AN INVESTIGATION OF THE MOTIVE BEHIND MERGER AND ACQUISITION: A CASE STUDY OF THE BARCLAYS BANK OF SCOTLAND (UK)

Submitted in partial fulfillment of the requirement of the degree of Masters in Business and Administration Of THE UNIVERSITY OF Wales Studied at Holborn College

Authors:

Acknowledgements
I would like to express profound gratitude to my supervisor, Dr Gordon Bowen, for his invaluable support, encouragement, supervision and useful suggestions throughout this research work. His moral support and continuous guidance enabled me to complete my work successfully. His student friendly approach and frankness in delivering suggestions boosted my confidence immensely and I could discuss smallest of the issues with him without any hesitations. One rarely comes across a supervisor who understands and accommodates student`s needs and requests in his own schedule, Dr Gordon Bowen is the one and I am highly obliged to him for that. Moreover, I would like to acknowledge all of my respondents who answered my questionnaires and interviews with patience. I am as ever, especially indebted to my parents, for their love and support throughout my life. I would also like to extend my gratitude to my brother Farooque for his support and understanding during my study.

PROPOSED RESEARCH TITLE: AN INVESTIGATION OF THE MOTIVE BEHIND MERGER AND ACQUISITION: A CASE STUDY OF THE BARCLAYS BANK OF SCOTLAND (UK)

OUTLINE OF THE PROPOSED RESEARCH: The research proposal is based on the case study of business concern called: Barclays Bank in connection with merger and acquisition of small banks policy adopted the Barclays bank. Economic turmoil in any business house increases the fear of merger into and acquisition by bigger businesses. The intention of this study is to identify the key factors behind (of) the motive leading to (behind) merger and acquisition.

RESEARCH BRIEF: This study is to evaluate motive behind merger and acquisition decision making, in financial instruments of banking company: Barclays Bank. The research will be conducted through investigative study comprising of: (i) literature reviews; (ii) interviews; (iii) analysis of companies datasets; (iv) analysis and findings; and recommendations.

ORGANIZATIONAL BACKGROUND Barclays bank was established back in 1690 in London which used the name of its founder James Barclay. During the period between 1905 and 1916, Barclays adopted an acquisition strategy to take over small English banks. In 1917, Barclays acquired London Provincials & South-Western Banks and merged with it. In 1919, Barclays Bank continued its acquisition policy by acquiring the British Linen Bank with a separate entity of board of directors. (http://www.aboutbarclays.com).

Barclays took possession of Woolwich plc in 2000 and closed 177 branches in the United Kingdom in the year 2002. Barclays took over the credit card firm Juniper Bank of United States from Canadian Imperial Bank of Commerce in 2003, re-named by Barclays Bank Delaware. The bank continued to adopt an acquisition strategy and in 2003 acquired Banco Zaragozano, which is (said to be) a Spanish bank. Barclays pioneered the activity of sponsorship of the Premier League by Barclaycard in 2004 (http://www.aboutbarclays.com).

Barclays bought out 54% share for 2.6bn in Absa Group Limited which was the biggest bank of South Africa in 2005. In the year 2006 Barclays took-over the HomEq Servicing Company for $457mn. Barclays bought Equifirst Company from Region Financial Company at a cost of $230mn in 2007. However, Barclays Personal Investment Management in Peterborough was closed and moved to Glasgow, with the loss of 900 jobs (http://www.aboutbarclays.com). Barclays borrowed from the Bank of England an amount of 1.6bn ($3.2bn) as a standby facility in 2007. The credit crisis caused difficulties for banks, and the loss of confidence caused daily inter bank trading to stop. The credit crunch caused Barclays shares to drop 9% in 2007. Barclays generated 5.6 billion by an unconventional privileges subject in July 2008. Barclays took-over the credit card trademark Goldfish at 30mn and increased the number of customers to 1.7M as well as $4.2bn in receivable in 2007. To strengthen the market position, Barclays also took-over the Russias Expobank for 335mn in 2008. Barclays also expanded its activities in Pakistan with initial outlay of $100 million (http://www.about barclays.com).

THE STATEMENT OF THE PROBLEM Globalization demands that companies merge to compete more effectively through consolidation. Since the early 1990s, America and the United Kingdom are countries which have seen increasing tendency of the mergers of giants. (increase.) Some of notable mergers and acquisitions (which) are Pfizer/Pharmacia, GlaxoWellcome/ Smithkline and Beecham, and Astra/Zeneca mergers. The potential benefits expected from mergers and acquisitions include the ability of the companies to cut costs and, hence, find new products, consolidate research departments to enhance efficiency and speed up the development of products, cut down costs of operations, and make better use of excess manufacturing capacity. Some past research, however, seems to paint a rather gloomy picture of mergers; a significant body of the past research indicates that the success rate of mergers and acquisitions, both domestic and cross-border is not very high. Corporate executives and policy makers are aware of the fact that carrying out a merger strategy is a risky line to tow, this is because these risks combine with the usual business uncertainties such as competition, pricing volatility, product and technological obsolescence, operating risk, overpayment risk and, of course, financial risk. This research intends to explore the profitability and value addition for the shareholders of two companies, company X and company Y as a result of the merger.

REASON FOR THE STUDY For the idea of this research, different kinds of corporate merger will be analyzed. Mergers and acquisitions happen to be one of the most complex areas of Corporate Finance. Investors( both individuals and corporate) need to make informed decisions when deciding on where to put their money, as such this

research will contribute to

helping them better assess the performance of

mergers through analysing the profitability and shareholder returns.

OBJECTIVES OF THE STUDY Primary Objective: To evaluate and investigate the pre and post merger financial and operational performance of Barclays bank. Importantly, the researcher would look at the following issues: 1.The company operational and financial performance using financial ratio analysis and correlation analysis to determine whether the merger enhanced the performance of the companies involved in the merger. 2. Secondly, since one of the aims of the company is to provide shareholders with increased value, the research will also look at the extent to which shareholder value has been increased through the analysis of the company financial variables over past 10 years period. This study seeks to achieve three main research objectives: Secondary Objectives 1. To re-evaluate the framework and theoretical models associated to mergers and acquisitions; 2. To examine benefits and motives behind mergers and acquisition to firms; and 3. To suggest recommendations to the Barclays bank on how to improve mergers and acquisition in business development.

RESEARCH QUESTIONS Research questions will be based on the objectives of the research study: 1. What are the motives behind for Barclays Bank adopting mergers and acquisitions? 2. Does (the relationship correlated) any correlation exist between financial variables (costs of sale; sales; profits) and size of an organisation? 3. How does Barclays Bank (measure) forecast to increase value creation in accessing merger and acquisition? The contents of this section should be in the Introduction chapter and thus the start of the dissertation will be chapter 1. Before chapter 1 is the abstract: 300 words and include the aim/objective of the study, research approach and main findings from the research.

Chapter 1 Introduction 1.1 Introduction Mergers and acquisitions happen to be one of the most complex areas of Corporate Finance in todays world of globalisation. Investors( both individuals and corporate) need to make informed decisions when deciding on where to put their money, as such this research will contribute to helping them better assess the performance of mergers through analyzing the profitability and shareholder returns. The research will consider the case study of business concern known as Barclays Bank (UK). The chapter gives an overview of the complete dissertation. 1.2 Enquiry Overview The main purpose of the research is to analyse the performance of mergers through analyzing the profitability and shareholders returns by taking the case study of business

concern called Barclays Bank (UK). There were three main objectives of the study out of which one was to provide the management of the companies with recommendations to increase the profitability of the firm based on the findings. The aim of the study was to investigate and evaluate the pre and post merger financial and operational performance of Barclays Bank. The introduction chapter provides aims and objectives of the study along with the basic information related to significance of the study. Second chapter i.e. literature review provides necessary literature data related to mergers and acquisitions involving an investigation of different theories analysed by various researchers and analysts in the similar topic. The purpose to carry out the literature data was to gather the knowledge to achieve main objectives of the research. Third chapter was research methodology which discussed the research paradigm selected to conduct the research; the strategy used and; different techniques of data collection i.e. interviews, questionnaires and sampling techniques. Next chapter followed research methodology was data analysis which explained every question concluded via interviews and the analysis of the financial performance of the company before and after the merger period of the company It also included the pilot tests concluded through the research study and the data gathered was in the form of diagrams; charts and graphs for easy understandability. The final section carried out was to the discussion regarding the conclusions and recommendations for the management to improve the profitability of the organisation. The study also aimed to provide the research limitations and the prospects for future study. 1.3 The Statement of the Problem Globalisation demands that companies merge to compete more effectively through consolidation. Since the early 1990s, America and the United Kingdom are countries which have seen the mergers of giants increase. Some of mergers and acquisitions which are Pfizer/Pharmacia, GlaxoWellcome/ Smithkline and Beecham, and Astra/Zeneca mergers. The potential benefits expected from mergers and acquisitions include the ability of the companies to cut costs and, hence, find new products, consolidate research departments

to enhance efficiency and speed up the development of products, cut down costs of operations, and make better use of excess manufacturing capacity. Some past research, however, seems to paint a rather gloomy picture of mergers; a significant body of research indicates that the success rate of mergers and acquisitions, both domestic and cross-border is not very high. Corporate executives and policy makers are aware of the fact that carrying out a merger strategy is a risky line to tow, this is because these risks combine with the usual business uncertainties such as competition, pricing volatility, product and technological This obsolescence, operating risk, overpayment risk and, of course, financial risk. companies, company X and company Y as a result of the merger.

research intends to explore the profitability and value created for the shareholders of two

1.4 Aims and Objectives The study aimed to understand the motives behind adopting merger and acquisition strategy and analyse the performance of mergers through analyzing the profitability and shareholders returns. The key aims and objectives of the study were: To investigate and evaluate the pre and post merger financial and operational performance of Barclays bank; To re-evaluate the framework and theoretical models associated with mergers and acquisitions; To examine benefits and motives behind mergers and acquisition to firms; and To suggest recommendations to the Barclays bank to increase the profitability of the firm. 1.5 Background of the Study

