LIST OF ABBREVIATIONTerms ExplainM&A Mergers and Acquisitions SCB Saigon Commercial Joint Stock BankSHB Saigon Hanoi Bank Ho Chi Minh City Development Joint Stock Commercial APB Bank Joi
Reasons for the S{UỦY G3 TH TH HH Hy 1 2 Objectives of the SfUy Gv nọ HH 2 3 Questions of the StUyy - 5 4 kg Ho TH HH HH ng 3 4 Objects and scope of the Study
Before 2012, Vietnam experienced a significant boom in its commercial banking sector, with the number of banks reaching 42 by the end of this period Many of these banks, often small in scale, struggled with capital mobilization and lending, leading to increased deposit rates and reliance on the subprime market Consequently, the bad debt ratio among credit institutions rose, resulting in instability within the banking system Additionally, the global financial crisis of 2008 negatively impacted Vietnamese commercial banks As Vietnam integrated into the global economy, the influx of foreign banks presented both opportunities and challenges, intensifying competition within the domestic banking landscape.
The rising demand for modern banking services has revealed significant limitations within the domestic banking system, particularly for smaller banks that struggle with weak competitiveness and inadequate management skills Their fragmented business operations, outdated technology, and subpar product and service quality fall short of global banking standards As a result, many of these banks are confronted with substantial risks and are teetering on the edge of bankruptcy.
In response to challenges such as cross-ownership issues, elevated non-performing loans (NPLs), and the inadequate financial strength of certain commercial banks, the Vietnamese Government launched the Project on Restructuring the Credit Institution System on March 1, 2012 This initiative, known as Project 254, is part of a broader strategy aimed at revitalizing and developing Vietnam's banking sector through 2025.
By 2030, as outlined in Decision 986/QD-TTg dated August 8, 2018, the restructuring of commercial banks will focus on effectively addressing bad debts and strengthening weak credit institutions through market-driven methods The aim is to reduce the number of underperforming credit institutions and establish a healthier banking environment The State Bank of Vietnam is promoting voluntary mergers, acquisitions, and consolidations among financial institutions, ensuring that the legal rights and interests of all parties are protected This approach is a key strategy for restructuring the Vietnamese banking sector.
The Vietnamese banking system has seen seven successful mergers and acquisitions (M&A) involving 14 commercial banks, resulting in a reduction of seven banks in the country Notably, only the mergers between HDB and Dai A Bank, and Sacombank and Southern Bank were voluntary, while the other transactions were mandatory due to the weaknesses of the acquired banks This M&A process in Vietnam's commercial banking sector has progressed through two phases, with the first phase beginning in 2011.
The period from 2015 to 2020 is ideal for a systematic evaluation of bank mergers and acquisitions (M&A) during the restructuring process By analyzing these deals, we can draw conclusions and provide recommendations aimed at enhancing the financial efficiency of M&A activities within the banking sector.
Starting from the above-mentioned issues, I conducted a thesis on “Impact of mergers and acquisitions on the financial performance of acquiring banks in bank system in Vietnam ”.
This research evaluates the impact of mergers and acquisitions (M&A) on the financial performance of acquiring banks in Vietnam's banking system from 2011 to 2020 It explores theories related to M&A activities and the financial performance of Vietnamese commercial banks, focusing on the relationship between M&A and the efficiency of banking operations The study analyzes trends in key financial indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) to assess their effects before and after M&A transactions.
This study evaluates the effects of mergers and acquisitions (M&A) on the financial performance of acquiring banks in Vietnam, specifically focusing on profitability indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) before and after M&A transactions Additionally, the research aims to propose strategies to enhance the effectiveness of M&A activities within the Vietnamese banking sector.
The research will try to answer two main questions, such as:
(a) How do M&A activities have impacts on the financial performance of acquiring banks?
(b) What recommendations should be made to improve the financial effectiveness of M&A activities in the banking system in Vietnam?
