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PhD Research Proposal

The Firm Valuations in Mergers & Acquisitions, and Its


Impacts on Key Financial Ratios
Evidence from Banking Industry in UK over the period of
2000-2013

Yhlas Sovbetov

20 August 2013

Electronic copy available at: http://ssrn.com/abstract=2394509

1. INTRODUCTION
1.1. The Rationale of Mergers & Acquisitions
Companies set various of strategies to enlarge and expand their business to the different
markets in both domestic and global scope. According to Santos et al (2012) and Akgobek
(2012), these strategies generally based on an internally growing which is expressed as raw
organic growth of the firm, or externally expansion that is building strategic corporation
bridges such as mergers and acquisitions (hereinafter referred as M&A). Moreover, according
to Khan (2011), the recent economic difficulties, besides a cut throat competition in the
financial markets, bereave the chance of week structured firms to survive, and forcing them
either to death or M&A. On other hand, as Kyei-Mensah (2011) states, the most recent
business expansions at international level are made through M&A, due to its less cost of
market entrance than other methods, and it is a phenomenon that the corporate investment is
the quickest way to increase shareholders wealth. Plus, according to Kumar and Bansal
(2008), Malucha (2009), and Akgobek (2012) another rationale of preference of M&A
strategy too often is establishing greater market power, and getting a competitive advantage
over rivals. They believe that M&A and other strategic alliances are reforming the structure
of the corporation by empowering its competitive relations in the market.
Furthermore, as rationale of M&A, Roberts et al (2003) opine that besides gaining access to
new markets, seizing access to source of raw materials can be aimed as aftermath of the
strategy for new opportunities. Moreover, as Malucha (2009), Khan (2011), and Akgobek
(2012) state, merge of two entities sometimes creates more new value than sum of each
separate, which is know as synergy effect, and this can entice the firms at tough periods.
Also, the author believes that, one another motive behind M&A is that it helps to increase the
market share and cost efficiency of the firm. Moreover, according to Motis (2007) and
Akgobek (2012), the M&A strategy can be aimed as feasible method of growing in particular
markets by diversifying the risk associated assets, and thus increasing the efficiency.
1.2. Recent M&A Activities in UK
According to Tzonis (2008), since the last three decades, the literature has witnessed
noteworthy increase in the numbers of M&A in the UK. As author states, only during the
period of 1980-1990, two hundred and sixty three (263) public listed firms, and hundred and
thirty seven (137) non financial firms, in total three hundred and ninety three (393) firms

Electronic copy available at: http://ssrn.com/abstract=2394509

were acquired. The cost of these acquisitions were nearly 32bn by the end of the 1995. On
other hand, in recent years, the M&A activities in UK tend to decline. According to Heera
(2013), the volume of deals in the last quarter of 2009 were 1176, whereas in the last quarter
of 2010 it declined to 989. Likewise, the value of deals in the same period of 2009 and 2010,
were 65.5bn and 55.6bn respectively. Moreover, the author states that most of these UK
deals (%15) were made with U.S, (%5) Australia, and (%3) Germany.
Table 1: Recent M&A Activities in UK

Source: (Heera, 2013)


On other hand, in M&A, evaluation of utilities or assets, assessing their fundamental value is
crucial. For instance, Sovbetov (2012) in his study about privatization of stated owned
monopolies, criticises the Thatcher's privatization policy of British commanding height such
as British gas, oil, railway, airways, and etc. He underlines that the Thatcher government
failed in evaluating these state owned utilities, and they were undervalued than their
fundamental value, while their shares were acquired.
1.3. Firm Valuation in M&A
Chaplinsky and Schill (2000) in their notes about valuation methods in mergers and
acquisition, stated that there are a few method tools available in assessing the fundamental
fair value of the enterprise in M&A such as dividend-cash-flow-based approach, earningsbased approach, and assets-based approach. Here, the authors explain the dividend-cash-

