Research Proposal

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

PhD Research Proposal

The Firm Valuations in Mergers & Acquisitions, and Its

Impacts on Key Financial Ratios

Evidence from Banking Industry in UK over the period of

2000-2013

Yhlas Sovbetov

20 August 2013

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

1. INTRODUCTION

1.1. The Rationale of Mergers & Acquisitions

Companies set various of strategies to enlarge and expand their business to the different

markets in both domestic and global scope. According to Santos et al (2012) and Akgobek

(2012), these strategies generally based on an internally growing which is expressed as raw

organic growth of the firm, or externally expansion that is building strategic corporation

bridges such as mergers and acquisitions (hereinafter referred as M&A). Moreover, according

to Khan (2011), the recent economic difficulties, besides a cut throat competition in the

financial markets, bereave the chance of week structured firms to survive, and forcing them

either to death or M&A. On other hand, as Kyei-Mensah (2011) states, the most recent

business expansions at international level are made through M&A, due to its less cost of

market entrance than other methods, and it is a phenomenon that the corporate investment is

the quickest way to increase shareholders wealth. Plus, according to Kumar and Bansal

(2008), Malucha (2009), and Akgobek (2012) another rationale of preference of M&A

strategy too often is establishing greater market power, and getting a competitive advantage

over rivals. They believe that M&A and other strategic alliances are reforming the structure

of the corporation by empowering its competitive relations in the market.

Furthermore, as rationale of M&A, Roberts et al (2003) opine that besides gaining access to

new markets, seizing access to source of raw materials can be aimed as aftermath of the

strategy for new opportunities. Moreover, as Malucha (2009), Khan (2011), and Akgobek

(2012) state, merge of two entities sometimes creates more new value than sum of each

separate, which is know as synergy effect, and this can entice the firms at tough periods.

Also, the author believes that, one another motive behind M&A is that it helps to increase the

market share and cost efficiency of the firm. Moreover, according to Motis (2007) and

Akgobek (2012), the M&A strategy can be aimed as feasible method of growing in particular

markets by diversifying the risk associated assets, and thus increasing the efficiency.

1.2. Recent M&A Activities in UK

According to Tzonis (2008), since the last three decades, the literature has witnessed

noteworthy increase in the numbers of M&A in the UK. As author states, only during the

period of 1980-1990, two hundred and sixty three (263) public listed firms, and hundred and

thirty seven (137) non financial firms, in total three hundred and ninety three (393) firms

were acquired. The cost of these acquisitions were nearly 32bn by the end of the 1995. On

other hand, in recent years, the M&A activities in UK tend to decline. According to Heera

(2013), the volume of deals in the last quarter of 2009 were 1176, whereas in the last quarter

of 2010 it declined to 989. Likewise, the value of deals in the same period of 2009 and 2010,

were 65.5bn and 55.6bn respectively. Moreover, the author states that most of these UK

deals (%15) were made with U.S, (%5) Australia, and (%3) Germany.

Table 1: Recent M&A Activities in UK

Source: (Heera, 2013)

On other hand, in M&A, evaluation of utilities or assets, assessing their fundamental value is

crucial. For instance, Sovbetov (2012) in his study about privatization of stated owned

monopolies, criticises the Thatcher's privatization policy of British commanding height such

as British gas, oil, railway, airways, and etc. He underlines that the Thatcher government

failed in evaluating these state owned utilities, and they were undervalued than their

fundamental value, while their shares were acquired.