The proposed research is based on the case study of a business concern called: Barclays bank (relative) related to its merger and acquisition strategy. As economic turmoil increases the fear associated with merger and acquisition thus the intention of this study is to identify the key factors of the motives behind mergers and acquisitions. Mergers and acquisitions create value. Companies tend to achieve economies of scale, economies of scope and market power. Galpin and Herndon (2000) and Nicholas (2004) cited that it becomes an issue for mergers and acquisitions to look for success. There is no certainty that mergers and acquisitions will be successful. It is possible to highlight the failure of mergers and acquisitions from the original investment perspectives. Companies adopt rapid mergers and acquisitions and these can cause the business failures Jennings (1985) and Haransky (1999). DiGeorgio (2002) cited that mergers and acquisitions faced failure because of the inadequate due diligence and short of compelling strategic rationale, and overvaluation of the targeted company. Some companies faced (the) HR problems of staff conflict between corporate cultures within two or more companies and this created tension among staff. Mergers and acquisitions also faced problems to achieve economies of scale because their managements failed to integrate people, processes and systems (Honore and Maheia, 2003). In short, mergers and acquisitions failed because of wrong strategic rationale, lack of sufficient analysis, lack of knowledge in accessing risk investment, poor management plans, over valued targeted companies and overpaid the valuation. Thus overall to make M&A a success the mergers and acquisitions process should have clear goals, reasonable time frames, top management commitments and supports, skilled and knowledgeable project team, comprehensive integration plan, learning company, and managerial capabilities (Appelbaum et al., 2000, Schraeder and Self, 2003, Gomes et al., 2007). Thus in todays world of globalization mergers and acquisitions has been an utmost important method to expand any business or to get an entry to any foreign market. Firms having an intention to invest in any other country opt for mergers and acquisitions as a strategy to sail through the competitive market and generate profits for the company than any other investment strategy. The main cause behind any merger is that two firms

combining their operations together could gain better efficiencies than as compared to the firms operating separately. 1.6 The Scope and Limitations of study Flaws in scope are inherent in any study so for this study, that could be a reasoning for not achieving the objectives of the research clearly. The limitations for the study were mainly the time frame i.e. the time utilised to conduct the interviews and more over, the time, the interviewers gave to conduct the interviews and their personal interest in finding out the overall result of the study i.e. the data collection method was the most time consuming and tough part of the research which can be biased as the responses collected through interviews could detain the respondents from providing accurate information related to the actual issue due to bindings related to legal perspectives of the company. 1.7 Conclusion This research was based on the business expansion strategy adopted by a firm to grow by taking the reference as the case of the business concern i.e. Barclays Bank. Lower success rates of the strategy were outlined related to the objectives and the case produced efficient recommendations for the management to improve its performance after the merger to increase the profitability of the organisation and that of the stakeholders of the company. The study was carried out by taking into consideration the quantitative perspective of research i.e. an objective study, to conduct an analytical research carrying much of numerical data to be presented in graphical form. Following this chapter is literature review which offers the study with necessary literature data related to mergers and acquisitions involving an investigation of different theories analysed by various researchers and analysts in the similar topic.

Enquiry Overview needs references.

Chapter 2: Literature review 2.1 Introduction This chapter reviews the literature data that is relevant to the research objectives, which is to analyse historical mergers and acquisitions. The aims of this chapter are to collect literature data and analyse them into specific areas in order to design a list of questions and make recommendations to the management. Literature data is derived from a pool of previous reports of researchers who have investigated similar topics and have narrowed down the research into specific areas. 2.2 Definition of Mergers and Acquisitions Merger is defined as two or more commercial companies combining into a larger organisation (Hornby et al, 1999). Acquisition is defined an action or process to takeover full control of a company by other company (Hornby et al, 1999). A merger comprises combining assets of two or more companies which are merged in one entity in order to build a new legal entity (Buckley and Ghauri, 2002) and acquisition is a control of assets which is transferred from one company to another company (Buckley and Ghauri, 2002). A merger is defined as the use of a common fund of money and interest to combine two or more companies into a new enterprise (Pike and Neale, 2006) and acquisition is defined as a take over of one or more companies in exchange for cash (Pike and Neale, 2006)

2.3 Types of mergers and acquisitions Mergers and acquisitions are business strategies which aim to eliminate rival companies in the competitive market. Merger often refers to absorption merger or establishment merger (Chen and Findlay, 2003, Nakamura, 2005). There are several motives that encourage companies to adopt merger and acquisition activities. Companies tend to adopt mergers and acquisitions in order to achieve economies of scale and economies of scope. Companies hope that through mergers and acquisition they can create economies of scope which allow market diversification, for example Time and Warner. Companies adopting mergers and acquisitions are also trying to access the technology or market research which can help companies to achieve a dominant position. In the market, there are three types of mergers and acquisitions, which are called horizontal mergers and acquisitions; vertical mergers and acquisitions; and conglomerate mergers and acquisition (Gaughan, 2002, Chen and Findlay, 2003). A-Horizontal Merger A horizontal mergers and acquisitions are said to be a combination of companies which sell substitutable products, and usually they are in direct competition within the same characteristic market location. A company adopts a horizontal merger and acquisition in order to eliminate an acquired company as a competitor in the market. A company also tends to use mergers and acquisitions to increase the market share, purchase surplus capacity and increase profits. A horizontal merger and acquisition can also prevent new entrants from entering the market and so reduce rivalry in the market. A merger and acquisition is also a response to the advantage of technology change and liberalization in the global market (Chen and Findlay, 2003). There has been an increase in horizontal mergers and acquisitions in recent years from different sectors such as pharmaceutical, automobile and petroleum. A good example of a horizontal merger and acquisition was

Glaxo and SmithKline Beecham which consisted of a US $76 billion transaction (MANDA, 2007). It is believed that a horizontal merger and acquisition can increase sales, particularly when two companies combine with new technologies which can generate more sales (Carey, 2000). B-Vertical Merger Vertical mergers and acquisitions are the combination of companies which have a common (referred to) client-supplier or buyer-seller relationship. A vertical merger and acquisition can reduce ambiguity and transaction costs through the business upstream and downstream linkages (Chen and Findly, 2003). However, this type of merger and acquisition needs an effective value chain to achieve the economies of scope. A company seeks a merger and acquisition in order to strengthen buyer-seller relationships. A company adopts a vertical merger and acquisition strategy so that the company can develop in different stages of a production process (Gaughan, 2002). However, there are two common types of vertical mergers: (a) backward or upstream vertical integration and (b) forward or downstream vertical integration. Backward or upstream vertical integration is the primary motive in which a company tends to seek a dependable source of supply in the market. Dependability can be justified through the terms of supply availability as well as through quality maintenance and timely delivery considerations. An efficient timely delivery system can increase the level of company efficiency which delivers their products in order to be more reliable (Coyle, 2000). In case the acquired business is also a raw material supplier to a competitor then it eliminates the competition. However, the forward downstream vertical integration is more a primary type of merger motive. Downstream vertical integration aims to move toward the end users, who might be other industrial users or the general public. Downstream vertical integration creates safe outlets for selling products and services (Coyle, 2000). It also adds the profits of the acquired business to that of the mergerers. Unlike a horizontal merger and acquisition, vertical integrated companies may not have the direct motive to prevent a new entrant entering the market. However, it might consider restricting new entrants entering into the market.

C-Conglomerate Merger A conglomerate merger and acquisition is rather different to a horizontal merger and acquisition or a vertical merger and acquisition in the market. A conglomerate merger and acquisition refers to two or more companies which do not have related products. A conglomerate merger and acquisition has the advantage of increasing a companys chance to enter into a new business environment. In addition the merger and acquisition strategy tends not to encourage the management to invest its business in the same industry, which might reduce financial risks (Gaughan, 2002). Product extension; market extension; and pure product are types of conglomerate mergers and acquisitions. Product extension refers to trade in non competing products and intends to make use of the related marketing channels to promote its products and services. The most common deals of conglomerate mergers and acquisitions recently are AOL-Time Warner, Phillip MorrisKraft, Pepsico-Pizza Hut. However market extension refers to companies manufacturing the same products or services but in different territorial markets. This type of merger is formed between two or more companies but in different geographical locations, for example, Time Warner-TCI. 2.4 Assessing the impact of mergers and acquisitions A static trade off model is used to compare efficiency. The allocatable efficiency refers to the merger related losses and the market power with the merger-related profits in managing cost efficiency. This involves the analysis of the scale effect, learning effects and resource reallocation in the post merger business environment (Williamson, 1968; Farell and Shapiro, 1990). It is easier to use the static trade off model in measuring horizontal mergers and acquisitions. In principle, the model is also applied to conglomerate mergers and acquisitions and vertical mergers and acquisitions. However, this model creates only referring measures and monopoly. The notion of merger waves is continuing in the global market. Table 2.1 showed that the number of merger waves in US industry is increasing and this will be continued. It showed that number of deals in mergers and acquisitions increased from 9617 deals in 1983-1986 to 31,152 deals from 1997-2000 i.e. they increased more than 300%. This also showed that the total amounts

of mergers and acquisitions increased from US $618 billion 1983-1986 to US $4500 billions in 1997-2000. Table 2.1 Merger waves in the US industry Merger wave Current $ amount in billion Constant (2000) in Number of deals 3012 4828 NA 9617 31,152

periods billion 1898-1902 6.9 136 1926-1939 7.3 69.3 1966-1969 46 236 1983-1986 618 NA 1997-2000 4500 4500 Source: derived from merger and acquisition, 2000

Mergers and acquisitions have different motives (Jansen, 2002, in Picot 2002). Mergers and acquisitions near the end of the 19th century had a high frequency development. In some cases, mergers and acquisitions were funded by loans and the deals are investigated by managers. However, mergers and acquisitions can be expensive and this results in some managers of companies finding it difficult to find lenders (Gaughan, 2002). Table 2.2 shows the top largest mergers and acquisition in the global market since 2000. The two highest deals during 2000 were AOL and Time Warner which was US $164,747 million, and Glaxo Wellcome Plc and SmithKline Beecham Plc.s merger and acquisition deal which was US $75,961 million in 2000. Royal Dutch Petroleum Co. and Shell Transport & Trading Co.s merger and acquisition deal was US $74,559 million, etc. Table 2.2: Ten largest M&A deals worldwide since 2000 Transaction Rank Year Acquirer 200 0 200 0 Merger: America Online Inc. (AOL) Glaxo Wellcome Plc. Target Value ( in Million US$) 1 2 Time Warner SmithKline Beecham Plc. 164,747 75,961

3 4 5 6 7 8 9 10

200 4 200 6 200 1 200 4 200 0 200 2 200 4 200 6

Royal Dutch Petroleum Shell Co. AT&T Inc. Comcast Corporation Sanofi-Synthelabo SA Spin-off: Nortel

Transport

&

Trading Co. BellSouth Corporation AT&T Broadband & Internet Svcs Aventis SA

74,559 72,671 72,041 60,243

Networks Corporation Pfizer Inc. Merger: JP Pharmacia Corporation Morgan Bank Corporation Endesa SA One

59,974 59,515 58,761 56,266

Chase & Co. Pending: E.on AG

Source: Institute of Mergers, Acquisitions and Alliances Research MANDA (2007) The latest wave of mergers and acquisition in 2000 is likely to be differentiated by the amount of expenditure rather than by analysing how many deals have been done. These mergers and acquisitions were large. Recent mergers and acquisitions were looking at financial economy aspects and restructuring unprofitable companies and empowering managers to deliver cash flow in order to create value in the companies (Doyle, 1994). Table 2.3 showed the scale of financing of merger and acquisition of the UK companies by the UK companies. Table 2.3: The scale of financing of mergers and acquisition of UK firms by UK firms Year 2000 2001 2002 2003 2004 Number acquired 587 492 430 558 694 Outlay (M) 106,916 28,994 25,236 18,679 31,244 Cash (%) 37 NA 70 86 63 Ordinary shares (%) 62 NA 27 9 33 Fixed interest (%) 1 NA 3 5 4