4 Objects and scope of the study
This research focusess on the impact of M&A on financial performance of 6 acquiring banks in Vietnam.
The financial performance ratios, including Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM), were analyzed for six acquiring banks: Saigon Commercial Joint Stock Bank (SCB), Saigon Hanoi Commercial Joint Stock Bank (SHB), Ho Chi Minh City Development Joint Stock Commercial Bank (HDB), Vietnam Maritime Commercial Joint Stock Bank (MSB), Joint Stock Commercial Bank for Investment and Development of Vietnam, and Saigon Thuong Tin Commercial Joint Stock Bank (STB) This analysis covers a three-year period prior to the mergers and acquisitions (M&A) and extends six years post-M&A, spanning from 2012 to 2020.
Value Of the S{UY - G0 TH HH TH nọ HH 3 6 Research Structure
Given the substantial financial and non-financial resources dedicated to mergers and acquisitions (M&A), it is essential to assess their actual impact on the financial performance of commercial banks in Vietnam Understanding this impact will provide valuable insights for stakeholders involved in the M&A process.
Research on the effects of mergers and acquisitions (M&A) on bank performance will enable policymakers to establish new standards for appropriate levels of M&A activity The insights gained from this study will inform more effective strategies for managing a firm's liquidity levels.
This study enhances understanding of the significance of mergers in evaluating performance, particularly for current investors and customers of commercial banks within the competitive banking industry.
This study serves as a foundational resource for researchers focusing on mergers and acquisitions, particularly in examining their effects on the financial performance of commercial banks It aims to enhance the existing body of theoretical and empirical knowledge, paving the way for future investigations in this critical area of finance.
This research aims to propose various solutions to enhance banking performance, specifically benefiting executives and managers of commercial banks The study will focus on banks that have recently undergone mergers, analyzing their relative performance to provide valuable insights.
This study's findings will enhance the understanding of investor behavior regarding bank mergers, acquisitions, and restructuring Additionally, it aims to identify research gaps and serve as a valuable reference for future studies in the field of mergers and acquisitions.
Chapter 1 : Literature review and Theoretical framework Chapter 2 : Methodology
Chapter 3 : Reserach resultsChapter 4 : Discussion and recommendation
LITERATURE REVIEW AND THEORETICAL
Literature review about impacts of M&A on financial performance of
acquiring banks 1.1.1 Researches about M&A and impacts on acquiring banks’ activities
Globalization, technological advancements, and recent financial crises have significantly transformed banking systems worldwide, prompting national authorities to deregulate and restructure their domestic industries In this context, mergers and acquisitions (M&A) have emerged as a vital strategy for many countries, leading to extensive academic research focused on the outcomes of these M&A activities.
Mergers and acquisitions (M&A) significantly influence the restructuring of banking systems across various countries Research by Hernandez et al (2015) on 51 financial institutions during Spain's 2008-2012 restructuring indicated that a well-controlled transition from savings banks to traditional banks enhances both solvency and value While comprehensive evaluations of M&A outcomes were premature, initial findings suggested a positive impact on Spain's financial system Similarly, Focarelli et al (2001) assessed 2,500 banks from 29 OECD countries, revealing that cross-border M&As improved efficiency and profitability Elikplimi et al (2012) identified a two-way relationship between banking development and cross-border M&As in 11 African nations from 1993 to 2008, reinforcing the positive correlation However, contrasting studies exist, such as Rezitis (2008), which found that M&A negatively affected Greek banks' technical efficiency, and Focarelli et al (2002), which reported no profitability gains in Italy's banking sector from 1985 to 1996 despite increased service income These discrepancies highlight the varying impacts of M&A, influenced by factors like bank size, strength, structure, and national financial management practices.
A study conducted in 2011 revealed that the restructuring of banks in Egypt significantly enhanced the efficiency and solvency of the banking system Similarly, in Germany, despite ongoing debates regarding the effects of mergers and acquisitions (M&As) on the banking sector, the consensus is that these M&As have generally been successful, leading to improved performance among financial institutions (Koetler, 2005) While the bank restructuring process can be costly and time-consuming, larger banks that can absorb greater losses and effectively monitor smaller banks play a crucial role in identifying and addressing their issues, ultimately reducing the overall costs of bank reconstruction (Iwanicz-Drozdowska et al., 2016).
