Proceeding to a more detailed analysis of specific aspects, Tables 5.3 and 5.4 contain data on types of growth activity from 2000 to 2008.
Table 5.3 shows domestic and cross-border (intra- or extra-EU) deals by the banking groups, while Table 5.4 displays sector and cross-sector deals for
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Table 5.3 Domestic vs cross-border M&As (2000–8) Groups (Country) Domestic
M&A
Cross-border intra-EU M&A
Cross-border extra-EU M&A
BBVA (ES) 23 11 37
Banco Santander (ES) 23 34 41
BNP Paribas (FR) 31 58 40
Société Générale (FR) 25 29 37
Crédit Agricole (FR) 27 33 15
HSBC (UK) 20 27 42
RBS (UK) 47 16 12
(Continued)
M&A intra-EU M&A extra-EU M&A
Barclays (UK) 207 34 22
Crédit Suisse (CH) 22 0 70
UBS (CH) 21 0 149
ING (NL) 33 69 59
Intesa SanPaolo (It) 168 29 35
UniCredit (It) 55 65 23
Deutsche Bank (DE) 55 246 127
Commerzbank (DE) 15 24 17
Total 772 675 726
Source: Own processing of Zephyr Database.
Table 5.4 Sector vs cross-sector M&As (2000–8)
Groups (Country) Sector M&A Cross-sector M&A
BBVA (ES) 48 23
Banco Santander (ES) 62 36
BNP Paribas (FR) 64 65
Société Générale (FR) 33 58
Crédit Agricole (FR) 35 40
HSBC (UK) 45 44
RBS (UK) 9 66
Barclays (UK) 34 229
Crédit Suisse (CH) 21 71
UBS (CH) 44 126
ING (NL) 29 132
Intesa SanPaolo (It) 151 81
UniCredit (It) 92 51
Deutsche Bank (DE) 88 340
Commerzbank (DE) 30 26
Total 785 1,388
Source: Own processing of Zephyr Database.
egies pursued by the banking groups. Further information on industry clas- sification and country of target is contained in subsequent tables for a more complete and accurate vision of M&A types used.
Table 5.3 illustrates how at an aggregate level, the banks pursued geographi- cal expansion principally through cross-border operations, and only to a lesser extent through domestic operations during the time horizon. This reflects the maturity of domestic markets and the limited growth opportunities associ- ated with maturity. More than half of the 2,173 M&As performed by the 15 banking groups from 2000 to 2008 were cross-border deals (1,401), compared to only 772 domestic deals. The 1,401 cross-border M&As were fairly evenly distributed between intra-EU deals involving banks from different EU coun- tries (675) and the slightly higher number of extra-EU deals involving EU and non-EU groups (726). Bank intermediaries based in Europe, attracted by promising growth prospects and less stringent regulations on bank ownership structure, directed their attention towards Rest of Europe, North America, Latin America or Asia Pacific. This aspect will be explored in detail later.
Growth objectives were pursued across national borders, and in particular beyond the EU (cross-border extra-EU deals) by several banking groups with a significant international dimension, including BBVA, Banco Santander, Société Générale, Crédit Suisse, UBS and HSBC. Similarly, ING, Deutsche Bank, BNP Paribas, UniCredit, Crédit Agricole and Commerzbank showed a clear preference for cross-border deals over domestic deals, despite con- cluding more cross-border intra-EU M&As than extra-EU M&As.
Three banks were an exception to the general trend. In the period 2000–8 RBS, Barclays and Intesa SanPaolo pursued a geographical strategy diametri- cally opposed to that of the other banks in the study. In particular, they sought growth through domestic rather than cross-border deals, focussing principally on the home market. All three completed a higher number of domestic M&As than cross-border M&As; this focus on the domestic market was not however incompatible with a widespread international presence (Barclays) or significant cross-border acquisitions (see the disastrous RBS takeover of ABN AMRO).
The domestic and cross-border deals indicated in Table 5.3 relate to total M&As on banking (sector) and non-banking (cross-sector) targets. Table 5.4 provides information on the number of sector and cross-sector deals com- pleted by the 15 banks from 2000 to 2008, though there is no breakdown of domestic and cross-border (intra- and extra-EU) activities. Further details of these aspects are shown in later tables.
From Table 5.4 it emerges that the majority of banking groups sought to diversify through cross-sector rather than sector deals. More than half of the 2,173 M&As carried out by the banks during the time horizon involved non-banking targets (1,388). M&As on banks (sector) totalled 785.
ING and Deutsche Bank. On the other hand, the M&A activities of BNP Paribas, Crédit Agricole, HSBC and Commerzbank were more evenly bal- anced between sector and cross-sector deals. Finally, the growth strategies of BBVA, Banco Santander, Intesa SanPaolo and UniCredit focused principally on banking targets, evidence of a preference for more traditional types of business. For the latter banks the number of sector M&As was significantly higher than cross-sector deals, in contrast with the general tendency at an aggregate level.
Table 5.5 provides more detailed information on domestic M&As by the banks in the study, and in particular the distribution of deals between sector and cross-sector.