Source: www.statistic .gov.uk

The cross border mergers and acquisitions are also increasingly important. The numbers of mergers and acquisitions from years 2000 to 2004 is shown in Table 2.3. There was an increase in cross border mergers and acquisitions in the UK. Table 2.4 Cross-border acquisition UK companies acquired by foreign UK companies acquisition of companies Year Number 2000 227 2001 162 2002 117 2003 129 2004 171 Source: www.statistic .gov.uk foreign companies Number Value 557 181,285 371 41,473 262 26,626 243 29,756 278 20,321

Value 64,618 24,382 17,798 9,309 29,815

In Europe, mergers and acquisitions have been treated as a well known business strategy tool for companies. In the 1920s, mergers and acquisitions were probably intended to achieve benefits from cost efficiency strategy. As a result, there was huge increase in production. In 1960s, mergers and acquisitions were used to aim at an internationalisation strategy. In 1980s, the aim of mergers and acquisitions was to develop corporate controls. These valuable assets appear to be independent of any interest in economics of scale or monopoly profits in order to be successful in this special market (Manne, 1965). The latest wave of mergers and acquisitions is because of a common currency, Euro, for developing the market (Ensico & Garcia, 1996). One of the aims of mergers and acquisitions is to control valuable assets in a corporation. One very important factor appears slipped out here and it is that the cross-border mergers have its roots in currency ratio revaluation between currencies of the respective countries. E.g. Shri. Laxmi Mittals acquisitions of steel companies were triggered coinciding with up valuation of rupee (INR) vis--vis dollar. Similarly when British pound got up valued there was a wave of acquisition of American companies by British companies or vice versa. Similarly whenever protected economies open out to the world trade FDIs try to either buy-out the competitors in opened out economy or enjoy sheer volume profits of

that economy.(Early bird gets the worm) China and India are two best examples of this situation. This helped investors in two ways. Firstly they increased their volume of overall profit and secondly they eliminated the competition to some extent. This was mainly to create monopoly type situations. This may be given a thought and included wherever it can fit. Several key issues are required to select the stock market process (Hughes, 1993) such as: (i) share price should be related to profitability of a firm; (ii) management performance; and (iii) the payoff in developing the business. Mergers and acquisition may be influenced by managers who wish to empire build. They tend to seek growth maximization in a company at all costs and at a lower discount rate enjoying high volume of business advantage, than in the market as a whole. Mergers and acquisitions may form a two-fold-aspect as shown in the following formula C=I/r. C refers to the value of capital; I refers to income or sales and r is rate of return. Sale can be improved if the company leads with superior marketing techniques (Kindleberger, 1969). A company may apply a lower discount rate to the assets which can generate better returns. Table 2.5 shows the effect of lost value from mergers and acquisitions. According to Jensen and Ruback (1983), the analysis showed that an average loss was -5.5% in a year. Mergers and acquisitions increased by an average of 42% yearly during the period 1980 to 1999 and this figure was equivalent to 3% of world GDP in 1980 and 8% in 1999 (UNCTAD, 2000). Investors intend to adopt mergers and acquisitions in both domestic and foreign markets. Both global financial advisers and transactional banks have played an important role to increase merger and acquisition deals (Fagan 1990; and Fagan and Le Heron, 1990). Top-down management influences an increase in the encouragement of mergers and acquisitions in the global market mechanism. Increasing the speed of privatisation and the concept of de-regulation increases the number of merger and acquisition deals. Some countries such as the US and the UK use the distinctly AngloSaxon phenomenon that forms a free market, increasing the market stock assessment and encouraging mergers and acquisitions (Bishop and Kay, 1993).

Mergers and acquisitions refer to a company which acquires one or more other companies assets. The purpose of using merger and acquisition strategy is to increase the company competitive advantage and core competency (UNCTAD, 2000). However, mergers and acquisitions are likely only to refer to larger companies in a given geographical location. It is believed that larger companies have experience in understanding of geographical location and global economic activities (McNee, 1960 and Dicken, 1998). Case studies analysts such as Sirower (1994); Byrd and Hickman (1992); Banerjee and Owen (1992); Jenings and Mozzeo (1991); Sevaes (1991); Morck et al (1990); Bradley et al (1988); Asquith et al (1987); Varaiya and Ferris (1987); and You et al (1986) have analysed different sample periods of mergers and acquisitions. The average of cumulative abnormal return from mergers and acquisitions were negative points.

Table2.5 Stock market reaction to acquirers during 1980s Case study Sample period Sample size Event window Sirower (1994) 1979-1990 Byrd and 1980-1987 Hickman (1992) Banerjee and 1978-1987 57 352 366 172 52 342 (-1,0) (day,0) (day,0) (closing) (-1,+1) (-5,+5) -3.3 -0.8 -3.35 -1.78 -2.9 -0.85 168 128 (-1,+1) (-1,0) Ave. CAR -2.3 -1.2 acquire

Owen (1992) Jenings and 1979-1985 Mozzeo (1991) Sevaes (1991) 1981-1987 Morck et al 1980-1987 (1990) Bradley et al 1981-1984 (1988 Asquith et al 1973-1983 (1987)

Varaiya

and 1974-1983

96

(-1,0)

-2.15

Ferris (1987) You (1986)

Day

et

al 1975-1984

133

(-1,+1)

-1.5

before and after announcement

CAR cumulative abnormal return Source: Sirower, 1977 Mergers and acquisitions become strategic tools for companies to develop their business. They can do this because of political stability. Many multinational companies invest in other countries as governments tend to give more attractive incentive and taxation policies to attract more investors. This has increased the numbers of mergers and acquisitions in the USA (Yoshida, 1987). Another factor that attracts investors to form merger and acquisition strategy is location. Location becomes an important issue for investor investment decision making. For example: The market becomes more liberal for businesses in the USA and this becomes the favourite factor encouraging investors to invest in the country (Nukazawi, 1988). The creation of merger and acquisition is also influenced by government strategies. More and more privatisation and free trade policy is attracting companies which tend to go with cross-border mergers and acquisitions. The building of regional blocs such as the European Union has increased the function of interdependencies between the building of economic and political organisations (Dent; and Phelps, 1999). This encourages more multinational companies to adopt cross-border mergers and acquisitions (Dermine, 2000). 2.5 Investment in merger and acquisition development Mergers and acquisitions were interpreted differently by different researchers. However, mergers and acquisitions have three stages of process: (i) planning; (ii) implementation; and (iii) integration (Picot, 2002). Planning refers to the stage where operational, managerial and legal techniques and optimization are undertaken. The implementation

stage refers to activities that involve non-disclosure agreements, letters of intent and conditions of deal closure. Integration refers to post integration of the future business development. According to Gaphin and Herndon (2000) who introduced the Watson Wyatt Deal Flow Model, the model divides in to five smaller stages, which consist of formulate, locate, investigate, negotiate and integrate. These are the stages of business strategic principles. The first three stages are related to the pre-deal phase. It is necessary to look at Watson Wyatt model to analyse the pre mergers and acquisition analysis to fit the strategic plan of an organisation. (The Watson Wyatt model Galpin and Herndon, 2000, p.9) According to Watts (1980) and Green (1980), an analysis of market seeking behaviour is one of the factors that encourage companies to adopt mergers and acquisitions. Companies tend to look at incremental expansion for their market extension. Researchers such as Letto-Gilles et al., (2000); Chapman (1999); and Dunning (1997) identified that mergers and acquisitions are encouraged by the opportunity to enhance market access as their principle motivation. Companies that are merged may need to change the companys structure in order to grow the operation. To do this, companies may employ more staff and increase the space of the company. Companies may hope that they can be successful and secure access to the technology provided, markets and other assets which are acquired. Furthermore, large companies adopt merger and acquisition strategies in order to restructure their organisation to be more effective and to improve commercial performance (Gregory and Cooper, 2000). However, companies which adopt a mergers and acquisitions strategy may cause disinvestment and redeployment of resources (Caption et al., 1998). 2.6 Motives for Mergers and Acquisitions Various studies have been performed to find out the motives behind mergers and acquisitions of firms. Many experts have different opinions upon the objectives and motives behind mergers and acquisitions. The literature on merger motives generally draws the distinction between financial or value-maximisation and managerial or non-

value-maximising motives (Napier, 1989). Managers are looking for profit maximisation and benefits for shareholders. Hence, managers will not avoid the exploitation of value creating opportunities. However, managers also believed that mergers and acquisition should be on a lower basis than its true value. However it is difficult to distinguish the explanation of mergers and acquisitions. Managers expect to exploit economies of scale through mergers and acquisitions. A merger and acquisition strategy can increase the size of an organisation and managers expect that through mergers and acquisitions, they can generate more production economies (Pike Neale, 2006). Managers also hope to obtain synergy to gain benefits. They hope to gain benefits through the combination of resources. Managers also hope that they can enter to a new market. This is because through mergers and acquisition, companies can increase their expertise to produce different products and enable access to different market segments. They may think that adopting a merger and acquisition strategy is the faster way to achieve business expansion. The managers motives for adopting merger and acquisitions strategies are shown in table 2.6. It is suggested that merger and acquisition motives fall under a range of theories and it is also believed that managers are influenced by synergy and valuation, which provide a positive NPV value. Managers also believed that the merger and acquisition can increase monopoly power in the market (Trautwein, 1990). However there is a lack of information and indication of both practice and research in relating to the motives. According to Gaughan (2002), merger and acquisition motives are to increase the growth of the company rapidly. Companies adopt merger and acquisition strategies in order to increase economic growth, in both economies of scale and economies of scope. It is believed that companies increase their size through mergers and acquisitions and this may be able to create a lower cost of capital, for instance finance costs. Companies hope that if they put their investments in an investment project in order to increase investment return, the new merged companies may enjoy success with its superior management skills in targeting their business development. Companies adopt mergers and acquisition by introducing new interest and sub-cultures within companies.

There are several theories which refer to mergers and acquisitions, which are: efficiency theory; monopoly theory; raider theory; Valuation theory/ Investment theory; empire building theory/ agency theory; and process theory. To sum up, the theories for the motives behind mergers and acquisition are different from one deal to another. However, some mergers and acquisitions are based on rational choices in the market. Investors are looking for much higher investment returns. Mergers and acquisitions also aim to increase profits. Mergers and acquisitions also aim to create wealth from customers. Mergers and acquisitions aim to receive wealth from shareholders in order to invest in more profitable investment projects. Mergers and acquisitions also target on benefit gains on private information. It is also believed that merger and acquisition companies tend to increase monopoly market structure for their business development. By increasing marketing power and market share, profits can be unenhanced through diminishing competition and increasing prices for customers. Of course, mergers that substantially reduce competition in the market may be challenged by the US Department of Justice or Federal Trade Commission on antitrust grounds (Ross et al. 2007). According to the Raider theory, investors will generate fund transfer to bid merger and acquisition deals in order to gain their investment values and capability of their business development.