flow-based approach as, the value that derived from future cash flows of the firm by
discounting it to the present day values. As well as, Malucha (2009) and Sovbetov (2012), in
their researches, analyzed this method by breaking into two parts: firstly, assuming that
enterprise has infinitive life and fixed future cash flows, and secondly, enterprise with
infinitive life, but annual growth rate was associated to the future cash flows. Here,
Chaplinsky and Schill (2000) underline that, %100 of profit after tax (PAT) are considered as
net free cash flow disregarding the dividend payments and retentions. They firstly, scheduled
annual cash flows of the firm assuming it has infinitive life, and afterwards, they discounted
the cash flows with weighted average cost of capital (WACC) to the present day values. This
WACC can be determined through CAPM calculations. On other hand, Franceschi (2008)
and Sovbetov (2012) state that this method funded on many assumptions and future
estimations. For instance, annual growth percentage g is calculated through past years
figures, to be applied for future cash flow stream. As well as, in case of annual growth (g)
penetrated, when the WACC (Cost of capital, shareholders return) is smaller than g then this
method fails to be valid.
In case of earnings-based valuation approach, Franceschi (2008) and Sovbetov (2012) state
that for public listed firms, the PE ratio should be multiplied with firm's earnings to calculate
the fundamental value of the firm. In case of private companies, the PE ratio should be
borrowed with similar type of company in same industry among listed ones. Also, a dilution
percentage should be considered according to borrowing conditions, restriction of shares and
information of private companies. The authors believe that it is the major limitation of this
valuation method.
In case of assets-based valuation approach, it is one of the mostly used methods where the PE
preserves its uncertainty, it lessens the future assumptions and estimations. However,
according to Sovbetov (2012), it is very dependent to the book values on balance sheet, and
may belie the acquirers or investors in assessing its fair value. As the author and Franceschi
(2008) underlined, another limitation of this method is that, it ignores the intangible assets.
Despite that the effects of these limitations were improved with International Financial
Accounting Standards (IFRS), it still has lacks and difficulties in representing the
fundamental value of the enterprises. In addition, in his report Franceschi (2008) claim that,
the book value (henceforth referred as BV) dependency of this method can be mitigated by
the formula that he mentioned in his study as following.

1.4. Research Objectives


The process of M&A from firm valuation till aftermath impact was subjected to many
researches so far. Similarly, in this research the author interests in researching the business
valuation techniques that used in M&A activities in UK, as well as, the early impacts of
M&A process on the acquirer firms key financial indicators. Here is the brief summary of
objectives of this research.
-

To examine the impact of M&A on profitability of the acquirer banks

To examine the impact of M&A on liquidity of the acquirer banks

To examine the impact of M&A on capital structure of the acquirer banks

To analyze the bid strategies in UK bank acquisitions

To analyze the firm valuation techniques in M&A in UK bank industry

2. LITERATURE REVIEW OF EMPIRICAL STUDIES


Till today, many researchers such as have investigated both the firm valuations techniques
during M&A activities (Chaplinsky & Schill (2000) in US; Franceschi (2008) in Italy;
Malucha (2009); Sensarma & Jayadev (2010) in India; Kyei-Mensah (2011) in US), and the
impacts of M&A on acquirer firms key financial indicators (Sudarsanam et al (2001), Guest
(2007), and Tzonis (2008) in UK; Salleh et al (2013) in Malaysia; Badreldin & Kalhoefer
(2009) in Egypt; Maditinos et al (2009) and Liargovas & Repousis (2011) in Greece;
Dutescu et al (2013) in Romania; Akben-Selcuk & Altiok-Yilmaz (2011) in Turkey;
Govender (2010) and Wilson (2013) in South Africa; Omah et al (2013) and Akinbuli &
Kelilume (2013) in Nigeria; Gersdorff & Bacon (2009) and Burns & Liebenberg (2010) in
US; Kumar & Bansal (2008), Khan (2011) and Poornima & Subhashini (2013) in India;
Samitas et al (2008); Altunbas & Ibanez (2004), Renneboog & Szilagyi (2007), and Cocris et
al (2011) in Europe; Cloodt et al (2006) in America, Asia, Europe; Zhou et al (2011) in Asia
and Latin America; Simoes et al (2012) in Latin America).
2.1. Empirical Researches in Europe
Altunbas and Ibanez (2004) investigated the strategic similarities of M&A activities and its
impact on the banks performance in Europe through the sample of 225 banks over the period