Numerous studies indicate that mergers and acquisitions (M&A) serve as a significant mechanism for facilitating the restructuring of the banking industry across various countries.
Empirical research on mergers and acquisitions (M&A) reveals varied impacts on bank performance Sufi (2004) highlighted that smaller organizations tend to experience more favorable outcomes from M&A compared to larger firms, which may face greater management challenges Weingberg (2007) found that mergers enhance the performance of the newly formed company by increasing market power and consolidating skills and competencies, allowing for better management of challenges Furthermore, Mantravadi and Reddy (2008) observed that the post-merger phase is often marked by positive market fluctuations for the company, although the effect on profitability remains minimal.
A recent study by Akpan et al (2018) analyzed the effects of mergers and acquisitions (M&A) on the operating performance of Nigerian banks from 1995 to 2012, revealing a notable enhancement in the performance of investment banks post-M&A Similarly, Abdou et al (2016) identified a positive correlation between M&A activities and the financial performance of Nigerian banks Additionally, Hassen et al (2018) investigated the impact of M&A on a sample of 60 banks, further contributing to the understanding of M&A effects in the banking sector.
Between 2005 and 2013, a study of 17 European countries found that mergers and acquisitions (M&A) had a positive long-term impact, achieving their intended objectives Additionally, Awan and Mahmmod analyzed the effects of M&A on the performance of seven commercial banks in Pakistan from 2002 to 2011, utilizing four key performance ratios—liquidity, profitability, solvency, and investment—and concluded that M&A positively influenced the banks' performance.
Research indicates that nearly half of mergers and acquisitions (M&A) fail to achieve their intended goals (Badreldin & Kalhoefer, 2009) A study by Afza and Yusuf (2012) on the banking sector in Pakistan from 1998 to 2006 found that while mergers improved cost efficiency, they did not significantly enhance profit efficiency Similarly, Abbas et al (2014) assessed the financial performance of ten banks post-M&A from 2006 to 2011 and reported no notable improvements in performance based on key ratios such as profitability, efficiency, leverage, and liquidity Beccalli and Frantz (2009) also noted that M&A activities were linked to a slight decline in profit efficiency, despite a significant rise in cost efficiency Additionally, Sanni and Adereti (2009) highlighted various reasons for M&A failures, including misaligned goals due to company size, irrelevant risk diversification, and potential cultural barriers within corporate policies and operations.
(2018) exploreed the post-initial public offering (IPO) operating performance of
A study of 245 European firms that completed M&A transactions post-IPO revealed that acquiring IPO firms generally did not perform differently than non-acquirers, yet experienced a notable decline in operating performance typical of most IPOs Research by Shaban et al (2019) on two Jordanian banks indicated that M&A led to a decrease in performance during the first two years, followed by gradual expansion, attributing fluctuations to challenges in managing increased assets Conversely, other studies, including those by Asimakopoulos & Athanasoglou (2013), Marimuthu & Ibrahim (2013), and Castellet & Fernandez (2005), argued that M&A had no significant impact on bank performance Additionally, Liargovas and Repousis (2011) found that M&A did not create wealth for banks.
In brief, the studies had rich comments on the impact of M&A activities on bank performance: positive impact, negative influence and even no effect.
Table 1.1: Research results about impacts of M&A on the aquiring banks
Positive Weingberg (2007), Reddy (2008), Akpan et al.
(2018), Abdou et al (2016), Hassen et al (2018), Awan and Mahmmod.
Negative Badreldin & Kalhoefer (2009), Abbas et al (2014),
Beccalli va Frantz (2009), Giudici va Bonaventura
(2018), Afza va Yusuf (2012), Shaban et al (2019).
