Mergers and acquisitions in the Australian finance sector have dominated the news in the past week.
Mergers and acquisitions (M&A) in the Australian finance sector have dominated the news in the past week.
Egged on by strong balance sheets and healthy earnings, Australia's finance houses, both large and small, are flexing their muscles and looking around at potential acquisitions.
In the same week that insurance heavyweights Promina and Suncorp-Metway completed their $7.8 billion merger, Bank of Queensland (BOQ) announced it planned to gobble up the Victoria-based Bendigo Bank.
BOQ has offered $2.5 billion for Bendigo, which equates to $17.91 per share. The offer clearly came as a shock to Bendigo's board, which was still mulling things over when Investor Weekly went to press.
For BOQ managing director David Liddy the offer makes complete sense.
"We see this transaction as a clear opportunity for two of the top regional banks to come together as a merged entity to create Australia's 'big small bank' and ensure the sustainability of regional banking services in Australia," Liddy said.
However, not everyone agrees with Liddy. A recent report from analysts at investment bank Credit Suisse takes a more sceptical view of financial services mergers.
"Whilst M&A has virtually been a perennial industry theme within the financial services industry, both in Australia and globally, from the perspective of the acquirer, it has proven to be unpredictable for basing directed investment decisions," the report said.
"In fact, stock market performance and financials industry consolidation have appeared to be a near-inverted relationship in many instances."
Although broadly supportive of BOQ's plans, the report went on to say financial merger integrations had in the past proven to be "difficult, disruptive, risky and with few management teams possessing the considerable leadership skills necessary to execute integrations successfully".
Credit Suisse said many merging entities in the past had experienced integration problems, such as personnel conflicts, strategic differences, high-level management defections and difficulties with expense control.
Moving away from 'big small banks' and towards 'big big banks', ANZ's $300 million bid for full ownership of online broker Etrade Australia looks increasingly under threat.
Not only has Etrade's second largest shareholder, investment house Caledonia Investments, been hoovering up shares like there's no tomorrow, but technology provider IWL said it had taken a strategic stake in Etrade subject to a potential bid of its own.
ANZ's $4.05 per share offer has been described as "highway robbery" by one disgruntled shareholder. Paul Nojin, a director of share research and advisory group Invest4Profit, has told his clients, who he claims own up to 10 per cent of Etrade Australia, to sell at no less than $6.
It's not only in Australia that financial services M&A is making headlines; the Europeans are at it too. British banking behemoth Barclays and Dutch rival ABN Amro are in preliminary merger discussions that could create a bank worth a staggering #86 billion ($210 billion).
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