of 1995-2004. They utilized the descriptive, multivariate, and regression analyses to assess
the impact. The authors found out that the bidder banks are more cost efficient than target
ones. But on other hand, in case of credit risk profile, the authors found that the targets have a
better view than the bidder ones. In addition, they also stated that the efficiency and deposit
strategies of mergers are improving their performance in both case of domestic and crossborder M&As, but the dissimilarities in capital structures could be conducive to lower
performance.
Cocris et al (2011) investigated the impact of M&As on banking performance in Europe
through the 18 bank acquisitions over the period of 2001-2009 via utilizing the descriptive,
regression, and correlation analyses. As an aftermath, they found that the M&A helps to
improve the technical efficiency of target banks. More interestingly, the authors conclude that
the M&A activities do not have significant impact on market value of the bidders shares.
Renneboog and Szilagyi (2007) studied the impact of M&A activities on bond performance
in Europe through the 225 M&A events over the period of 1995-2004 by utilizing the
multivariate and regression analyses. As a result, they observed that the bonds underperform
in cross-border M&As comparing to domestic ones. They also stated that the European
bidders are less sensitive to the asset and financial risk effects of M&As.
Liargovas and Repousis (2011) investigated the impact of M&As on performance of Greek
banking sector through the sample of 26 bank acquisitions over the period of 1996-2009 by
utilizing regression analysis. As a conclusion, they found the similar result as the Cocris et al
(2011) found in their study, that the M&A activities do not create a wealth on both bidder
and target banks. However, they got conflicted in results with Cocris et al (2011), in case of
impact on share values that they observed positive abnormal returns on both bidder and target
share values before ten days of announcement.
Maditinos et al (2009) studied the same subject with Liargovas and Repousis (2011), exactly
in the same region. But the authors focused only on two bank acquisitions in 1999: IonikiLaiki bank and Pisteos bank. They exercised covariance, regression, and correlation analyses,
and found that the M&A announcements have temporary impact on both bidder and target
shares. This result showed the similarity with Liargovas and Repousis (2011) ones.
Franceschi (2008) studied the valuation techniques in M&A activities over the period of
2002-2007 in Italy through 19 consultant reports by utilizing regression analysis. As a result,

he found that Italian consultant firms have used several valuation methods with wide range of
exchange ratios, but the dividend discount model (excess capital) was the most preferred one
among others.
Dutescu et al (2013) investigated the impact of M&As on performance of target firms in
Romania through the sample observation of 10 M&A events over the period of 2007-2009.
They examined the transaction analysis of these M&As with the data of 2007, and compared
it with three-years post-acquisition profitability data of 2009. As a result, they found that %80
of related activities in Romania were not profitable for the target firms.
On the contrary to Dutescu et al (2013), Akben-Selcuk and Altiok-Yilmaz (2011) studied the
impact of M&As on performance of acquirer firms in Turkey through the sample of 63 M&A
events over the period of 2003-2007 by utilizing regression analysis. As an aftermath, they
found that the returns of the stocks who involved in M&A activities are higher than average
return of the industry. Moreover, they found that the profitability of acquirers tends to decline
after conclusion of acquisition processes.
Guest (2007) in his study researched the impact of M&As on executive compensation in UK
through 4528 M&A events over the period of 1984-2001, and found significant pay increase
in the year following acquisition. But afterwards he observed a decline in following two years
that offset the initial increase. He opines that, the reason of initial increase could be the bonus
payments besides permanent salaries. Moreover, he found no evidence of compensation is
related to the acquisition performance, whether it is good or bad strategic decision, effects the
compensation increase.
Sudarsanam et al (2001) in their study of glamour acquirers and value acquirers postacquisition performance in UK by analyzing 543 acquisitions during 1982-1995, have found
that shareholders of value acquirers (low market-book value) experienced higher returns than
glamour acquirers (high market-book value) in the first three years of post-acquisition period.
Similarly, they found that the acquirers with low PE ratio have outperformed the acquirers
with higher PE ratio over the first three years of post-acquisition period.
Tzonis (2008) investigated the influences and reasons of M&As in UK through the sample of
470 M&A events over the period of 1986-2005 by observing the t-statistic test. As a result, he
concluded his research by stating that no evidence of M&A impact on stock market and
business cycle at industrial level, but there is a strong one in aggregate level.