&Ibrahim (2013), Castellet & Fernandez (2005), Liargovas va Repousis (2011)
1.1.2 Researches about financial performance of banks
Recent research on bank mergers and acquisitions (M&A) has significantly increased over the past decade, leading to a rise in empirical studies on the topic (Pham et al., 2015) To evaluate the success of M&A transactions in the banking sector, two main empirical methodologies are commonly employed: event studies and performance studies (Marques-Ibanez).
The event study methodology effectively assesses the impact of mergers and acquisitions on shareholder wealth, as noted by Altunbas (2004) and Beitel & Schiereck (2001) In contrast, the operating performance approach evaluates the financial performance of banks before and after M&A activities, highlighted by Akpan et al (2018) and Pazarskis et al (2014) This dual analysis provides a comprehensive understanding of the effects of M&A on both shareholder value and operational efficiency.
European Central Bank (2010) lists Return on Assets (ROA), Return on Equity (ROE) and Net Interest Margin (NIM) as three ratios measuring financial bank performance.
Bikker and Bos (2008) analyzed various financial ratios to assess bank performance, including the ratio of total interest income to total assets, annual interest expenses to total funds, personal expenses to total assets, other non-interest expenses to fixed assets, customer loans to total assets, and equity to total assets.
In a study conducted by Murthy (2004), key financial ratios of major commercial banks in Oman were analyzed, revealing that bank profitability can be effectively evaluated using three primary metrics: return on assets (ROA), return on equity (ROE), and net interest margin (NIM).
Bogdan and Ihnatova (2014) conducted a study on 143 commercial banks across five Central and Eastern European countries to assess their profitability from 2004 to 2011, utilizing return on average assets, return on average equity, and net interest margin as key performance indicators.
Fatima et al (2014) analyzed financial banking performance by examining six key ratios: profit after tax (PAT), return on assets (ROA), return on equity (ROE), debt to equity ratio (D/E), deposit to equity ratio (DE/E), and earnings per share (EPS) They utilized a Samples T-Test in SPSS to evaluate the impact of mergers and acquisitions (M&A) on these financial ratios across ten banks in Pakistan.
EMPIRICAL RESULTS occ ceeceeccesecseeeneteeeeseeeeeseseeeaeeeesseeeeeeaes 49 3.1 M&A in Banking sector in Vietnam during the period 2011-2020
Impacts of M&A on financial performance of acquiring banks in
Vietnam 3.2.1 Ratio trend analysis of acquiring banks
During the study period, all acquisition banks reported return on equity (ROE) values below 16% BIDV had an ROE of 10%, which is considered average, while other banks exhibited inconsistent index fluctuations, resulting in low profitability The lowest ROE was recorded by SCB bank, with a concerning figure of nearly 1%.
Before the merger and acquisition (M&A) period, acquiring banks such as SCB, SHB, HDB, MSB, BIDV, and STB experienced a decline, largely attributed to the overall economic conditions in Vietnam, which were negatively affected by the economic crisis and rising inflation.
Figure 3.1: ROE of acquiring banks from three years before and six years after
——SCB ===SHB HDB ===MSB ===BIDV ===S[IB
The profitability of many banks in Vietnam has declined, with some smaller banks even reporting losses and a rise in bad debts, putting the banking and financial system at risk for the coming years In response, the government issued Decree No 141/2006/ND-CP on November 22, 2006, mandating legal capital levels for credit institutions, which has compelled banks to rapidly increase their equity This decline in profits alongside the swift growth in equity has led to a significant drop in the Return on Equity (ROE) index for banks prior to mergers and acquisitions.
SCB experienced a significant decline in after-tax profit, dropping from 314.734 million in 2009 to just 63.835 million in 2012 Despite this downturn, the bank's equity surged, reaching 11,370,065 million in 2012, which is 2.3 times higher than its value in 2009 Additionally, SCB's return on equity (ROE) ratio reflected this profitability struggle, falling from 8.51% in 2009 to a mere 0.56% in 2012.
