In recent years, commercial banks have merged with securities firms and insuranc

Question

In recent years, commercial banks have merged with securities firms and insurance companies. For this assignment, find two examples of this trend and explain why each bank chose to undertake the merger. What potential downside do you see for each participating bank?

Please do not copy paste from online, few sentences in your own words will be all I need,

Thank you

Explanation / Answer

Merger is a Corporate Activity in which either 2 or more firms come togather or one acquire other. The basic principle lies behind it is to gain the competitive edge which is termed as Synergy. Synergy means the value of merged firm is more than the aggregate value of individual firm before meger (1+1 >2). In case of Banks, they do merger in very strategic manner with Insurance co. Or security firm to use their existing base of customer to sell Insurances or give them financial management services. When an Insurance activity is done by Bank it is called as Bankassurance. See the Merger fails if Banks are not able to fulfill the expextations of market. The potential downside the bank may face in long term and short term are- Loosing the exisiting customers by not focusing on core Business. Downfall in share prices due because of their noviceness in new business leads to losses in initial stages. Loss of employees because they might not been able to gel up with working enviornment of new firm. I can give you some examples relating to Indian Banking Industry Bank of India + Iffco tokio (insurance co ) Statebank of India + Metlife I hope this will help you.All the Best

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