Table 2: Summary of Empirical Research Results in Europe


Reference

Origin

Sample

Period

Model

Result

Europe

225
Banks

19952004

Descriptive Analysis
Multivariate
Regression

1. Bidders are more cost efficient than targets.


2. Total assets of bidders are 7 times larger
than targets.
3. ROE has increased after M&A.

Europe

18
Bank
M&As

20012009

Descriptive Analysis
Regression Analysis
Pearson Correlation

1. The M&A improves the technical efficiency


of the target banks.
2. The M&A does not
change market value of the bidder's shares.

Europe

225
M&As

19952004

Multivariate
Regression

1. European bidders are less sensitive to the


asset and financial risk effects of M&As.
2. Bonds underperform in cross-border M&As
relative to domestic deals.

Greece

26
Bank
M&As

19962009

Regression Analysis

1. The M&As do not create a wealth on bidder


or target banks.
2. Before 10 days of announcement the share
values of bidder and target banks get positive
abnormal returns.

Greece

2 Bank
M&As

1999

Descriptive Analysis
Autocorrelation
Autocovariance
Autoregressive

The announcements have temporary impact on


the value of bidder and target stocks.

Italy

19
Reports

2002
2007

Regression Analysis

The Dividend Discount Model - Excess Capital


is the most used valuation method.

Dutescu et al
(2013)

Romania

10
M&As

20072009

Transaction Analysis

%80 of M&As in Romania in 2007 were not


profitable.

Akben-Selcuk
& AltiokYilmaz (2011)

Turkey

63
M&As

20032007

Regression Analysis

1. Returns for stocks who involved in M&As


exceed average industry returns.
2. Profitability of acquirers declined after
acquisitions.

Regression Analysis
t-test

1. There is strong increase of pay in crossborder acquisitions at international levels, but


no of higher pay increase in domestic ones.
2. There is no evidence of differences in pay
changes between public and private
acquisitions.

Altunbas &
Ibanez (2004)

Cocris et al
(2011)

Renneboog &
Szilagyi (2007)

Liargovas &
Repousis (2011)

Maditinos et al
(2009)

Franceschi
(2008)

UK

4528
M&As

19842001

Sudarsanam et
al (2001)

UK

543
M&As

19821995

t-test

1. Shareholders of value acquirers experienced


higher returns than glamour acquirers.
2. The acquirers with low PE ratio
outperformed the higher ones.

Tzonis (2008)

UK

470
M&As

19862005

t-test

There is no evidence that M&As have impact


on stock market and the business cycle at
industrial level, but there is strong one in
aggregate level.