1.3. Firm Valuation in M&A

Chaplinsky and Schill (2000) in their notes about valuation methods in mergers and

acquisition, stated that there are a few method tools available in assessing the fundamental

fair value of the enterprise in M&A such as dividend-cash-flow-based approach, earnings-

based approach, and assets-based approach. Here, the authors explain the dividend-cash-

flow-based approach as, the value that derived from future cash flows of the firm by

discounting it to the present day values. As well as, Malucha (2009) and Sovbetov (2012), in

their researches, analyzed this method by breaking into two parts: firstly, assuming that

enterprise has infinitive life and fixed future cash flows, and secondly, enterprise with

infinitive life, but annual growth rate was associated to the future cash flows. Here,

Chaplinsky and Schill (2000) underline that, %100 of profit after tax (PAT) are considered as

net free cash flow disregarding the dividend payments and retentions. They firstly, scheduled

annual cash flows of the firm assuming it has infinitive life, and afterwards, they discounted

the cash flows with weighted average cost of capital (WACC) to the present day values. This

WACC can be determined through CAPM calculations. On other hand, Franceschi (2008)

and Sovbetov (2012) state that this method funded on many assumptions and future

estimations. For instance, annual growth percentage g is calculated through past years

figures, to be applied for future cash flow stream. As well as, in case of annual growth (g)

penetrated, when the WACC (Cost of capital, shareholders return) is smaller than g then this

method fails to be valid.

In case of earnings-based valuation approach, Franceschi (2008) and Sovbetov (2012) state

that for public listed firms, the PE ratio should be multiplied with firm's earnings to calculate

the fundamental value of the firm. In case of private companies, the PE ratio should be

borrowed with similar type of company in same industry among listed ones. Also, a dilution

percentage should be considered according to borrowing conditions, restriction of shares and

information of private companies. The authors believe that it is the major limitation of this

valuation method.

In case of assets-based valuation approach, it is one of the mostly used methods where the PE

preserves its uncertainty, it lessens the future assumptions and estimations. However,

according to Sovbetov (2012), it is very dependent to the book values on balance sheet, and

may belie the acquirers or investors in assessing its fair value. As the author and Franceschi

(2008) underlined, another limitation of this method is that, it ignores the intangible assets.

Despite that the effects of these limitations were improved with International Financial

Accounting Standards (IFRS), it still has lacks and difficulties in representing the

fundamental value of the enterprises. In addition, in his report Franceschi (2008) claim that,

the book value (henceforth referred as BV) dependency of this method can be mitigated by

the formula that he mentioned in his study as following.

1.4. Research Objectives

The process of M&A from firm valuation till aftermath impact was subjected to many

researches so far. Similarly, in this research the author interests in researching the business

valuation techniques that used in M&A activities in UK, as well as, the early impacts of

M&A process on the acquirer firms key financial indicators. Here is the brief summary of

objectives of this research.

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

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

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

- To analyze the bid strategies in UK bank acquisitions

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

2. LITERATURE REVIEW OF EMPIRICAL STUDIES

Till today, many researchers such as have investigated both the firm valuations techniques

during M&A activities (Chaplinsky & Schill (2000) in US; Franceschi (2008) in Italy;

Malucha (2009); Sensarma & Jayadev (2010) in India; Kyei-Mensah (2011) in US), and the

impacts of M&A on acquirer firms key financial indicators (Sudarsanam et al (2001), Guest

(2007), and Tzonis (2008) in UK; Salleh et al (2013) in Malaysia; Badreldin & Kalhoefer

(2009) in Egypt; Maditinos et al (2009) and Liargovas & Repousis (2011) in Greece;

Dutescu et al (2013) in Romania; Akben-Selcuk & Altiok-Yilmaz (2011) in Turkey;

Govender (2010) and Wilson (2013) in South Africa; Omah et al (2013) and Akinbuli &

Kelilume (2013) in Nigeria; Gersdorff & Bacon (2009) and Burns & Liebenberg (2010) in

US; Kumar & Bansal (2008), Khan (2011) and Poornima & Subhashini (2013) in India;

Samitas et al (2008); Altunbas & Ibanez (2004), Renneboog & Szilagyi (2007), and Cocris et

al (2011) in Europe; Cloodt et al (2006) in America, Asia, Europe; Zhou et al (2011) in Asia

and Latin America; Simoes et al (2012) in Latin America).