According to Maskell (2001), mergers and acquisitions can use the internal competitive advantages and increase core competency of the company in the global market (Maskell, 2001). Increasing cross border mergers and acquisitions creates numbers of economic geographers in distributing of economic activities (Martin, 1999). Mergers and acquisitions are also the key for companies to become agents of economic change. Companies hope to expand their business development into the global market (Amin and Thriff, 1992). However, investors are seeking potential investments. They expect their investment to generate a much higher investment return (Pike and Neale, 2007). Managers hope that mergers and acquisitions can generate greater profits. Managers tend to find out data information, technology and knowledge before making investment decisions (Dunning, 1998). Managers prefer more localised knowledge (Mackinnon et

al., 2002) from specific information data (Birkinshaw and Hood, 2000). Mergers and acquisitions enable a company to enlarge its size. It can also increase company capacities by adopting new technology (Zander, 1997). However, the merger and acquisition process may be influenced by the company decision making and political related issues which may restrict processing capacities. Companies use merger and acquisition strategies in order to survive and be successful, in competing with their rivals in the market. Disturbance theory explains the valuation process of the merger and acquisition which may be caused by environment uncertainty and this may change individual expectations (Trautwein, 1990). 2.7 Outcome from mergers and acquisitions Mergers and acquisitions continue to be used as a strategic alternative for business development. The fact is that there is no consensus in explaining mergers and acquisitions. Inconclusive data showed that investment returns on mergers and acquisitions were not good. An estimated figure of positive investment return is around 10% to 30%. But the actual investment return through mergers and acquisitions are mixed. There were some with negative investment returns within a range of -1% to -3% from a case study. Another case study showed that there was positive investment returns within the range about 1% to 7%. However, there was another case study which was examined by Trautwein 1990, which showed that mergers and acquisitions bring the synergy of economies of scale or economies of scope. Mergers and acquisitions, especially horizontal mergers and acquisitions, create economies of scale and vertical mergers and acquisitions, create economies of scope. However, conglomerate mergers and acquisitions lack theoretical evidence of value creation. But, there are researchers who have cited that conglomerate mergers and acquisitions create financial synergies in business development (Levy and Sarnat (1970), Lewellen (1971), Lintner (1971), Weston and Mansinghka (1971), Melnik and Pollatschek (1973), Williamson (1975), Amihud and Levi (1981), Stapleton (1982), and Amihud, Dodd and Weinstein (1986)).

Mergers and acquisitions also create a better position to borrow at lower rates. This is because their businesses increase the cash flow from the combination of companies. Mergers and acquisition reduce the weighted average cost of capital. Mergers and acquisitions also generate tax treatment issues (Madj and Meyers 1987). Mergers and acquisitions also lead companies to diversify their businesses, especially conglomerate mergers and acquisitions which believe that they can create better business segments. However, agency theory showed in particular that in conglomerate mergers and acquisitions, conflict can be created between shareholders and managers. There agency problem can take place where managers who are employed to act on behalf of shareholders, will operate in a way that is designed to maximize their own benefits (Atrill, 2006). Shareholders are seeking higher investment returns; however, managers are seeking a much larger empire for their business development (Jensen, 1986). For managers, size is the fundamental issue that determines executive compensation (Baker, Jensen, Murphy, 1988; Jensen and Murphy, 1990). Hence, managers tend to adopt mergers and acquisition strategies in order to increase the size of companies by using shareholder wealth. Managers also create a better cash flow position and create a less risky cash flow through mergers and acquisitions. Through mergers and acquisitions, manager job security is improved and financial risks are reduced. Maquieria, Megginson and Nail (1998) examined wealth changes around stock-for-stock mergers during the period of 1963 to 1996. The analysis found that horizontal and vertical mergers and acquisitions create real operating savings and create much more wealth gain, and conglomerate mergers and acquisitions do not create financial synergies. An analysis was examined by Delong (2001) about bank mergers which were based on the issues of geography and investment returns activity and found that the mergers of two banks in the same region and the same activity create value by 2% to 3% more compared with other types of bank mergers. However, a number of studies involved in merger which are based on accounting performance of companies were carried out by Ravenscraft and Scherer (1989) and Healy, Palepu and Ruback (1992). Ravenscraft and Scherer (1989) investigated company

profitability by business lines. They found that there was a decline in profitability post mergers and acquisitions. This means that mergers and acquisitions do not create better value. Healy, Palepu and Ruback (1992) also investigated with a combined industry adjusted operating performance for the fifty largest merger and acquisitions during the period of 1979 to 1984. The investigation examines three years before and after mergers and acquisitions. They came to the conclusion that mergers and acquisitions tend to have better industry adjusted performance. They found that there is an increase of industryadjusted performance during the post-merger and acquisition period. 2.8 Strategy planning, tactics and valuation It is possible to come out with various valuation outcomes in mergers and acquisition process. Mergers and acquisition involve cash and securities. Every company generates cash flows which are the basis of valuation, and the cash flow will be discounted and the expected value will be defined. A discounted rate is a function of risk free interest rate structure, and the premium risks will be used to calculate capital structure, market covariance, inflation, extreme value potential, etc. The market value might be determined by a high and low or equal to the rational expectation equilibrium value. Conglomerate mergers and acquisitions may be able to achieve some benefits which imply short term market value disequilibrium exists. A short term demand and supply conditions may influence the market value of a company. Salter and Weinhold (1979) examined the issues of the strategic relationship and acquiring companies and targeted companies. The overall criterion of relatedness is to lay out the key success factor of merger and acquisition companies. They found that the relatedness creates the transferring functional skills between businesses. Functional skills are the elements such as research and development, production, marketing and distribution. In fact, mergers and acquisitions create business diversification strategy with aims: to provide goods and services in a similar market in similar distribution channels; to adopt similar production technology; and to exploit relatedness criteria.

According to Rumelt (1974), skills and resources of company is the concept of developing and effectively exploiting of a core competence. Mergers and acquisitions create value and value can be created through reinforcement of skills. Mergers and acquisitions create positive changes through a combination of wealth companies (Halpern, 1973; Mandelker, 1974; Dodd, 1980; Asquisth, 1983; Bradley, Desai and Kim, 1983). A resource-based perspective refers to the chosen business activities and the internal resource positions which are factors that investors are looking for (Penrose, 1959). Resource and the fixed input need to combine with the types of activities to produce them as goods and services. Companies adopt mergers and acquisitions in order to enter into concentrated product markets. They believe that such market incumbents may create greater profits and may also prevent (avoid) new entrants entering into the market (Cave, 1981). 2.9 Success and failure factors for mergers and acquisitions Mergers and acquisitions create value. Companies tend to achieve economies of scale, economies of scope and market power. Galpin and Herndon (2000) and Nicholas (2004) cited that it becomes an issue for mergers and acquisitions to look for success. There is no certainty that mergers and acquisitions will be successful. It is possible to highlight the failure of mergers and acquisitions from the original investment perspectives. Companies adopt rapid mergers and acquisitions and these can cause the business failures Jennings (1985) and Haransky (1999). Haransky (1999) cited that there are five factors that cause the failure of mergers and acquisitions. (i) Companies did not have sufficient data to investigate the risk assessment in investment of target. (ii) Companies also tended to use the financial aspects to analyse the value of the deal. (iii) Some companies paid high premiums for takeover deals. It is because of the pressures from the management board. (iv) Mergers and acquisitions also were treated as an outdated strategic plan. (v) Managers also did not have enough experience in building integration on new companies.

Gadiesh et al. (2001) also identified five causes that made merger and acquisition failures. (i) Managers have poor understanding on the issues of strategic level. (ii) Companies adopting mergers and acquisitions overpaid for the mergers and acquisitions. (iii) Companies adopting mergers and acquisitions did not have sufficient knowledge to implement an integration planning and execution. (iv) Companies face lack of effective leaderships and strategic communication. (v) Companies face the problem of cultural mismatch. However, DiGeorgio (2002) cited that, (i) Mergers and acquisitions faced failure because of the inadequate due diligence and (ii) Short of compelling strategic rationale, and (iii) Overvaluation of the targeted company. (iv) Some companies faced the problems of staff conflict between corporate cultures within two or more companies and this created tension among staff. Mergers and acquisitions also faced problems to achieve economies of scale because their managements failed to integrate people, processes and systems (Honore and Maheia, 2003). In short, mergers and acquisitions failed because of wrong strategic rationale, lack of sufficient analysis, lack of knowledge in accessing risk investment, poor management plans, over valued companies and overpaid the valuation. This is just a quip When Merger and Acquisition fails they call it Murder and Assassination from the point of view of Investors. Jennings (1985, p.37) cited that locations is important in the planning stage, Planning an acquisition strategy can help avoid a takeover marked by poorly matched partners and maximize the potential for success. He also recommended that company should focus on comprehensive analysis and focus on more financial growth and than invest in managing the integration process. Company should always take into consideration (from) warning signs of unsuccessful acquisitions. Jennings (1985) also cited that successful mergers and acquisitions in the acquiring company process should be well-structured, with

comprehensive acquisition criteria and should adopt comprehensive analysis of factors or areas, and proactive person identification and contact. The acquiring company should make a subsequent comprehensive plan in all functional areas and planed responsibilities and timing for an integration phase. Mergers and acquisitions process should have clear goals, reasonable time frames, top management commitments and supports of both the sides, skilled and knowledgeable project team, comprehensive integration plan, learning company, and managerial capabilities (Appelbaum et al., 2000, Schraeder and Self, 2003, Gomes et al., 2007). Galpin and Herndon (2000) suggested recommendations in building a successful merger which was faster and smoother integration for mergers and acquisitions. However, not all recommendations face prior to deal closure. DiGeorgio (2002, 2003) divided the success of mergers and acquisitions into two stages which were: front-end success; and integration success. The front-end success selected the right target for mergers and acquisition that comprised: characteristic of leaderships; the stakeholder teams facilitating climate; time and resources available; mergers and acquisition analysis tools; understanding culture and company structure, etc. The successful outcome aims to: achieve objectives and goals by selecting the capable leadership; skilled and knowledgeable integration team members; and plan detailed communication, integration, and people issue. Gadiesh et al. (2001) creates six golden rules or guidelines of the acquiring target companies to make merger and acquisition a success, which are: (a) setting rationale; (b)giving why inform how; (c)(fasting) execution of plan at full speed; (d) keeping customers in the forefront; (e)connecting the vision; and (f) managing integration. Where as Epstein (2005) cited six rules of mergers and acquisition success which are (a) strategic vision and fit; (b) deal structure; (c) due diligence; (d) pre-merger and acquisition planning and (e) post merger and acquisition integration; and (f) external influencing factors, and exemplifies (the) those factors These rules have been used for an extensive research of the merger and acquisition between J.P. Morgan and Chase Manhattan Bank which was in 2000.