Guest (2007)

Source: (The authors own elaboration)

2.2. Empirical Researches in America


Gersdorff and Bacon (2009) examined the M&A activities in US, and its impact on market
efficiency, through observing 20 M&A events in the period of 2007 by utilizing regression
analysis tool. As a result, they found that there is an action in stock prices of acquirers only
after thirty days from announcement. This result is conflicting with Tzonis (2008), Cocris et
al (2011), and Liargovas & Repousis (2011), but it is consistent with Akben-Selcuk and
Altiok-Yilmaz (2011), and Sudarsanam et al (2001) findings.
Burns and Liebenberg (2010) pursued an observation about US takeovers in foreign markets
over the period of 2008-2009 by analyzing 1967 M&A events via multivariate regression
analysis tool. As a result, they found that US acquisitions had a positive impact on emerging
market firms, and small impact on developed markets.
Kyei-Mensah (2011) investigated the impact of M&A activities on wealth of US firms
through analyzing 401 M&A events over the period of 1988-2008 by utilizing descriptive,
regression, correlation, students test, and Wilcoxon-signed rank test analyses. As an
aftermath, he found that after M&A announcements the cumulative abnormal returns of
acquiring shareholders tend to decline significantly within comparison to the acquired ones.
Zhou et al (2011) in their research of bank M&A activities in emerging markets of Asia and
Latin America, found that the announcements create a return for target bank shareholders, but
there is no evidence that the acquirers wealth are decreased. They pursued this observation
through 132 bank M&A events over the period of 1998-2009 by exercising multivariate
regression analysis tool.
Simoes et al (2012) pursued the similar investigation as Gersdorff and Bacon (2009) did in
2009. In this study, the authors sampled the region considering only Latin American
countries such as Argentina, Brazil, and Chile. As an observation nearly 53 M&A events over
the period of 1995-2008 were analyzed. It means 742 rows of data were penetrated through
regression analysis. As a result, they found that M&A announcements signalled value
creations in above mentioned countries stock markets.

Table 3: Summary of Empirical Research Results in America


Reference

Origin

Sample

Period

Model

Result

Gersdorff &
Bacon (2009)

US

20
M&As

2007

Regression Analysis

There is an action in stock prices of acquirers 30


days after announcement.

Burns &
Liebenberg
(2010)

US

1967
M&As

20082009

Multivariate
Regression

US

401
M&As

19882008

Descriptive Analysis
Regression Analysis
Correlation Analysis
Wilcoxon-signed rank
t-test

Zhou et al
(2011)

Asia &
Latin
America

132
M&As

19982009

Multivariate
Regression

The M&A announcements in Asia and Latin


America created return for the shareholders of
target banks, whereas there was no evidence that
the wealth of acquirer shareholders is diminished.

Simoes et al
(2012)

Latin
America

53
M&As

19952008

Regression

M&A news signalled value creation in the


Argentinean, Brazilian, and Chile stock market.

Kyei-Mensah
(2011)

U.S. acquisitions have a positive impact on


emerging market firms and small impact on
developed markets.
After announcement, cumulative abnormal
returns of acquiring shareholders declined
significantly within comparison to the acquired
ones.

Source: (The authors own elaboration)


2.3. Empirical Researches in Africa
Badreldin and Kalhoefer (2009) studied the impact of M&As on Egyptian banks
performances, by analyzing 10 banks M&A events through the period of 2002-2007. They
selected three-years pre-acquisition data, and three-years post-acquisition data. They
compared the pre and post profitability data, and found no evidence of M&A impacts on
banks profitability.
Govender (2010) in his study investigated the relationship between the accounting quality
and performance of acquirers by analyzing 797 South African acquisitions through the period
of 2001-2009. The author found similar result as Sudarsanam et al (2001) found, that the
value acquirers outperformed the glamour acquirers in the post-acquisition period. Moreover,
the author observed that an increase in earnings of the glamour acquirers in last three years of
pre-acquisition period, and a decrease in earnings in first three years of post-acquisition
period.
Akinbuli and Kelilume (2013) examined the impact of M&A activities on firms growth and
profitability in Nigeria. They sampled 10 banks M&A events over the period of 2004-2008,
by utilizing regression analysis. As a result, they found that the impact of M&A activities
have temporary effects on firms growth and profitability. Therefore, they as a conclusion they
stated that M&As are not a solution for the financial distress in Nigeria bank industry.

