'The Effects of Mergers and Acquisitions (M&A) on Share Price' (With Reference to UK Top Five Banks from 2006-10)

Abstract

The primary objective of this research is to examine the share price trend of UK Banking Companies who were involved in M&A activity in the post-acquisition period and to investigate to what level large banking corporations remained successful in improving their open market share price by undertaking such strategic decisions. Since it is always the core intention of any type of commercial organisation to improve their profitability, it was an aim of this study to try to determine how much the profitability of such organisations is correlated with M&A activity and to look at the different factors which lead to a successful merger or takeover.For this research a case study is developed based on UK’s top five banks according as measured by market capitalisation on the London Stock exchange. These Banks are HSBC Holdings Plc, Standard Chartered Plc, Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland (RBS) Group Plc.There are primarily two types of analysis, accounting and statistical, used to support the conclusions. The findings of the case study revealed that share prices and the profits of the companies cannot be increased by the acquisition of similar companies. At the end of the study it is recommended that the trend of share price should be studied with overall economic conditions of the country (especially as in this case the period studied covers the development of the sub-prime mortgage crisis), demand and supply functions of this market to produce the better results.