2.1. Empirical Researches in Europe

Altunbas and Ibanez (2004) investigated the strategic similarities of M&A activities and its

impact on the banks performance in Europe through the sample of 225 banks over the period

of 1995-2004. They utilized the descriptive, multivariate, and regression analyses to assess

the impact. The authors found out that the bidder banks are more cost efficient than target

ones. But on other hand, in case of credit risk profile, the authors found that the targets have a

better view than the bidder ones. In addition, they also stated that the efficiency and deposit

strategies of mergers are improving their performance in both case of domestic and cross-

border M&As, but the dissimilarities in capital structures could be conducive to lower

performance.

Cocris et al (2011) investigated the impact of M&As on banking performance in Europe

through the 18 bank acquisitions over the period of 2001-2009 via utilizing the descriptive,

regression, and correlation analyses. As an aftermath, they found that the M&A helps to

improve the technical efficiency of target banks. More interestingly, the authors conclude that

the M&A activities do not have significant impact on market value of the bidders shares.

Renneboog and Szilagyi (2007) studied the impact of M&A activities on bond performance

in Europe through the 225 M&A events over the period of 1995-2004 by utilizing the

multivariate and regression analyses. As a result, they observed that the bonds underperform

in cross-border M&As comparing to domestic ones. They also stated that the European

bidders are less sensitive to the asset and financial risk effects of M&As.

Liargovas and Repousis (2011) investigated the impact of M&As on performance of Greek

banking sector through the sample of 26 bank acquisitions over the period of 1996-2009 by

utilizing regression analysis. As a conclusion, they found the similar result as the Cocris et al

(2011) found in their study, that the M&A activities do not create a wealth on both bidder

and target banks. However, they got conflicted in results with Cocris et al (2011), in case of

impact on share values that they observed positive abnormal returns on both bidder and target

share values before ten days of announcement.

Maditinos et al (2009) studied the same subject with Liargovas and Repousis (2011), exactly

in the same region. But the authors focused only on two bank acquisitions in 1999: Ioniki-

Laiki bank and Pisteos bank. They exercised covariance, regression, and correlation analyses,

and found that the M&A announcements have temporary impact on both bidder and target

shares. This result showed the similarity with Liargovas and Repousis (2011) ones.

Franceschi (2008) studied the valuation techniques in M&A activities over the period of

2002-2007 in Italy through 19 consultant reports by utilizing regression analysis. As a result,

he found that Italian consultant firms have used several valuation methods with wide range of

exchange ratios, but the dividend discount model (excess capital) was the most preferred one

among others.

Dutescu et al (2013) investigated the impact of M&As on performance of target firms in

Romania through the sample observation of 10 M&A events over the period of 2007-2009.

They examined the transaction analysis of these M&As with the data of 2007, and compared

it with three-years post-acquisition profitability data of 2009. As a result, they found that %80

of related activities in Romania were not profitable for the target firms.

On the contrary to Dutescu et al (2013), Akben-Selcuk and Altiok-Yilmaz (2011) studied the

impact of M&As on performance of acquirer firms in Turkey through the sample of 63 M&A

events over the period of 2003-2007 by utilizing regression analysis. As an aftermath, they

found that the returns of the stocks who involved in M&A activities are higher than average

return of the industry. Moreover, they found that the profitability of acquirers tends to decline

after conclusion of acquisition processes.

Guest (2007) in his study researched the impact of M&As on executive compensation in UK

through 4528 M&A events over the period of 1984-2001, and found significant pay increase

in the year following acquisition. But afterwards he observed a decline in following two years

that offset the initial increase. He opines that, the reason of initial increase could be the bonus

payments besides permanent salaries. Moreover, he found no evidence of compensation is

related to the acquisition performance, whether it is good or bad strategic decision, effects the

compensation increase.