Omah et al (2013) pursued an investigation in the same region and industry with Akinbuli
and Kelilume (2013). As a difference, the authors here, sampled 20 banks M&A events over
the period of 2001-2010 by aiming to measure the M&A effects on shareholders value. As a
aftermath of regression analysis, they observed a marginal increase in shareholders value
creation.
Wilson (2013) in his study in South Africa, investigated the trends and determinants of
M&A activities targeting the country firms, by observing 1072 M&A events through the
period of 1991-2011 via regional, Poisson distribution, negative binomial regression, and
variance analyses tools. As a result, she found that UK and US are the main acquirers of
South Africa firms. Moreover, as determinants of M&A, she found the share price, market
size, and macroeconomic stability are main factors in the country in M&A activities.
Table 4: Summary of Empirical Research Results in Africa
Reference

Origin

Sample
10
Bank
M&As

Period

Model

Result

Badreldin &
Kalhoefer (2009)

Egypt

20022007

Comparative Analysis

There is no evidence that M&A has impact on


banks profitability.

Govender (2010)

South
Africa

797
M&As

20012009

Descriptive Analysis
T-test

Akinbuli &
Kelilume (2013)

Nigeria

10
Banks

20042008

Regression Analysis

Omah et al
(2013)

Nigeria

20
Banks

20012010

Regression Analysis

There is a marginal positive impact of M&As


on shareholders value creation.

19912011

Descriptive Analysis
Regional Analysis
Poisson Distribution
Negative Binomial
Regression
Variance

1. United Kingdom and United States of


America are the main acquirers of South Africa
firms.
2. Share prices, Market size, return rate, and
macroeconomic stability are important
determinants of location of M&A activity.

Wilson (2013)

South
Africa

1072
M&As

Source: (The authors own elaboration)

1. The value acquirers outperformed the


glamour acquirers in the post-acquisition
period.
The M&As helps improve financial distress
only on temporary basis.

2.4. Empirical Researches in Asia


Cloodt et al (2006) in their research about impact of M&As on innovative performance of
firms in high-tech industries, found that non-technological M&As have negative impact on
acquirers performance due to its extra costs in repairing the disruptions that occurred in
adoption period. They pursued this research through 2429 M&A events in America, Asia, and
Europe over the period of 1985-1994 by utilizing regression analysis.
Kumar and Bansal (2008) investigated the impact of M&A activities on Indian firms
performance, through sampling 74 M&A events related to the period of 2000-2003. By
comparing the gathered data, the found that %60 of acquirers improved their performance in
post-acquisition period. Meantime, the authors state that the working capital and gearing ratio
are increased in post-acquisition period.
Khan (2011) in his research aimed to explore the rationales and driving forces of M&A
activities in India banking sector, by focusing on 4 bank M&A events over the period of
2005-2011 via t-statistic test tool. As a result, he found significance difference between pre
and post merger ratios such as NP (net profit), ROCE, ROE, and DE(debt-equity).
Sensarma and Jayadev (2010) explored the same country by the sample of 27 bank merger
events over the period of 1986-2003. He aimed to assess the efficiency, economic scale, and
valuation effect of these merger events by exercising regression analysis. As a result, he
found that in forced mergers, none of the shareholders gain value, but in voluntary mergers,
the bidders shareholders gain more that targeted ones.
Poornima and Subhashini (2013) pursued an investigation aiming to assess the impact of the
type of M&As on Indian firms performance by observing 33 M&A events in the period of
2009-2010. They utilized the paired t-test analysis, and found that the type of mergers is
irrelevant to the acquirers performance in Indian industries.
Finally, Salleh et al (2013) in their study, measured the efficiency of M&As in Malaysian
telecommunication industry by applying multiple regression analysis to the 6 banks data
relating the period of 2005-2010. As a result, they found that asset efficiency of acquirers
tend to decrease after M&A. Moreover, they observed that high sequence of acquisitions
decreases the asset efficiency of acquirers.

