Fortune Favors the Bold Evidence from an Asian Bank Merger

Abstract

This study surveys prior literature on mergers and acquisitions (M&A) with a special focus on factors affecting M&A outcomes and valuation. In addition, this study analyses one of the largest and most controversial mergers from the Philippine Banking sector: The merger of the fifth largest bank (BDO) with the third largest bank (Equitable PCI) in Philippines. This merger provides an ideal setting for a case study, subsequent links to M&A theories and generalizable lessons for future bank mergers. Furthermore, this study identifies key factors and steps taken by BDO management and the combined entity BDO Uni bank to obtain success. The acquisition spanned from 2004 to 2006 and was fully completed on December 27th, 2006 with BDO as the surviving entity renamed as Banco de Oro Uni bank (BDO Uni bank). BDO Uni bank had an increase in net income of 3.4 million. In addition, a doubling of its assets from PHP (Philippine peso) to 600 Peso Billion (Pbn) in the subsequent years relative to pre-merger BDO levels. Presently, BDO Uni Bank continues to generate stable revenue and be ranked number one in the Philippine Banking sector. Keywords: Shariah compliant hotels, purchase intention.