Unlike other banks affected by fluctuations in the gold market, SHB effectively anticipated changes in the VND/USD exchange rate, allowing it to adapt its business strategies to align with economic developments and build customer trust As a result, SHB reported significant financial growth, achieving a profit after tax of VND 318,405 million in 2009, which surged to VND 1,687,239 million in 2012—over five times the previous amount Additionally, SHB's equity value saw remarkable growth, rising from VND 2,043,043 million to VND 8,962,251 million during the same period Despite the increases in both profit and equity, SHB's return on equity (ROE) declined, indicating challenges in its profit-generating capacity.
The pre-merger period for HDB, spanning from 2010 to 2013, saw a notable rise in profit after tax in 2011, followed by a gradual decline leading to a decrease of 51,813 million dong by 2013 compared to 2010 This trend is outlined in Official Letter No 6554/NHNN-TTGSNH dated August 27, 2010, from the State Bank of Vietnam.
HDB has significantly boosted its equity, reaching 8,599,548 million by 2013, which marks a fourfold increase since 2010, despite a declining trend in the Return on Equity (ROE) ratio during the same period.
Between 2012 and 2015, MSB experienced a trend similar to HDB, marked by a rise in equity alongside a decline in after-tax profit during the pre-M&A period The Return on Equity (ROE) fell from 2.44% in 2012 to 1.01% in 2015, indicating a notable decrease in the bank's efficiency in utilizing equity and reflecting challenges in the bank's operational health.
From 2012 to 2015, BIDV demonstrated strong financial performance with consistent after-tax profit growth, achieving figures of 2,571,943; 4,051,008; 4,985,667; and 6,376,756 million dong respectively The bank's equity also rose significantly, increasing by 9,842,165 million dong during the same period Notably, BIDV maintained an average Return on Equity (ROE) exceeding 10%, showcasing resilience in a challenging economic landscape This success can be attributed to the bank's adherence to regulatory guidance and its ability to adapt to market changes while leveraging internal strengths However, following a year of mergers and acquisitions, BIDV experienced a gradual decline in ROE, dropping from 16.66% to 14.12%.
Between 2012 and 2015, Sacombank (STB) experienced significant growth in profit after tax, peaking in 2013 However, this trend reversed post-2013, with profits declining to VND 647,919 million by 2015 Similar to other acquirers, STB's equity rose sharply prior to mergers and acquisitions, yet the return on equity (ROE) demonstrated a downward trend throughout this timeframe.
One year after the implementation of mergers and acquisitions (M&A), most banks show minimal overall change While banks like SHB, HDB, and MSB experience an increase in return on equity (ROE), others, including SCB, BIDV, and STB, exhibit a declining trend.
After implementing M&A | to 2 years, banks have more positive changes, their ROE indicators show growth to 2020.
In 2014, following two years of mergers and acquisitions, SCB launched a range of tailored loan and service products, including car loans and fixed asset investment loans The bank implemented proactive debt recovery measures, utilized risk provisions, and sold debts to VAMC to manage non-performing loans (NPLs) As a result, SCB's NPL ratio decreased to 0.5%, enhancing its financial and safety ratios and fostering business development momentum.
In 2014, SCB achieved a profit after tax of VND 90,237 million, marking a remarkable 103% increase from 2013 Despite minimal growth in equity during this time, SCB's return on equity (ROE) rose compared to previous years However, in 2015 and 2016, the bank focused on restructuring efforts from the 2012-2014 period while enhancing its financial capacity, resulting in an equity increase of over VND 2,000,000 million since 2014 Unfortunately, due to credit risk provisions, SCB's after-tax profit fell short of expectations, leading to a decline in profits during 2015 and 2016, with ROE also decreasing to 0.69%.
From 2014 to 2016, SCB's credit growth was strategically enhanced, leading to a significant restructuring of assets for improved safety and efficiency In 2017, SCB concentrated on expanding its lending market share with key products aimed at individual customers and SMEs, such as consumer loans and small business loans This focus resulted in a 1.5-fold increase in profit after tax compared to 2016, while equity remained stable as capital was raised in the previous years Additionally, 2017 marked a positive trend in return on equity (ROE) for SCB.
