Value Creation at the Ongoing Consolidation of the European Banking Markets

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Abstract
The European banking landscape has experienced a profound restructuring since the mid 1980ties and still is substantially changing. In the last three years, prior to the formal start of the European Monetary Union, we counted more completed large mergers and acquisitions (M&A) than in the period between 1985 and 1997. We examine the value implications of 98 large national and international mergers and acquisitions of exchange listed European acquiring banks. Mergers and acquisitions with associated sectors, such as insurance and securities are considered as well. Effects are analyzed for the shareholders of the targets, the bidders and the combined entity of targets and bidders. We find, consistent with prior research, that the shareholders of the targets receive a considerable and significant positive revaluation of their shares. Effects for bidders are mostly insignificant. But, on an aggregate basis mergers and acquisitions of European banks do still create value. However, we detect a shift in results over time. European acquiring banks in large deals have experienced significant negative cumulated abnormal returns since 1998. Moreover, we find that in particular cross-border transactions of European banks seem to be value destroying.