Sudarsanam et al (2001) in their study of glamour acquirers and value acquirers post-

acquisition performance in UK by analyzing 543 acquisitions during 1982-1995, have found

that shareholders of value acquirers (low market-book value) experienced higher returns than

glamour acquirers (high market-book value) in the first three years of post-acquisition period.

Similarly, they found that the acquirers with low PE ratio have outperformed the acquirers

with higher PE ratio over the first three years of post-acquisition period.

Tzonis (2008) investigated the influences and reasons of M&As in UK through the sample of

470 M&A events over the period of 1986-2005 by observing the t-statistic test. As a result, he

concluded his research by stating that no evidence of M&A impact on stock market and

business cycle at industrial level, but there is a strong one in aggregate level.

Table 2: Summary of Empirical Research Results in Europe

Reference Origin Sample Period Model Result

Altunbas &

Ibanez (2004) Europe

225

Banks

1995-

2004

Descriptive Analysis

Multivariate

Regression

1. Bidders are more cost efficient than targets.

2. Total assets of bidders are 7 times larger

than targets.

3. ROE has increased after M&A.

Cocris et al

(2011) Europe

18

Bank

M&As

2001-

2009


Regression Analysis

Pearson Correlation

1. The M&A improves the technical efficiency

of the target banks.

2. The M&A does not

change market value of the bidder's shares.

Renneboog &

Szilagyi (2007) Europe

225

M&As

1995-

2004

Multivariate

Regression

1. European bidders are less sensitive to the

asset and financial risk effects of M&As.

2. Bonds underperform in cross-border M&As

relative to domestic deals.

Liargovas &

Repousis (2011) Greece

26

Bank

M&As

1996-

2009 Regression Analysis

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

or target banks.

2. Before 10 days of announcement the share

values of bidder and target banks get positive

abnormal returns.

Maditinos et al

(2009) Greece

2 Bank

M&As 1999


Autocorrelation

Autocovariance

Autoregressive

The announcements have temporary impact on

the value of bidder and target stocks.

Franceschi

(2008) Italy

19

Reports

2002


The Dividend Discount Model - Excess Capital

is the most used valuation method.

Dutescu et al

(2013) Romania

10

M&As

2007-

2009 Transaction Analysis

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

profitable.

Akben-Selcuk

& Altiok-

Yilmaz (2011)

Turkey 63

M&As

2003-


1. Returns for stocks who involved in M&As

exceed average industry returns.

2. Profitability of acquirers declined after

acquisitions.

Guest (2007) UK 4528

M&As

1984-

2001

Regression Analysis

t-test

1. There is strong increase of pay in cross-

border acquisitions at international levels, but

no of higher pay increase in domestic ones.

2. There is no evidence of differences in pay

changes between public and private

acquisitions.

Sudarsanam et

al (2001) UK

543

M&As

1982-

1995 t-test

1. Shareholders of value acquirers experienced

higher returns than glamour acquirers.

2. The acquirers with low PE ratio

outperformed the higher ones.

Tzonis (2008) UK 470

M&As

1986-

2005 t-test

There is no evidence that M&As have impact

on stock market and the business cycle at

industrial level, but there is strong one in

aggregate level.

Source: (The authors own elaboration)

2.2. Empirical Researches in America

Gersdorff and Bacon (2009) examined the M&A activities in US, and its impact on market

efficiency, through observing 20 M&A events in the period of 2007 by utilizing regression

analysis tool. As a result, they found that there is an action in stock prices of acquirers only

after thirty days from announcement. This result is conflicting with Tzonis (2008), Cocris et

al (2011), and Liargovas & Repousis (2011), but it is consistent with Akben-Selcuk and

Altiok-Yilmaz (2011), and Sudarsanam et al (2001) findings.

Burns and Liebenberg (2010) pursued an observation about US takeovers in foreign markets

over the period of 2008-2009 by analyzing 1967 M&A events via multivariate regression

analysis tool. As a result, they found that US acquisitions had a positive impact on emerging

market firms, and small impact on developed markets.