Digeorgio (2002; and 2003) concerned the front end success and the integration success and target on a company business structure which include the top management; stakeholders relationships; time nature, resources; and mergers and acquisition tool; process investigation; skill and experience; learning mechanism; and cultural suitability. Mergers and acquisition should adopt four must do factors. They are: objectives; (i) gain in specific areas; (ii) the ability of management and; (iii) excellent fit. Rockwell (1968) cited another six factors to be considered for mergers and acquisitions: (i) the involvement of top management; (ii) definition of business; (iii) analysis of performance; (iv) early stage problems identification; (v) early stage right movement; and (vi) human investment and involvement.

2.10 Valuation, strategies and implementations The motive of a merger and acquisition may be to ensure survival. If all the major competitors are becoming bigger through these transactions, then a company may engage in a merger and acquisition to ensure competitive parity. The strategy literature recognizes that a company capability or competencies can be a source of competitive advantage. Some literatures show that while bidders earn on an average zero or negative abnormal returns during acquisition announcements, targets obtain positive excess returns (Jensen and Ruback (1983); Jarrell, Brickley and Netter (1988); and Andrade, Mitchell and Stafford (2001). Roll (1986) predicts that acquisition announcements should have a zero combined abnormal return, as acquisitions would be only a transfer of wealth from bidders shareholders to targets shareholders. However, Jensen (1986) predicts that the combined abnormal return should be negative as managers, instead of paying out the excess cash, use it to invest in negative net present value (npv) projects. The evidence indicating that transfers of control generate a combined positive abnormal return is clearly against their predictions.

Evidence also based on stock price reaction at the announcement dates strongly indicates that on average, acquisitions are expected to create wealth. Divestitures are also events that on average have positive combined abnormal returns. (Alexander, Benson and Kampmeyer, 1984); Jain, 1985; Hite, Owers and Rogers,1987; and Mulherin and Boone, 2000). According to Weston (2002), the fact that restructuring activity occurs in waves and with industry clustering is evidence that firms respond efficiently to changes in the underlying political, financial, cultural and economic environment, which would be consistent with economic motives. The current theoretical literature is dealing with dynamic models of acquisitions (Lambrecht, 2001; and Morellec, 2002) in several respects. Smit (2001) emphasizes that the importance of strategic interactions in corporate acquisitions as firms rarely have monopoly rights over the acquisition. Acquisitions will take place in industry and for this industry the output price will fluctuate over time so as to clear the market according to the following function: Pi(t) = Xi(t)D[Q(t)] with Pi 0. Where Q is the quantity supplied at time t, Dcorresponds to the deterministic part of the inverse demand function, which is assumed differentiable with D0(Q) < 0, and X(t) represents external random shocks in demand. In an efficiency improvement for the economy, the acquiring firm in this game obtains zero expected gain no matter what type of the industry characteristics. If business unit is undervalued, in equilibrium, firms with standard ability should earn a normal economic profit during acquisitions Grenadier (2002) analyzes the effects of competition on the likelihood of investment values falling below their initial cost. The calculation of simulation exercises, that this possibility increases dramatically when investors cannot exercise their real options optimally due to competition. In the model, acquisitions and divestitures are modelled as an industry phenomenon. Mitchell and Mulherin (1996) report from their survey in the 1980s that takeovers and restructuring activities cluster in industries that experience shocks of the greatest magnitude. They report that a few industries concentrate a high percentage of takeover activity. They also point out that this industry clustering is a characteristic of acquisitions during 1980s as these patterns are not observed in earlier

periods. Andrade, Mitchell and Stafford (2001) argue that if each takeover wave is different in terms of industry composition, then unexpected industry shocks are probably the cause of the takeover activity. In the model the sunk costs of acquisitions must be understood as internal as well as external costs imposed by financing availability, regulations, etc. Thus, the model also predicts that shocks reducing the cost of acquisitions could also induce restructuring activity 2.11 Organisational Literature Barclays bank was established back in 1690 in London which used the name of James Barclay. During the period between 1905 and 1916, Barclays adopted an acquisition strategy to take over small English banks. In 1917, Barclays merged with London Provincials & South-Western Banks. In 1919, Barclays Bank continued its acquisition policy by acquiring the British Linen Bank with a separate entity of board of directors. Barclays saw the possession of Woolwich plc in 2000 and closed 177 branches in the United Kingdom in the year 2002. Barclays took over the credit card firm Juniper Bank of United States from Canadian Imperial Bank of Commerce in 2003, re-named by Barclays Bank Delaware. The bank continues to adopt an acquisition strategy and acquired Banco Zaragozano, which is said to be Spanish bank in 2003 (http://www.aboutbarclays.com). Barclays pioneered the activity of sponsorship of the Premier League by Barclaycard in 2004. Barclays bought of a 54% share for 2.6bn in Absa Group Limited which was the biggest bank of South Africa in 2005. In the year 2006 Barclays took-over the HomEq Servicing Company for $457mn. Barclays bought Equifirst Company from Region Financial Company at $230mn in 2007. However, Barclays Personal Investment Management in Peterborough was closed and moved to Glasgow with the loss of 900 jobs. Barclays borrowed from the Bank of England an amount of 1.6bn ($3.2bn) as a standby facility in 2007. The credit crisis caused difficulties for banks, and the loss of confidence caused daily inter bank trading to stop. The credit crunch caused Barclays shares to drop 9% in 2007. Barclays generated 5.6 billion by an unconventional privileges subject in

July 2008. Barclays took-over the credit card trademark Goldfish at 30mn and increased the number of customers to 1.7M as well as $4.2bn in receivable in 2007. To strengthen the market position, Barclays also took-over the Russias Expobank for 335mn in 2008. Barclays also expanded its activities in Pakistan with initial outlay of $100 million. [The entire text above is the repetition of earlier text. The utility of repetition may be examined] (Source: Official website of Barclays Bank - http://www.aboutbarclays.com) 2.12 Conclusion Literature review has revealed a lot of useful data.And as seen from above data and the organisational literature it (is proved) can be concluded that in todays world of globalization, the most sought after mode for business expansion within the country or cross-border expansion (or a method of entry in a foreign market) is by mergers and acquisitions. Due to specific reasons such as, attaining synergy; reducing total costs and achieve economies of scale and of scope and; increase their market position, the companies prefer mergers as a smart way of cross border investment than other investment options. The same corporate strategy has been always adopted for its business expansion. But along with the growing importance of M&As their success rate has been declining due to various reasons of which mainly are motives other than maximisation of shareholders wealth, poor integration of all the business areas after the deal and not considering synergy in realistic terms. The three main types mergers and acquisitions are horizontal mergers and acquisitions; vertical mergers and acquisitions; and conglomerate mergers and acquisition (Gaughan, 2002, Chen and Findlay, 2003). The importance of mergers and acquisitions in business expansion has been increasing continuously as mergers and acquisitions increased on an average of 42% yearly during the period of 1980 to 1999 and this figure was equivalent to 3% of world GDP in 1980 to 8% in 1999 (UNCTAD, 2000). However, it is always seen that the success and failures in mergers and acquisition motives are uncertainty. Analysis of arising the scale effect, learning effects and resource reallocation in the post merger business environment are undertaken (Williamson, 1968; Farell and Shapiro, 1990). Several key issues are required to select the stock market process (Hughes, 1993). Thus a merger and acquisition can be said as a

(response) reactive action to the advantages of technology change and liberalization in the global market (Chen and Findlay, 2003). Literature data was carried on for analysis in discussion section (chapter 4) to examine distinctive factors that advised for the company to implement their mergers and acquisitions and was also used for designing questions for conducting interviews. The next chapter is the methodology which the research examines a suitable research method for research development process.

Chapter 3: The methodology 3.1 Introduction The methodology is referred to the methods of study principles in particular areas. Both model research methodology and research philosophy are correlated in developing (a) the research process. This chapter contains analysis of important issues for research development in relation to a case study of Barclays Bank policy of Mergers and Acquisitions. The research is based on mainly a qualitative research approach and some numeric data calculations which involves assumptions (Saunders et al, 2007) and calculations their financial performance merger and acquisition. The discussions on analysis of methodology is aimed to find a suitable research methodology in terms of cost saving and time specific, which can achieve the result from the use(d) of other research method. The research process includes: (i) research paradigm; (ii) research approach; (iii)

qualitative and qualitative approach; (iv) interviews; (v) questionnaires; (vi) pilot study; (vii) validity and reliability; (viii) strengths and weaknesses of the research method. 3.2 The objective of the methodology The objective of using the methodology analysis is to identify the strengths and weaknesses of the method. The researcher sets the research methodology objective that is to find a suitable research method for building research process. To find a suitable research method, the researcher has carried out investigation and evaluation for research development in order to achieve better results by giving a period of time and cost availability. In addition, the research has also accounted other feasibilities which include: access availability; risk involved; and skills and experiences. 3.3 Research paradigm Paradigm means the process of scientific practices using human philosophies and assumptions which relate to nature of knowledge around the world. There are two research paradigms which are commonly used by students. They are: (i) positivistic paradigm; and (ii) phenomenological paradigm. Positivistic paradigm is based on natural sciences. Positivistic paradigms approach contain an analysis of the facts or causes that are based on social phenomena. A positivistic paradigm is not a subjective view. A positivistic paradigm adopts an independent and exiting reality from involvement within participants which is based on objective views. The concept of positivistic paradigm contains the belief of human behaviour that should investigate in the same way as the natur(e)al sciences have been conducted in the studies. A positivistic paradigm is a type of a quantitative research method. A positivistic paradigm can be used for cross sectional studies in different contexts which have same constraints. Data collection is done in a short time and analysis will be conducted based on the data collection. A positivistic paradigm is an experimental study in which a research is conducted in a laboratory or in a systematic way. A positivistic research paradigm is to examine the research nature

problem. A positivistic paradigm aims to use hypothesis testing. A positivistic paradigm has high reliability characteristic. However, phenomenological paradigm refers to a process of analysis that people make sense of a phenomena which surround the world (Saundra et al, 2003). phenomenological is a fact that causes in question A (Allen, 1997). It is related to

understanding human behaviour from an involvement of own reference. It is assumed that a phenomenological research paradigm that is a qualitative research phenomena. A phenomenological paradigm is more subjective in reality and the data is rich. The data aspects of human activity by targeting based on meaning of social phenomena rather than scientific calculation of measurement and the social phenomena is dependent on human mind. A phenomenological research paradigm is suitable for business and management research topics. A phenomenology research paradigm is usually referred to conceptual analysis which relates to theoretical, conceptual and empirical evidences. This research contained both positivistic and phenomenological research paradigms. A phenomenological paradigm (is) mainly focuses on the interview data and a positivistic research paradigm is based on the scientific calculations to define the results 3.4 The research approach The purpose of this research is to achieve better results from the data collection in relation to a merger and acquisition. To do this, analysis of inductive and deductive approaches are carried out for investigation. An inductive approach refers to the understanding of process in research contact and it is likely suitable for a qualitative research method. A deductive is mainly for a quantitative research approach (Saunders et al, 2003. 3.5 The qualitative method and quantitative method