Table 5.5 Domestic sector and cross-sector M&As (2000–8) Groups
(Country)
Banks Insurance Asset Manage ment
& Wealth Manage ment
Invest ment Services
Consumer Finance
Specialty Finance
Other
BBVA (ES) 11 7 – 1 – – 4
Banco
Santander (ES) 9 6 – 3 – 1 4
BNP Paribas (FR) 12 5 – 3 4 1 6
Société Générale
(FR) 7 – 4 – – – 14
Crédit Agricole
(FR) 4 9 1 2 – – 11
HSBC (UK) 2 – – 4 1 2 11
RBS (UK) 1 5 2 4 1 1 33
Barclays (UK) 18 59 14 6 20 1 89
Crédit Suisse
(CH) 4 3 3 – – – 12
UBS (CH) 5 1 1 – – – 14
ING (NL) 3 6 1 4 – – 19
Intesa SanPaolo
(It) 106 11 4 15 2 – 30
UniCredit (It) 26 5 – 12 5 1 6
Deutsche Bank
(DE) 7 9 3 4 3 – 29
Commerz bank
(DE) 5 – 1 – 2 – 7
Total 220 126 34 58 38 7 289
Source: Own processing of Zephyr Database.
1 M&As on bank targets (sector M&As);
2 M&As on non-banking targets (cross-sector M&As). To facilitate analysis and provide a more precise and complete picture of alternative targets, the six main non-bank activities that attracted the interest of the major- ity of the banking groups were identified as: (1) Insurance; (2) Asset Management & Wealth Management, including Non-equity Investment Instruments; (3) Investment Services; (4) Consumer Finance, including also Consumer Services and Mortgage Finance; (5) Speciality Finance; (6) Other, comprising activities not included in the previous categories, such as for example Real Estate and Information Technology.
From analysis of Table 5.5 it emerges that, as seen above, at an aggregate level domestic deals were principally cross-sector. More than half of the M&As undertaken by the 15 banks during this period (772) involved non- banking (552) rather than banking targets (220).
A preference for domestic consolidation through cross-sector rather than sector deals was by all the banks in the study to a greater or lesser extent, and was particularly strong in the case of two British banks, Barclays and RBS, the German Deutsche Bank and the Dutch ING conglomerate. As the data in Table 5.5 indicate, the business strategies implemented within national borders by these four banks had a significant impact on the aggregate number of domestic cross-sector M&As during the time horizon.
Other banks in the study clearly favoured non-banking targets in their domestic M&A activities, including Société Générale, Crédit Agricole, HSBC, Crédit Suisse and UBS. For groups such as BBVA, Banco Santander, BNP Paribas, UniCredit and Commerzbank, the difference between the number of cross-sector and sector deals was insignificant.
The behaviour of one bank was entirely different. Intesa SanPaolo chose not only to focus on the domestic market but also showed a clear preference for banking targets: of the 168 M&As concluded within national borders, 106 were sector deals while only 62 were cross-sector deals.
Thanks to detailed information in Table 5.5 on the various non-banking targets acquired by the banking groups in the study, it was possible to iden- tify which sectors were the focus of domestic cross-sector M&As during this period.
In particular, it can be seen from Table 5.5 that the 552 domestic cross- sector deals principally involved targets operating in the sectors Other (289) and Insurance (126), followed at a distance by Investment Services (58);
Consumer Finance (38) and Asset Management & Wealth Management (34).
A very limited number of domestic cross-sector M&As were seen on Specialty Finance targets (7).
sification on the domestic market, despite the centrality of Other and Insurance. Table 5.5 reveals also that Barclays’ high level of diversification into non-banking sectors had a significant impact on aggregate data.
However, Barclays was not the only bank in the study to adopt a strat- egy of broad diversification on the domestic market over the period under review. Other banks – BNP Paribas, RBS, Deutsche Bank, Intesa SanPaolo and UniCredit – pursued targets in a wide range of non-banking sectors, showing varying degrees of preference for Insurance and Other. The two Italian banks were typified by frequent domestic M&As, some on targets in Investment Services.
The domestic growth strategies of the remaining banking groups focussed almost exclusively on targets in Insurance and/or Other sectors. A very limited number of transactions involved Investment Services (BBVA, Banco Santander, Crédit Agricole, HSBC and ING); Asset Management & Wealth Management (Société Générale, Crédit Suisse and UBS); or Consumer Finance (Commerzbank).
Table 5.6 presents data on cross-border intra-EU M&As in the period 2000–8.
For each of the 15 banks in the study, the following information on tar- gets is specified:
1 Country of origin (Western Europe or Eastern Europe);
2 Industry classification, with a distinction between banking (cross- border intra-EU sector) and non-banking deals (cross-border, intra-EU cross-sector). The non-banking sectors are those highlighted in Table 5.5 (Insurance; Asset Management & Wealth Management; Investment Services; Consumer Finance; Specialty Finance and Other).
From the analysis of Table 5.6, it can be seen that at an aggregate level the cross-border intra-EU deals concluded by the banking groups in the study were principally cross-sector. More than half of the 675 consolidation operations involved non-banking targets (407); the remainder were banking targets (268).
