Events surrounding Royal Bank of Scotland acquisition of NatWest - Dissertation Example

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This research project involved analysis of the events surrounding the acquisition of National Westminster Bank Plc by Royal Bank of Scotland through identification of the factors that led to the business consolidation and the impact of acquisition on RBS’ shareholders’ wealth. …
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Events surrounding Royal Bank of Scotland acquisition of NatWest
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Download file to see previous pages The analysis of the paper shows that the motives behind mergers and acquisitions of NatWest or other business consolidation across Europe are the synergies and various integrative benefits that can be derived in banking industry. Major impact of macroeconomic factors motivating such practices were domestic deregulation, lower interests rates leading to sliding interest income margin and rising growth. Moreover, the 1990s financial dominance was shifted from Eastern financial institutions to the Western banks and technological development especially in terms of IT, changes in corporate thinking and increasing importance of corporate governance practices and shareholder wealth creation were other major factors that motivated the banks to look for possible acquisitions. Therefore, costs reduction, revenue augmentation and NatWest’s wide presence attracted a much smaller banks like RBS to bid and acquire Britain’s one of the oldest banking institutions. The analysis of RBS annual reports provides valuable insight in to whether this has increased RBS’ shareholders’ wealth. The results show that there have been more than expected revenues and costs savings in post acquisition period while the net interest income, total income, and EPS have all increased in absolute terms. However, the comparison of RBS and NatWest with the market returns shows that no value is created for the shareholders in post acquisition period. The reason could have been that RBS continued its acquisition spree without consideration of shareholders, which shows poor governance practices in RBS Group....
Drivers of NatWest Acquisition 13 2.1.5 Structure of Global Banking Industry in 1990s 15 2.1.6 Impetus of Mergers in UK Banking Industry 16 2.1.7 Impact of Consolidation on Firms’ Efficiency 20 3. Chapter 3 22 3.1 Critical Evaluation and Analysis 22 4. Chapter 4 35 4.1 Conclusion and Recommendation 35 Reference List 37 Bibliography 44 1. Chapter 1 1.1 Project Background & Introduction The expansion of world trade as evident from financial and economic globalisation has provided substantial benefits to the countries. Much of these benefits have been a result of the mergers and acquisition activities that has taken place around the world in every sector. Improvement in cost to income ratio is one of the major reasons for merger and acquisition. At the same time, acquisition has another broad aspect. This helps in increasing market share and reducing competition significantly, which enhance firm’s presence and bargaining power over not only consumers but also suppliers. This paper is a critical analysis of one of these acquisitions that took place between RBS and NatWest at the turn of 21st century in UK. This project is outlined in four sections. The first section provides the research aim and objectives. The second section is the literature review, which encompasses the definitions of merger and acquisition, background of NatWest and RBS, drivers of NatWest acquisition, structure of global banking industry, and the impetus for consolidation in general and in UK banking industry and finally, the impact such consolidation has had on the structure and efficiency of the merged banks. The third section is the critical evaluation of the theories in the light of the acquisition’s effects on both the banks. And lastly, the fourth section concludes the paper. 1.2 Project ...Download file to see next pagesRead More
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