Some researchers take the terms of phenomenological paradigm as a qualitative research method and take the term of positivistic paradigm as a quantitative research method. A quantitative method is based on information of numbers, and figures to analyse the data. The advantage of using quantitative method is that the data can be quantified based on scientific calculation to prove it reliability. However, the quantitative method is not taken as a major part in this research. The scientific calculation part is based on the ratio analysis of the motive behind of Barclays Bank through the use of merger and acquisition strategy. The purpose of not to focus on a quantitative method is a quantitative method may need a large sample to represent the whole population. Smith (1986) cited that a quantitative method needs a longer time to collect the data. The researcher has limited time to collect the data. The research is concentrated on a qualitative research method which the data consists of human experience in everyday life. The data collection comprises in writing records by observing behaviour which can be examined qualitatively (Bordens and Abott, 2002). A qualitative research method allows a small sample to define the results. A qualitative research method uses interviews to collect the data from consultants and managers. They are experienced in mergers and acquisitions. A qualitative research approach adopts the techniques such as: (i) in-depth interviewing; (ii) projective techniques; and (iii) a case study. A qualitative approach may use historical data to analyse the data. The advantage of using a qualitative research approach is that a qualitative can start the research is an early stage. A qualitative research may have disadvantage to achieve high level of reliability data. But it may contain a high level of validity (Hussey and Hussey, 1997). However, Smith (1986) also cited that using a qualitative method approach can obtain same results as the use of quantitative research. The research is based on a qualitative research approach. Hence, the data collection mainly expresses through words (Saunders et al, 2007). The interview data is made through making (m)notes. 3.6 A case study

The research study is based on a case study of Barclays bank in relation to the motive behind the banks policy of merger and acquisition. A case study is suitable for an explanatory research study. A case study is defined as an investigation on a real life context which is in between the situation of current phenomenon and unclear context. Hence, history studies are needed to get broader knowledge on a particular context. Hence, it is advantageous to use theory development and to use questions, (such) like (as) what?, why/ and how?, to get more appropriate answers. However, some questions may (use) be directional close ended questions in order to get definite answer. This is a single case study in relation to a merger and acquisition performance. A case study adopts three sources of evidence, which are: (i) interviews; (ii) documents; and (iii) observation. A case study research is suitable for a business and management research topic (Saunders et al, 2003).

3.7 Interview data collection Interview is part of the data collection for this research. A case study may use unstructured and may use informal discussions with a key informant. However, if a research focuses on few key informants, it may reduce the level of validity of the research. In this case, the researcher uses semi structured interview in order to collect the interview data. The purpose of using semi structure interview is to familiarise the respondents informants perspective on the issue which can identify the insight and information in order to analyse the gap of the research. The research begins with specific questions to conduct interviews and it may also allow interviewees (their thought which) express whatever they feel is correct according to their belief. (they want.) The interview is carefully designed. All interviews are (based on) either face to face interviews (and) or one to one interview. There are ten questions all together. It is believed that face to face interview can achieve a high response rate (Zikmund, 2000). Each interview is made with an earlier appointment. Each interview (takes) took about (an estimate) 20 minutes.

3.8 The sampling A sample (consists) size is 5. (of) Five managers are selected for interviews. A qualitative research allows a small sample to define the results. Five managers are chosen from Barclays bank. The researcher uses walk-in approach to the Barclays managers. This group is recommended by a friend working as a security officer in Barclays. He recommended other managers (for) to agree for conducting interviews. All managers have knowledge of mergers and acquisitions, especially the consultants who have experience(d) in merger and acquisition projects. All interviewees of age (are) between 29 to 55 years. (old). There are all mixed genders. There are two females and three males. 3.9 The company data Barclays company data is based on the financial statements. The analysis is based on last eight years merger and acquisition financial statements. This part is an empirical evidence research. The research aims to find the gap between the theories and empirical evidence finding. The ratio analysis is particularly used for analysing the company financial statement in order to identify the company performance.

3.10 The questions The research is mainly based on a qualitative research method to define the results. Interview data plays an important part in the research process development. There are in all ten questions that are designed for conducting interviews. Every interview uses the same set of questions to conduct the interview(s). Questions have been amended for few times because of the structure. However, the main target of designing the questionnaires is to provide clear and simple questions but they need experienced and knowledgeable person to answer the questions. There are ten questions all together for this research and all the questions are referred to the research (Bryman and Bell, 2007).

DATA ANALYSIS PLAN

The research will be carefully designed based on a quantitative research method to classify the outcome. A grounded theory, content analysis and discourse analysis are not used for this proposed research because they are more likely to qualitative research method. This proposed study is based on a quantitative research method. The analysis data will be based on: (i) descriptive statistics such as measures of norm and measure of range; and (ii) rational statistics such as regression and correlation. Quantitative analysis comprises of the study of information which relates to arithmetical measurement. The approach would be utilized to analyse the data and for identifying the concepts and categories driving to the empirical data. Composed data would be based on two main data which are literature data interview data. First, the researcher will identify the research methodology method. This has been proposed in this research study that a quantitative method will be utilized for the case study. The research will analyze the characteristics of the research method and develop them into procedures. The procedures will be used as a guideline in order to (minimum) minimise research problems. The research will be based on finance theory; financial econometrics perspectives; and the theory of financial management and its applications. SPSS software will be used to analyse the correlation risk assessments based on the Barclays data. This analysis of literature data will be based on a library data to examine previous researchers works. The data collection will be carried out to analyse precise regions to define the results. These would be then used to suggest recommendations based on the specific areas. A discussion segment will be worked out to analyzing the data. The data will use statistical tools such as graphs, bar charts, pie charts and percentage based measures.

ANTICIPATED ANALYSIS AND FINDINGS The research will be design in expecting to find answers to the research questions outlined. This may also need to include the results which are

anticipated to reflect the theoretical models and instances found in the literature data along with more information within the realm of this topic. Only specific areas will be used for recommendations 3.12 The pilot test Before conducting interviews, all questions are used a test and re-test approach in order to provide clear questions (Saunders et al, 2003). The purpose of doing this is to minimise the problem of interview. The researcher aims to make sure that all questions are understood by all interviewees. The researcher very much concern(s)ed about the process of designing questionnaires. A pilot study is used to reduce any bias which may cause the problem of data collection.

3.13 Bias The research process development is aimed to reduce any bias. Hence, it is important to have a proper structure of research development process. All questions are designed in using plain English approach. Questions are both open and close ended questions. This reduces to many broader questions. This research also aims to target some specific areas in relation to mergers and acquisitions. 3.14 Validity, reliability and ethnic issues High validity, reliability and ethnic issues are important for the research. The research is carefully designed in order to get much accurate results. A quantitative method contains a high level of validity. The scientific calculations may contain a high level of reliability. The research is based on theoretical framework which may contain high validity and reliability. The pilot study is based on a test-and-retest and using

internal consistency approaches (Mitchell, 1996). This increases the ethnic issue. At the same, interviewees may feel easier to understand the questions and this may achieve a high response rate with more accurate answers. This may also increase its validity. All managers and consultants have knowledge of mergers and acquisitions. Both phenomenological and positivistic paradigms are undertaken for analysis. This increases the validity and reliability of the research. All appointments are made in early so that managers can provide available times for interviews. This also increases the validity and reliability. The researcher always prepares himself to accept any cancellation of appointment for another date. The face to face interview approach can achieve a high level of respondent rate. 3.15 The strengths of the research methodology This research is properly designed in order to achieve better results for recommendations. The strength(s) of this methodology is to focus on a case study in relating to a merger and acquisition. The research also can manage the time and cost constraint. The supervisor and teachers are very helpful to give advises in order to collect more accurate answers. A qualitative research method is based on the fact of human knowledge and experience in every day life. This can be more relevant to what is happens in reality. This means that not all scientific calculations are very accurate. It is believed that the human knowledge and experience in their every way of life are more accurate because of the macro environmental factors. The research is careful designed in order to achieve more accurate answers. A pilot study approach by using test and re-test method is aimed to reduce bias. The researcher also aims to complete the dissertation at specific time. Ratio analysis is used to strengthen the data collection for examining specific areas which can be used for recommendations. The researcher tends to use open ended and close ended questions in order to achieve unexpected answers and specific answers from interviewees. 3.17 Conclusions

The methodology is used to identify a suitable research process development in order the researcher can achieve better results in collecting the data. An efficient method can achieve both cost and time saving. The research tends to use a qualitative research method for collecting data. However, ratio analysis is also used to examine specific areas that might be useful for recommendations. The research approaches use both inductive and deductive approach for developing the research. There are five interviewees selected for interviewees and 10 questions are designed for interviews. A pilot study and a test and re-test approach are used in order all interviewees understand the meanings of the questions. Each interview takes about 20 minutes. The following chapter is the finding and analysis.

CHAPTER 4 ANALYSIS & FINDINGS Give this chapter a proper introduction

A list of questionnaires Strongly-Agree 1 Agree 2 No-View 3 Disagree Strongly-Disagree 4 5

1) Merger and acquisition is aimed to increase size of an organisation Answer: 1 2 3 4 5

2) A horizontal merger and acquisition is aimed to increase sales and profits

Answer: 1

3) Mergers and acquisitions create cultural conflict Answer: 1 2 3 4 5

4) Mergers and acquisitions can create value Answer: 1 2 3 4 5 5) Training programme can gain the knowledge and experience for seniors to solve the problem of cultural conflict between staff Answer: 1 2 3 4 5

6) The management should not over-estimate the valuation of an acquired company Answer: 1 2 3 4 5

7) Mergers and acquisitions can increase market shares. Answer: 1 2 3 4 5 8) Management should restructure the organisation by implementing an integrated system between parent and subsidiary companies Answer: 1 2 3 4 5

9) Increasing market share is the reason for post merger and acquisition success Answer: 1 2 3 4 5

10) Losses in financial performance are the failure for mergers and acquisitions Answer: 1 2 3 4

11) The fear of losses from mergers and acquisitions is important Answer: 1 2 3 4

Data findings and analysis In total 21 managers were selected from different branches of Barclays bank in London. The sampling technique was purposive sampling in order to provide valuable inputs in the research. In purposive sampling researcher chooses information rich cases that would provide information required to reach the aims and objectives of the report. The primary data collected is presented as follows using statistical presentations.

Strongly-Agree 1

Agree 2

No-View 3

Disagree Strongly-Disagree 4 5

Q1) What is your profession in Barclays bank? 1) Customer services 3) Investments and Planning 2) Pensions and retirement plans 4) Personal accounts manager 5) Derivative investments 7) Mortgage advisor 6) Business accounts consultant 8) Loan officer

L oanofficer

Mortg e ad ag visor

13% 12% 18% 14% 11% 15% 5% 10% 15% 20%

Bu ess accou con sin nts

P erson Accou ts Mg al n r

Derivative In vestmen ts

P ension & retirem s ent

In vestm ts & P en lann g in

C stomer services u

0%

This particular question was designed to ensure that researcher does not select high percentage of managers from one particular section which may influence the outcome of the findings. Too many managers from the same departments or area may have similar opinions. An approximately equal proportion of respondents was selected for answering the questionnaire. This questionnaire was administered along with the semi structured interviews in which researcher sought for justifications behind their choices and provided clarifications.