Similar to SCB, SHB's ROE recorded similar results with the superiority of
2013, a decrease in 2015 and 2016 In 2017, the ROE increased again.
After two years of mergers and acquisitions (M&A), banks such as HDB, MSB, BIDV, and STB have demonstrated significant growth in their Return on Equity (ROE) Throughout the M&A process, all these banks reported positive profits Although BIDV, SCB, and SHB experienced a decline in ROE due to capital raising efforts, they have since shown a positive upward trend in their ROE performance.
In general, the ROE of the acquiring bank are positive, tending to be negative in the pre-M&A period, but showing signs of prosperity after M&A.
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4.2.1.1 Commercial banks promote self-restructuring, improve operational capacity Commercial banks participating in M&A deal have a good starting point in terms of financial capacity, operation scale often brings into play optimal advantages after implementing M&A.Currently, in addition to the largest commercial banks in the top of the commercial banks in Vietnam such as
Major commercial banks in Vietnam, such as Vietcombank, Vietinbank, BIDV, and Agribank, along with prominent joint-stock banks like Techcombank, VP Bank, and MB, dominate the market However, many other banks in the region face challenges related to management, financial stability, and technological capabilities To enhance their operational efficiency, these banks must focus on improving their core business activities, minimizing investments in unproductive areas, and regularly reviewing their operations Additionally, it is crucial for commercial banks to assess their ownership structures and limit undesirable cross-ownership relationships.
Commercial banks must focus on the self-restructuring of their financial resources, operational models, governance systems, distribution channels, banking technology, and human resources By enhancing operational efficiency, they can align their practices with sustainable development goals.
4.2.1.2 Develop a strict and specific deal plan
The success of a commercial bank merger and acquisition (M&A) deal hinges on the consensus among all parties involved, which is evident throughout each stage of the M&A process A well-defined implementation plan with a strategic roadmap is essential to safeguard the interests of all stakeholders Thorough preparation, including market research, product development, and customer targeting, is crucial to create value for all parties involved Additionally, identifying the appropriate type of M&A is vital, as each transaction type is subject to specific laws, mechanisms, and processes Ultimately, the most critical factor in achieving a successful bank M&A deal is the agreement between the buyer and seller, prompting banks to focus on various key issues.
When selecting a partner for a deal, banks prioritize factors such as capital, assets, and human resources to ensure a successful collaboration.
For banks to successfully navigate mergers and acquisitions (M&A), information transparency is crucial in identifying suitable partners When transparency is prioritized, it fosters easier discussions and planning for effective mergers Careful evaluation of timing and M&A strategies is essential to mitigate negative market reactions upon deal announcements Selecting the right target banks aligned with business objectives enhances synergy among M&A participants Banks must establish clear criteria for choosing target banks, set specific goals, and assess potential advantages and challenges throughout the M&A process Each bank should define its long-term development strategies while adapting to macroeconomic conditions A thorough evaluation of the target bank's management capabilities and leadership quality is vital for reaching consensus during M&A The success of an M&A deal largely hinges on this consensus, with proper preparation, situation analysis, and a clear understanding of financial and cultural challenges Key considerations include strategic goals, talent retention, and fostering synergy in financial resources and corporate culture Ultimately, successful M&A transactions depend on selecting the right target bank and having well-defined goals and long-term strategies to navigate potential difficulties.
Effective preparation is crucial for the negotiation process, particularly in mergers and acquisitions (M&A), as it directly impacts the rights and interests of all stakeholders involved To ensure a successful M&A deal, parties must establish clear criteria, goals, and expectations, fostering high levels of consensus and agreement Thoroughly understanding these elements can significantly influence the future activities of the involved parties.
