Determinants of Premiums Paid in European Banking Mergers and Acquisitions

36 Pages Posted: 6 Mar 2005

Abstract

This study aims at analysing the determinants of the premium paid in European banking mergers and acquisitions (M&A). This analysis will highlight the reasons for the bank M&A wave during the 1990s.

The empirical study analyses a sample of 81 European banking mergers and acquisitions from 1994 to 2000.

The results show that there are different variables that make the target bank attractive for the acquirer, such as the percentage of equity, the percentage of loans and financial profitability. However, geographical and product diversification have not been considered by the acquirers as a reason to pay higher premiums. Moreover, when analysing a sub-sample of savings banks and cooperatives, it is found that M&A deals have been used as a protection measure to avoid being acquired, since these acquisitions aim at attaining a great size, what implies higher premiums are paid for mergers between equals, for acquisitions of higher banks and by those who show lower growth.

Keywords: Premiums, banking mergers and acquisitions

JEL Classification: G34, G21

Suggested Citation

Diaz Diaz, Belen and Sanfilippo Azofra, Sergio, Determinants of Premiums Paid in European Banking Mergers and Acquisitions. Available at SSRN: https://ssrn.com/abstract=676841

Belen Diaz Diaz (Contact Author)

University of Cantabria ( email )

Avda. Los Castros, s/n
Administracion De Empresas
39005 - Santander (Cantabria)
Spain
+34-942-201660 (Phone)
+34-942-201890 (Fax)

Sergio Sanfilippo Azofra

University of Cantabria ( email )

Avda. Los Castros, s/n
39005 - Santander (Cantabria)
Spain