Table 5: Summary of Empirical Research Results in Asia


Reference

Origin

Sample

Period

Model

America,
Asia,
Europe

2429
M&As

1985
1994

Regression Analysis

Kumar &
Bansal (2008)

India

74
M&As

20002003

Comparative Analysis

Khan (2011)

India

4 Banks

20052011

t-test

There is significance difference between the


pre and post merger NP, ROCE, ROE, DE.

Sensarma &
Jayadev (2010)

India

27
Banks

19862003

Regression Analysis

In forced mergers, none of shareholders


(bidder/target) gain value. In voluntary
mergers, the bidder's shareholders gain more
than the targeted ones.

Poornima &
Subhashini
(2013)

India

33
M&As

20092010

Paired t-test

The type of mergers does not have impact on


acquirer's performance.

Malaysia

6 Bank
M&As

20052010

Multiple Regression

1. Asset efficiency of acquirers tend to


decrease after M&A.
2. High sequence of acquisitions decreases the
asset efficiency of acquirers.

Cloodt et al
(2006)

Salleh et al
(2013)

Result
Non-technological M&As have negative
impact on acquirer's performance due to its
extra resources to repair the disruptions.
Acquirers performance has been improved in
post-M&A period.

Source: (The authors own elaboration)

3. RESEARCH METHODOLOGY
3.1. Type of Research
Starting with theoretical bases, and following the empirical research results, this research will
make an observation as parallel with the characteristics of deductive reasoning approach. As
the impacts of M&A on key financial ratios in UK bank sector over the period of 2000-2013,
are aimed to be measured, the type of this research should be based on quantitative approach.
3.2. Data Description & Analysis
All banks which involved to the M&A activities in the period of 2000-2013 should be sorted
out, and their data should be gathered from annual reports that is the secondary data source.
As key financial indicators the profitability, efficiency, and structural ratios are involved to
the analysis. These ratios are described below.
a) Profitability Ratios: Net Profit (NP), ROE, ROA, ROCE
b) Efficiency Ratios: Current Ratio (CR), Liquidity Ratio (LIQ)
c) Structural Ratios: Debt-Equity (DE), Total Debt to Total Capital (DC)

At least 25 M&A events are aimed as observation number for this research, and taking into
consideration of twelve-years data, that will formulate a table with 350 rows of data. All the
related data are aimed to be sorted out, and penetrated through the regression and correlation
analysis to observe the impacts.
3.3. Research Framework
First concept of the research is based on pre and post M&A periods. Five-years pre M&A
period, and five-years post M&A period would be satisfactory to compare and assess the
M&A impacts on banks key financials. Second concept of the research is based on evaluating
the impacts with regression and correlation analysis without classifying as pre and post
periods. In addition, both of these concepts would involve the examination of the most
accurate valuation techniques in UK banking M&A activities.
3.4. Research Hypothesis
The following hypotheses are formulates as research questions.
H1: There is a significant impact of M&As on profitability of the banks.
H2: There is a significant impact of M&As on efficiency of the banks.
H3: There is a significant impact of M&As on capital structure of the banks.
H4: All valuation methods of banks in UK have similar results, therefore their preference are
irrelevant.
3.5. Research Difficulties
According to the Sovbetov (2013), the banks have different structure than other financial
institutions. The differences in regulatory regime, and the rules described in the Basel
Accords, distinct the banks from others. One another limitation is the lack of transparency of
the bank reports, as Sovbetov (2013) underlined. The reliability of this research would base
on annual published reports of the related banks. In addition, as a final limitation, the
metaphor of too big to fail gives to banks a privilege effigy with government backing
supports and tolerance. Therefore, investigate these firms become more difficult than other
financial institutions.

4. TIMESCALE
In order to manage the time efficiently, the following grant chart was formulated by the
author of this research proposal.
Figure 1: Time Schedule of this Research Proposal
Literature Review
Market Observation
Empirical Results
Methodology
Data Collection
Data Analysis

Source: (Designed by author)

5. REFERENCES
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