M&A transactions go beyond merely merging buyers and sellers; they aim to create significant value through a comprehensive integration of relevant factors Effective resolution of post-M&A challenges occurs only when all parties are aligned Commercial banks recognize that M&A can lead to economic advantages, such as increased scale, enhanced reputation, and expanded networks However, achieving consensus during negotiations can be challenging, particularly when two merging banks hold similar market positions and both parties seek management control.
An effective information management policy is crucial for commercial bank mergers and acquisitions (M&A), as accurate information plays a vital role in financial transactions To mitigate the risks associated with unofficial information that could negatively impact the bank's business, management should strategically disclose essential information to relevant parties, fostering trust and accountability within the organization Transparency in financial data—including revenue, profits, outstanding loans, capital mobilization, and bad debt—enhances a bank's ability to attract potential partners for mergers When information is transparently managed, both domestic and foreign investors can easily engage with the bank, facilitating the pursuit of larger and more effective partnerships.
Selecting the right M&A consulting organization is crucial for the success of any merger or acquisition deal The expertise of consulting firms, including brokerage, auditing, and legal services, plays a significant role in shaping the outcome of the transaction A lack of professionalism from these organizations can jeopardize the interests of all parties involved Therefore, it is essential for the parties to clearly define the nature of the transaction—whether it's a merger, acquisition, or share sale—before engaging a consulting firm A competent consulting team will guide the parties in understanding the regulatory landscape, transaction mechanisms, and the formulation of M&A contracts, ultimately facilitating a smoother deal process.
The value of a bank is determined by the agreed price between involved parties, influenced by the products and services offered and the bank's image in customers' minds In M&A transactions, a selling bank can achieve its desired price only by effectively showcasing its strengths to the buying bank Therefore, it is crucial for selling banks to assess their strengths and weaknesses, while merchant banks must evaluate the benefits gained from each transaction Multiple valuation methods may be employed to yield reasonable results, as global M&A experience indicates that cash flow, rather than income, primarily dictates deal value In Vietnam, M&A deals typically consolidate balance sheet data from each bank to create a unified financial overview post-merger Additionally, the choice of valuation method is influenced by various factors, including brand reputation and operational efficiency, necessitating a combination of pricing approaches for optimal outcomes.
When valuing a transaction, it is essential to consider the differences in certainty, reliability, and suitability among various methods Key factors include analyzing financial statements, assessing the involved parties and their assets, evaluating profitability, and reviewing recent transactions for relevant comparisons.
Branding is a crucial intangible asset for banks, significantly influencing customer perception and the bank's interests following mergers and acquisitions (M&A) Each bank has the autonomy to develop a unique business strategy tailored to its characteristics and target market segments, with its brand identity reflecting its distinct personality and corporate culture During M&A, it is essential to adapt these branding elements to align with new circumstances, aiming to enhance shareholder value and market dominance Post-merger, evaluating the strategy for a new brand is vital for retaining existing customers and attracting new ones, while also considering the perspectives of management, shareholders, and clients Customer stability and trust are pivotal for a bank's growth in the aftermath of a merger, as they mitigate liquidity risks and capital shortages It is common for banks to establish strong customer relationships; thus, during M&A, maintaining effective customer care policies is critical to prevent clients from switching to competitors, especially if their needs are not adequately addressed during the transition.
To ensure successful M&A implementation, it is essential that customer policies are communicated effectively to all members of the organization This approach fosters customer confidence in transactions and guarantees the continuity of normal banking operations throughout the process.
4.2.1.3 Continue to deal with bad debts
Commercial banks serve as financial intermediaries, connecting economic organizations, businesses, and individuals by supplying essential capital for production and business activities However, various subjective and objective factors can lead to customers being unable to fulfill their debt obligations, resulting in bad debts for banks This issue is exacerbated during economic downturns, where an increase in bad debts can hinder credit availability and threaten the liquidity of banks Consequently, bad debts significantly impact the overall business performance of banks, making it crucial to accurately assess these debts during mergers and acquisitions before any transactions are finalized.