Q2) Merger and acquisition is aimed to increase size of an organization Answer: 1 2 3 4 5

8% 17% 7% 47% 21%

s trong ag ly ree Ag ree No view D ag is ree S trong D ag ly is ree

This question opened the subject and probed into the view that the respondents are carrying in their minds about mergers and acquision. Majority of them agreed that these techniques are used to expand the organization. 7% of the respondents did not give their opinions, these respondents latter justified that there could be many more reasons behind merging or acquiring an organization and expansion does not necessarily be the only reason. Remaining 25% of the respondents who disagreed with the statement made by the researcher also justified stating that expansion is not the only reason but it is often carried out for achieving complex objectives. 68% agreed response was a majority, latter in the interview these respondents provided clarification that there could be many more reasons behind adopting these techniques but the resulting outcome is certainly an expansion of the organization.

Q3) A horizontal merger and acquisition is aimed to increase sales and profits Answer: 1 2 3 4 5

8%

6%

5% 37% 44%

S trong ag ly ree

Ag ree

No V iew

D ag is ree

S trong dis ree ly ag

A horizontal merger takes place when two competing companies in a market join together. This way the companies share their resources, technology and market share. Such mergers are generally carried out with a pure intention of magnification of profits and sales volumes. The responses indicated the same as discussed earlier in the literature review. Majority of the respondents agreed that horizontal mergers are aimed at increasing the profits and sales volume. The justification they provided behind their agreement to this was just an example of Barclays with the Woolwich Plc. This magnified Barclays span of customers and its profits and sales indeed. Another example that was used by some of the respondents was of Juniper Bank of USA acquired by Barclays that helped them diversify into American continent resulting in the increased volume of sales.

Q4) Mergers and acquisitions in Barclays created cultural conflict amongst employees Answer: 1 2 3 4 5

9% 3% 46%

23% 19%

S trong a ree ly g

Ag ree

No view

D a ree is g

S trong dis g ly a re

A mixed bag of response was received in this question. This question was intended to detect impact of mergers and acquisitions in Barclays onto the internal customers i.e. employees. Only 42% of the managers agreed that the M&A activities did in fact impact the cultural balance in the employees. While 46% of the respondents did not choose to express their opinion and justified as the cultural balance was neither disturbed nor enhanced. They also suggested that even though there have been mergers and acquisitions Barclays never laid off the actual staff but instead simply kept the previous staff and trained them to Barclays policies. This saved any kind of conflicts within the employees. 12% respondents disagreed to the statement and justified as the M&A activities have been a success in terms of enhancing the cultural balance and activities. Q5) Mergers and acquisitions created financial and operational value at the workplace Answer: 1 2 3 4 5

35% 30% 25% 20% 15% 10% 5% 0% S trong ly ag ree Agree No View Disag ree 19% 20% 18% 11% Opinion% 32%

S trong ly Disag ree

This question was posed in support of the previous question where a cultural conflict was discussed. Researcher intended to focus on post merger activities where creation of value, financial as well as operational was questioned. 51% respondents agreed that M& A activities of Barclays indeed created financial and operational value for the company. This was further translated as cross cultural mergers enhanced the functioning of the internal sections and helped improved the total customer service experience for the people. 49% of the respondents either disagreed or did not give any opinions. Their justification mainly stressed on the failures that Barclays had to endure after acquiring certain toxic assets in America and Spain.

Q6) Pre M&A Training program can help seniors to avoid the problems of cultural conflict between staff Answer: 1 2 3 4 5

S trong dis ree ly ag D ag is ree No view Ag ree S trong ag ly ree 0%

5% 9% 11% 42% 33% 10% 20% 30% 40% 50% Opinion %

This question focused on pre M&A activities. Development of a comprehensive training program that involves detailed study of the organization to be merged with or acquired its culture, financial analysis, operational procedures, employee welfare etc would help formulate a strategy that can be designed to adapt to the current conditions of the organization. A majority of the respondents agreed that a pre training program would certainly avoid any kind of conflicts that may spark amongst the employees. The respondents justified the same by sharing experiences of Woolwich Plc. Those respondents who disagreed that training may not be able to avoid any sort of cultural conflicts insisted that the training program designed might not consider all the possibilities and minutest of the details. Q7) The management should not over-estimate the valuation of an acquired company Answer: 1 2 3 4 5

29%

22% 49%

S trong a ree ly g

Ag ree

No view

D g isa ree

S trong disa ree ly g

It is obvious that the acquired company increases the assets as well as liabilities of the acquirer company. There may be tendency to show overvaluation of the company under acquisition in order to please the shareholders or the owners of the acquiring company. The bubble may burst any time and the shareholders or owners may feel cheated when they realise that their ROR has diminished beyond limits. Then they feel that it may be acquisition for the acquired company but for them it is not acquisition but assassination of the shareholders/owners.

Q8) Mergers and acquisitions can increase market shares. Answer: 1 2 3 4 5

11% 13%

17%

S trong a ree ly g Ag ree No v iew

27% 32%

D a ree is g S teong D a ree ly is g

The strong agreement to the above question proves that if the market share cannot increase no one will go in for M&A. Answers to this question confirm the basic motive of the M&A practice. Whether it is aimed to eliminate the competitors or expand business joining the competitors or ensure raw materials or spare-parts supplies ,one thing is certain the M&A increases and stops loss of market share.

Q9) Management should restructure the organisation by implementing an integrated system between parent and subsidiary companies Answer: 1 2 3 4 5

13%

11%

17% 27%

32%

S trong ag ly ree

Ag ree

No view

D ag is ree

S teong Dis ree ly ag

The concept of the M&A operation is not amalgamation. In fact both the partners should be able to continue their activities, which hitherto they were conducting independently; they agree to do the same jointly under a separate banner. However their individuality does not get dissolved, it remains identifiably separate. In fact there umpteen instances that show that M&A operations undertaken were just for some specific purpose and the joining companies parted ways as soon as the purpose was achieved. The merged companies then separate. It can be concluded that restructuring is not an essentiality. On the other hand it should be avoided. HRD never agrees for identity merger. The system integration is always done without restructuring. This helps in reaping the advantages of M&A keeping individuality aspect unaffected. Both the partners maintain this arrangement scrupulously.

Q10) Increasing market share is the reason for post merger and acquisition success Answer: 1 2 3 4 5

17%

11% 28%

19% 25%

S trong a ree ly g

Ag ree

No view

D a ree is g

S teong D g ly isa ree

Many times increasing market share is given prime importance than the making of profits. Profits can be managed later on when the operations become steady. Acquisition success is also important because the managers are responsible to respective groups of share holders. They may agree for lesser returns for some time but will not accept failureThe researcher is of the view that broadening the market base is the basis of all M&A operations. Acquisition success follows.

Q11) Losses in financial performance are the failure for mergers and acquisitions Answer: 1 2 3 4

6% 12% 29% 18%

S trong a ree ly g Ag ree No view D a ree is g S teong D g ly isa ree

35%

The managers have almost equivocally opined that if financial loss is the outcome of the M&A it can be taken as the failure of the M&A. It is also observed from the past that such cases occur when it is a case of conglomeration which means that it is a working arrangement with the historical competitors. This arrangement comes in force to protect every partners area of coverage. In such case there may be some pricing restrictions imposed willingly by all for all. In such cases the loss is inevitable. But in most other cases especially horizontal and vertical M&A the gains are either in %ages or in volume of profits. As a corollary to above it is generally taken as a failure of M&A if the company suffers financial loss.

Q12) The fear of losses from mergers and acquisitions is important Answer: 1 2 3 4

8%

1% 3% 79%

9%

S trong a ree ly g

Ag ree

No View

D g isa ree

S trong D ag ly is ree

The answers show that the opinion is divided and in that a balance division of it. However, in the opinion of the researcher it is not so. There may be some initial period of losses till the matter settles and the teething troubles are over. When he M&A arrangement is finally accepted by the planners, the managers, change of culture by the staff, patient shareholders/owners of both sides and then the union starts paying off. The fear of losses is no doubt is always there; but it is the planning that needs to be almost perfect. Half hazard planning may result in losses. In view of the above discussion the researcher ventures in making following recommendations. A few are general recommendation for all the companies but few are specifically for the Barclays bank All diagrams need to state source ie. From Study. Label diagrams 4.1 etc You need to have a section Discussion and use the objectives as headings and relate each objective to the primary findings and also to the literature.

Chapter No. 5 RECOMMENDATIONS Part A: General Recommendations

A-1: There are some checks before we actually start negotiations. These can be summarized as follows. 1. Set Expectations. Ensure that employees, the press, and investors perceive the merger as successful. 2. Resolve Differences in Management Style. Understand the business culture of the acquired company and allow it to coexist with your company culture. 3. Assess cultural compatibility along with organizational vision. and motivational Tone. 4. Orient New Employees GOAL: Quell rumors, forestall an exodus, and build enthusiasm for the new organization. The orientation of employees should be on these points. The employees should be aware of the strategic reasoning behind merger. The history of the target company. Line of authority of the target and combined merged company. Further opportunities. 5. Realign and Restructure. : Quickly shed duplicate overhead and position for future growth. 6. Integrate the Computing Infrastructure. Make certain the entire organization can communicate and collaborate .

A-2: Each and every concern intending to operate M&A has to be careful in
planning the merger or takeover. The concern has to follow general rules for planning these can be summarized as follows, 1. Do your homework beforehand. 2. Set realistic expectations 3. Decide whether to go first. 4.Give yourself maneuvering room. 5.Manage the price concession process. . Manage the nonprice concession process, too. 6.Create and sustain credibility throughout the negotiation. 7.Keep time on your side. 8.Negotiate until the contract is signed.

9.Quit while youre ahead. A-3: There are signs which can predict that the M&A operation can be a risky operation. The negotiator must be alert and watchful to ensure that he is not leading his party in some trap Following are the tell tale signs to be watched 1.Most of the target firms revenues come from a business you dont understand. 2.The target firm has a radically different corporate culture. 3.A sudden, positive change in the targets recent revenue or inventory 4.The targets management seems desperate to go forward. 5.The buyout will create instant millionaires out of employees who hold founders stock. A-4: Negotiating a M&A operation is an art. While the negotiator has to in watching and avoiding the pitfalls he also has to ensure that there is no possibility of Sudden Death of the negotiations. He will ensure to keep away dear killers. 1. Unreasonable Preconditions. Any un reasonable precondition put forth by the target at any time indicates that the target is no more desirous to go ahead with negotiations. 2. Strategic Leaks. Generally the entire deal is supposed to be a confidential matter till it is decided by both the parties. Any vital information may be to shareholders or media or to political VIPs if is published or gossiped, it should sound an alert and the negotiator may decide to call it a day. 3.Delay Tactics. If the target is found to cause inexplicable delays in the timetable set for negotiating the deal, it is an indication that the deal may not be completed in time causing loss to the M&A operator. 4.Musical Chairs. It is some times observed that the target negotiating team is often changed without viable explanation. The deals areconfidential matters and have to be in the knowledge of only a few persons from each side. Frequent and sudden changes in negotiating team of target indicate that the deal may not go through. It should be stopped then and there.

