impact of Mergers and Acquisitions in the Banking and Insurance Sector

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The Impact of
Mergers and Acquisitions
in the
Banking and Insurance Sector

Table of Contents

Executive summary2
The impact of M&As on employees, staff representatives and their unions2 The impact of M&As on consumers3
The impact of M&As on shareholders5

The impact of mergers and acquisitions on employees in the financial services sector (Tina Weber)6
Introduction6
Trends in employment in the financial services sector6
Table 1: Employment in Financial Services, EU, 1992 and 19987 Trends in the nature and quality of employment in the financial services sector8 The nature of restructuring in the financial services sector9 The impact of restructuring and mergers on working conditions and the industrial relations climate10

The role of employee representation in mergers and restructuring11

Recommendations13

Financial services mergers and acquisitions:
Consumer impacts (Andrew Leyshon)15
Introduction15
Service provision in retail financial services16
Impact on smaller and larger consumers18
Reactions by consumers to mergers20
Conclusions21
References21

The performance of banking mergers: Propositions and
policy implications (Hans Schenk)24
Abstract24
Introduction24
Methodology25
The empirical evidence: event studies27
Table 1: Assessment of the 50 largest bank mergers, 1990-199928 Figure 1: CAR (%) of 87 foreign acquisitions by large Dutch firms, 1990-199530 The empirical evidence: ex-post studies31

Table 2: Selected banks ranked by asset size, 199936
Figure 2: Typical long-range average cost curve37
Purely strategic (bank) mergers: a bit of theory37
Effects of purely strategic (bank) mergers and some policy suggestions39 Conclusions41
References42
The Impact of Mergers and Acquisitions in the
Banking and Insurance Sector

Executive Summary

In January 2000, UNI-Europa Finance commissioned three experts to produce papers on the impact of Mergers and Acquisitions (M&As) in the European Banking and Insurance sector to complement its own internal survey “Mergers & take-overs in the finance sector – Report of a UNI-Europa survey”. One of the papers focuses on the impact of M&As on employees, a second assesses the impact on consumers and the third paper looks at the outcome of M&As on shareholders. This paper summarises the key findings of these papers and highlights the fact that all experts point to the negative impact of M&As in the finance sector.

The impact of M&As on employees, staff representatives and their unions

The paper argues that the European financial services sector is currently undergoing a period of major restructuring, which started in northern Europe in the early 1990s and slowly moved southwards, only reaching the southern European countries more recently. It brought with it a greater diversification of activities and the use of new working methods in order to make savings in efficiency in the light of increasing competition.

Data from Eurostat show that there has been a significant decline in employment in the European financial services sector in all member states (although some countries have suffered more than others). These figures have to be regarded with some caution because of uncertainties over the defining framework applied by Eurostat and over the extent to which outsourced functions are taken into account in the calculation of employment. The UNI-Europa survey estimates that 130,000 jobs have been lost in the last 10 years as a result of mergers and take-overs alone.

On the whole it is often difficult to separate the impact of mergers and the impact of other competitive pressures or the introduction of information and communication technology. What is clear, however, is that these factors are often linked and that merger decisions provide an impetus for workforce...
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