What Are Banking Acquisitions?

Banking acquisitions are purchases of companies that offer financial services with the goal of expanding a bank's scope, market share, and coverage. These can include other banks as well as financial institutions with different services like insurance, financial consulting, and so forth. Banks usually become large before they pursue acquisitions. Smaller banks may consider mergers, where they join forces with other companies in the interest of improving their strength in the market.

Large banks and other financial institutions are often continually looking for new banking acquisitions as part of their business strategy. At any given time, they can be in the process of researching and negotiating several different deals at once. Often they attempt to conceal their activities to avoid market disruptions and prevent situations like sudden spikes in company value triggered by eager investors attempting to take advantage of a rumored acquisition or merger. Changes in value can make a deal more complicated.

Many banking acquisitions involve purchases of banks that can offer as partners to expand market share. A company with an established presence in Germany, for example, might want to buy a bank in the United States. The partner bank will expand market share and available services with a presence in the United States. This leads to more customers as well as increased customer satisfaction; German customers, for example, would find it easier to travel and work in the United States because of the new branches.

Banking acquisitions can also result in gaining control of valuable banking properties that may come with substantial capital or reputation. A well-known bank may be left under its own branding to continue attracting customers to that name while generating revenue for the parent company. Banks can also expand into new services like offering home loans through bank acquisitions, rather than starting an entirely new company. Buying an established institution is more cost effective and also provides an opportunity to start immediately, rather than having to build up a bank from scratch.

Trade publications usually include information about recent banking acquisitions and may also speculate on rumors. It can be difficult to conceal investigations associated with the acquisition process, as any purchaser wants to do thorough research and this may attract the attention of sharp-eyed investors and commentators. Banks usually refuse to comment on rumors until a deal is final, to maintain confidentiality while negotiating the fine details of an acquisition transaction.