Part B: Specific Recommendations for Barclays bank

History: The Barclays bank had worked silently for a period of almost three hundred years i.e. from its inception in the year 1609till 1905. Thereafter it conducted M&A spree in two phases. The first phase can be considered as from 1905 to 1919. Thereafter for a period of eighty years it was silent again. The second M&A spree was from year 2000 till 2008.The first period was taking over banks from British soil only while in the second it crossed its borders to execute M&A and acquired foreign banks and concerns mostly on European soil. The two periods signify the type of M&A operations. Following recommendations are made taking into considerations above two phases B-1: The Barclays bank can now look towards west and take advantage of the falling US dollar currency vis--vis British pound or Euro currency. The situation is apt for entering credit market of US and other North American countries. The Barclays bank has experience of House equipment credit systems and it can as a first step venture into that segment of US market. The Barclays bank has handled M&A well whenever it got opportunity to acquire banks on European soil when their currency was falling. The Barclays bank may repeat history. B-2: The Barclays bank had closed its HR units. May be in the passage of time the Barclays bank has revived it. Now however here should be a separate unit that can deal with culture clash amongst joining units. This expertise can be n the market for the nedy companies. B-3: The Barclays bank should also have another Market Watch Dog unit. This unit shall maintain a continuous watch on the shares of other banks and on their credit ratings. Especially mercantile banks should be its next targets. This line of business is a paying business. The more is the credit more is the activity and more money flows in. The bank can separate mercantile activities from other banking activities. Further M&A operations may be conducted through that mercantile wing.

Conclusion:

There cannot be a specific conclusion, as this is a case study and especially about a bank that has a history of around 400 years of successful management. However it can be concluded that future M&A operations are not going to be limited within a specific country but due to globalization and spreading of trade and business net all over the world the process is going to be more complicated. It will have to adapt to international trading practice along with the political changes. The watchdog units have to maneuver with an expert team on political environments in which the target is situated and then only the M&A operations can be a success. Internationalisation of trading has made negotiations and execution of the M&A process an experts job. This need be taken care of.

Structure of last chapter: Conclusion based on summary of main findings and link to the literature; Recommendations 2/3 based on primary research findings and link to the literature; Research limitations; And future research i.e. how the research can be expanded or developed. Appendix (after the list of references) copy of questionnaire and a completed questionnaire.

References and Bibliography Alessandri, T. M. (2002) A portfolio of Decision Processes: Rationality in Capital Investment Under Perception of Risk and Uncertainty, Chapel Hill: The University of North Carolina, American Economic Review, vol. 76, no. 3, May, pp.323-329. Asquith, P.R. (1983) The gains to bidding firms from Merger, Journal of Financial Economic, vol.12, pp.122-141. Asquith, P.R., Brunner, R.F and Mullins, D. W. (1986) Merger Returns and the form of financing, Working Paper, Harvard University. Barringer, B. R. and Ireland, R. D. (2006) Entrepreneurship Successfully Launching New Ventures, NJ: Pearson Prentice Hall Bishop, M. and Kay, J. (1993) European Mergers and Acquisitions policy, Oxford University Press Inc., New York. Browne, C. H. (2007) The Little Book Of Value Investing, NJ: John, Wiley & Sons Bryman, A. and Bell, E. (2007) Business Research Methods, 2nd edit., Oxford: Oxford University Press Cafarelli, E. (1981). Developing New Products And Repositioning Mature Brands A Risk-Reduction System That Produces Investment Alternatives. New York: John Wiley & Sons Cantwell J. A and Hodson C (1992). Global R & D and UK Competitiveness in M. Casson ( ed) , Global Research Strategy & International Competitiveness, Oxford: Blackwell Cochrane, J (2000). The Risk And Return Of Venture Capital. Unpublished Working Paper, Chicago: University of Chicago. Cooke, T. (1987). Mergers & Acquisitions, London: Basil Blackwell Ltd

Datta, D, Pinches, G & Narayaran, V. (1992). Factors influencing wealth creation from Mergers and Acquisitions: A Meta analysis, Strategic Management Journal, vol.13, pp.67-84.

Davidson, A. (2006). How To Win As A Stock Market Speculator, London: Kogan Page Day, J.F.S. (1986). The Use of Annual Reports By UK Investment Analysis, Accounting and Business Research, Autumn, 1986 Duelli, J (2000). Pharmaceutical Companies in a fever of Merger- The Importance of M & A for an Increase in Shareholder Value, Pharma 2000 Eisenhardt, K. M (1989). Building Theories Form Case Study Research, Academy of Management Review, iss.14, no.4, pp.532-550 Elliot, B. & Elliot, J (2002). Financial Accounting and Reporting 2001-2002, Financial Times Prentice Hall. Fazzari, E.L (1988). Financing Constraints and Corporate Investment; Comments and Discussion, Brooking Papers on Economic Activity. Washington Gaughan, P (1991). Mergers and Acquisitions, Publishers, Inc.,. New York: Harper Collins

Goffin, K and Mitchell, R (2005). Innovation Management Strategy And Implementation Using The Pentathlon Framework, New York: Palgrave Macmillan Gort, M (1966). An Economic Disturbance Theory of Mergers, Quarterly Journal of Economics, vol. 83, pp.624-642. Graham, J. R and Harvey, C (2001). The Theory and Practice of Corporate Finance: Evidence From The Field, Journal Of Financial Economics, May/Jun, 2001, Vol.60, Iss. 2.3, p. 187, Amsterdam Gregory, A (2000). Accounting Firm Reputation and Company Valuation Pratices: The UK Evidence, Exeter: University of Exeter Healy, P.M., Palepu, K.G and Rubak, R.S (1992), Does Corporate Performance Improve After Mergers?, Journal of Financial Economics Hitt, M.A., (2001). Mergers and Acquisitions: A Guide to Creating Value for Stakeholders, New York: Oxford University Press Hopkins, D. (1999) Cross-border Mergers & Acquisitions: global and regional perspectives; Journal of International Management, vol.5, pp.207-239

Hotchkiss, E. and Mooradian, R. (1998). Acquisitions as a Means of Restructuring, Journal of Financial Intermediation, vol.7, p. 240. Houtman, R.L Trnblom, J.F, and Wachter, A. (1984). Practical And Theoretical Consideration In Quality Decision Making Report By Study Group How Statistical Method Could Contribute To Building Quality Into The Product, The European Organization For Quality Control Howkey, J. (2002). Exit Strategy Planning: Growing Your Business For Sale and succession, Aldershot: Gower Huiskonen, J, Niemi, P and Pirtilla, T. (2003). An Approach To Link Customer Characteristics To Inventory Decision Making, International Journal of Production Economics, 11 January, 2003, Vol.81/82, p.255, Amsterdam Johnson, G and Scholes, K. (2002). Exploring Corporate Strategy, Financial Times Prentice Hall. Jones, C. P. (2002). Investments Analysis And Management, 8th edit., NY: Wiley Kaplan N S.and Weiback M S (1992). The Success of Acqusitions: Evidence from Divestitures, Journal of Finance, Vol. 47, no.1, pp.107-139. Kaplan, S. N and Scoar, A. (2002). Private Equity Returns: Persistence And Capital Flows." Unpublished Working Paper, University Of Chicago Katz, S (2006). Earning Management And Conservatism In The Transition Between Private And Public Ownership: The Role of Private Equity Sponsors, Columbia University Kay, J. (1993). Foundations of Corporate Success: Distinctive capabilities, Oxford University Press. Keane, S. M. (1992). A Survey of The Valuation Practices of Professional Accounting Firm, I.C.A.S Kidd, S. (2006). Market Report 2006: Road Haulage, December 2006, Middlesex: The Key Note Limited Koliopulos, T and Liddle, D (2007). Project Finance International Yearbook 2007, London: Thompson Lock, D. (2000). Project Management, 8th edit., Hampshire: Gower Magenheim M (1998) read as Hitt, M.A., (2001). Mergers and Acquisitions: A Guide to Creating Value for Stakeholders, New York: Oxford University Press

Malgarini, M And Piga, G (2006). Capital Accumulation, Productivity And Growth, New York: Palgrave Malhotra, N. K and Birks, D. F (2007). Marketing Research An Applied Research, 3rd European Edit., Essex: Prentice Hall Moskowitz, T And Vissing-Jorgensen, A (2002). The Return to Entrepreneurial Investment: A Private Equity Premium Puzzle? American Economic Review, Vol.92, pp.745 778 Pike, R and Neale, B (2003). Corporate Finance And Investment Decision And Strategies, 4th edit., Essex: Pearson Education Pike, R and Neale, B (2007). Corporate Finance And Investment Decision And Strategies, 5th edit., Essex: Pearson Education Rock, M. L, Rock, R and Sikota, M. (1994). The Mergers & Acquisitions Handbook, New-York: .McGraw-Hill, Saunders, M, Lewes, P. and Thornhill, A. (2003) Research Methods for Business Studies Students 3rd edit.,Essex: Prentice Hall Saunders, M, Lewis, P and Thornhill, A (2007). Research Methods For Business Students, 4th edit., Essex: Pearson Scharfstein, D. (1998). The Dark Side Of Internal Capital Markets II: Evidence From Diversified Inefficient Investment. NBER Working Paper No. 6352 Shirreff (2004). Dealing With Financial Risk, London: Profile Book Ltd Shleifer, A. and Vishny, R. (1988). Management Buyouts as a Response to Market Pressure,in A Auerbach (ed.) Mergers and Acquisitions, Chicago: University of Chicago Press Suijs, J. (2000). Cooperative Decision-Making Under Risk, Massachusetts: Kluwer Academic Publisher Tennent, J. and Friend, G. (2005). Guide to Business Modelling, 2nd edit., London: Profile Books Limited Trovato, E. (2006). Focus on: Emerging Asset Classes Introduction Moving from the fringes into the mainstream, Professional Wealth Management, 1 June 2006. p.1, London

Tseng, L. J. and Lai, C. W. (2007) ABC Joint Products Decision With Multiple Resource Constraints. Journal of American Academy Of Business, March 2007, vol.11, Iss. 1; pg.237-243, Cambridge Voight, J. (2007) How Consumers Help Build A Brands DNA, Adweek, 29 January 2007, Vol.48, Iss. 5, p.16, New York. Weng, W. L. (2001) Growth Option and Investment Under Uncertainty, Stanford University Zikmund, W. G. (2000) Business Research Methods, 6th edit., Orlando: Harcourt Web links http://www.aboutbarclays.com. Retrieved on 19 April 2009