Only a small minority of banks in the study conducted more cross-border intra-EU cross-sector M&As than sector M&As. Nevertheless, these cross-sector transactions had a significant impact on aggregate data.
In particular, Table 5.6 reveals three different types of behavioural approach to cross-border intra-UE sector and cross-sector M&As:
1 banks with a marked propensity for non-banking targets, such as Deutsche Bank, ING, Société Générale and Barclays. Of these four, the German Deutsche Bank and the Dutch ING stand out for their strategic orientation towards cross-sector M&As;
Groups (Country) Banks Insurance Asset Management
& Wealth Management
Investment Services
Consumer Finance
Specialty Finance
Other
WE EE WE EE WE EE WE EE WE EE WE EE WE EE
BBVA (ES) 6 – 1 – 1 – – – 3 – – – – –
Banco Santander (ES) 23 3 2 – – – – – 4 – – – 2 –
BNP Paribas (FR) 25 4 5 – – – 11 – 2 2 2 – 6 1
Société Générale (FR) 7 3 1 – 4 – – – – – – – 14 –
Crédit Agricole (FR) 19 2 6 – – – 3 – – – – – 3 –
HSBC (UK) 12 5 – – 5 – 1 – – 1 1 – 2 –
RBS (UK) 5 1 2 – – – 1 – 1 – 1 – 5 –
Barclays (UK) 9 – 4 – 2 – 5 – 1 – – – 13 –
Crédit Suisse (CH) – – – – – – – – – – – – – –
UBS (CH) – – – – – – – – – – – – – –
ING (NL) 13 4 3 1 2 2 5 – 3 – – 3 30 3
Intesa SanPaolo (It) 9 12 – – – – 3 – – – – 1 4 –
UniCredit (It) 18 28 1 1 – – 5 – 1 1 3 4 2 1
Deutsche Bank (DE) 31 17 33 3 11 1 29 2 2 – 1 – 108 8
Commerzbank (DE) 85 4 3 – 3 – 4 – – – – – 2 –
Total 185 83 61 5 28 3 67 2 17 4 8 8 191 13
Source: Own processing of Zephyr Database.
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3 banks with an even balance of sector and cross-sector cross-border intra- EU M&As, such as BBVA, BNP Paribas, RBS and Commerzbank.
The two Swiss banks (Crédit Suisse and UBS) are absent from Table 5.6 given that cross-border M&As are defined as transactions involving one EU opera- tor and one non-EU operator.
The detailed data on country and industry classification of targets shown in Table 5.6 made it possible to specify:
for cross-border intra-EU sector M&As, the geographical area in which the banks in the study concentrated the highest number of deals (Western Europe or Eastern Europe);
for cross-border intra-EU cross-sector M&As, the geographical area (Western or Eastern Europe) and the sector (Insurance; Asset Management
& Wealth Management; Investment Services; Consumer Finance; Specialty Finance and Other).
In terms of cross-border intra-EU sector M&As, at aggregate level more than half of the 268 external growth operations pursued by the banking groups (185) related to banking targets headquartered in Western Europe, while only 85 involved banks based in Eastern Europe. This preference for M&As on banks in Western rather than Eastern Europe was common to all the banks in the study to a greater or lesser extent, with two exceptions: the Italian banks Intesa SanPaolo and UniCredit, both of which showed a keen interest in the Eastern European banking market. Conversely, BBVA and Barclays did not complete a single acquisition in Eastern Europe, all their targets being based in Western Europe.
In terms of cross-sector intra-EU cross-border deals, at an aggregate level it can be seen that the 407 transactions completed by banks in the study principally concerned targets in Western Europe (372). Of these, 191 deals related to targets in Other, followed at some distance by Investment Services (67) and Insurance (61). There were considerably fewer acqui- sitions of targets headquartered in Western Europe operating in Asset Management & Wealth Management (28), Consumer Finance (17) or Specialty Finance (7).
Only 35 cross-sector intra-EU cross-border M&As were completed on tar- gets in Eastern Europe. These deals involved companies in the sectors Other (13) and Speciality Finance (8), followed by Insurance (5); Consumer Finance (4); Asset Management & Wealth Management (3) and finally Investment Services (2).
Aggregate results on strategic choices at a geographical and business level relating to cross-border intra-EU cross-sector deals do not necessarily reflect
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can be seen that:
1 only a limited number of banks actually conformed to behaviour at an aggregate level, in both geographical and business terms, by focussing on targets in Western Europe in Other, Investment Services and Insurance, and targets in Eastern Europe in Other and Speciality Finance. Examples of such banks are Deutsche Bank, ING, BNP Paribas and UniCredit;
2 a significant number of banking groups preferred cross-sector cross-border intra-EU deals involving targets in Western Europe. These included BBVA, Banco Santander, Société Générale, Crédit Agricole, RBS, Barclays, and Commerzbank. HSBC and Intesa SanPaolo completed only one deal on an Eastern European target from 2000 to 2008. The preferred business sectors of these banks were diversified and included Other, Insurance, Investment Services, Asset Management & Wealth Management and Consumer Finance.