Impact of Acquisitions on Banks a case study of Standard Chartered Bamk

Abstract

The prospect of increasing profitability and market share by acquisition or merger has continued to exercise a more immediate and seductive appeal to organizations than a reliance on organic growth alone, despite the seemingly high risks attached. This thesis attempts to analyze two aspects of an acquisition: (1) whether banks involved in M&A activity are more efficient after the M& A activity than before (2) secondly what is the impact of M&As on the acquired employees in terms of satisfaction, commitment and morale. Financial institutions contribute significantly to the Gross Domestic Product (GDP) and economic performance of Pakistan. Therefore, efficiently operating banks are of huge importance for our economy. This study takes into consideration the acquisition of Union Bank by Standard Chartered Bank and thus deduces the results for the entire banking sector. Obtaining efficiency scores using CAMELS framework of financial ratios it is shown that Standard Chartered Bank performed slightly worse after the acquisition. The human aspects of merger and acquisition and the impact such a major change event has on employee health and well being has received relatively little research attention. Post-merger measures of mental health suggest merger to be a stressful life event, even when there is a high degree of cultural compatibility between the partnering organizations. Acquisitions often have a negative impact on employee behaviors resulting in counter productive practices, absenteeism, low morale and job dissatisfaction. It appears that an important factor affecting the successful outcome of acquisitions is top management’s ability to gain employee trust.