Kyei-Mensah (2011) investigated the impact of M&A activities on wealth of US firms

through analyzing 401 M&A events over the period of 1988-2008 by utilizing descriptive,

regression, correlation, students test, and Wilcoxon-signed rank test analyses. As an

aftermath, he found that after M&A announcements the cumulative abnormal returns of

acquiring shareholders tend to decline significantly within comparison to the acquired ones.

Zhou et al (2011) in their research of bank M&A activities in emerging markets of Asia and

Latin America, found that the announcements create a return for target bank shareholders, but

there is no evidence that the acquirers wealth are decreased. They pursued this observation

through 132 bank M&A events over the period of 1998-2009 by exercising multivariate

regression analysis tool.

Simoes et al (2012) pursued the similar investigation as Gersdorff and Bacon (2009) did in

2009. In this study, the authors sampled the region considering only Latin American

countries such as Argentina, Brazil, and Chile. As an observation nearly 53 M&A events over

the period of 1995-2008 were analyzed. It means 742 rows of data were penetrated through

regression analysis. As a result, they found that M&A announcements signalled value

creations in above mentioned countries stock markets.

Table 3: Summary of Empirical Research Results in America


Gersdorff &

Bacon (2009) US

20

M&As 2007 Regression Analysis

There is an action in stock prices of acquirers 30

days after announcement.

Burns &

Liebenberg

(2010)

US 1967

M&As

2008-

2009

Multivariate

Regression

U.S. acquisitions have a positive impact on

emerging market firms and small impact on

developed markets.

Kyei-Mensah

(2011) US

401

M&As

1988-

2008


Regression Analysis

Correlation Analysis

Wilcoxon-signed rank

t-test

After announcement, cumulative abnormal

returns of acquiring shareholders declined

significantly within comparison to the acquired

ones.

Zhou et al

(2011)

Asia &

Latin

America

132

M&As

1998-

2009

Multivariate

Regression

The M&A announcements in Asia and Latin

America created return for the shareholders of

target banks, whereas there was no evidence that

the wealth of acquirer shareholders is diminished.

Simoes et al

(2012)

Latin

America

53

M&As

1995-

2008 Regression

M&A news signalled value creation in the

Argentinean, Brazilian, and Chile stock market.


2.3. Empirical Researches in Africa

Badreldin and Kalhoefer (2009) studied the impact of M&As on Egyptian banks

performances, by analyzing 10 banks M&A events through the period of 2002-2007. They

selected three-years pre-acquisition data, and three-years post-acquisition data. They

compared the pre and post profitability data, and found no evidence of M&A impacts on

banks profitability.

Govender (2010) in his study investigated the relationship between the accounting quality

and performance of acquirers by analyzing 797 South African acquisitions through the period

of 2001-2009. The author found similar result as Sudarsanam et al (2001) found, that the

value acquirers outperformed the glamour acquirers in the post-acquisition period. Moreover,

the author observed that an increase in earnings of the glamour acquirers in last three years of

pre-acquisition period, and a decrease in earnings in first three years of post-acquisition

period.

Akinbuli and Kelilume (2013) examined the impact of M&A activities on firms growth and

profitability in Nigeria. They sampled 10 banks M&A events over the period of 2004-2008,

by utilizing regression analysis. As a result, they found that the impact of M&A activities

have temporary effects on firms growth and profitability. Therefore, they as a conclusion they

stated that M&As are not a solution for the financial distress in Nigeria bank industry.

Omah et al (2013) pursued an investigation in the same region and industry with Akinbuli

and Kelilume (2013). As a difference, the authors here, sampled 20 banks M&A events over

the period of 2001-2010 by aiming to measure the M&A effects on shareholders value. As a

aftermath of regression analysis, they observed a marginal increase in shareholders value

creation.

Wilson (2013) in his study in South Africa, investigated the trends and determinants of

M&A activities targeting the country firms, by observing 1072 M&A events through the

period of 1991-2011 via regional, Poisson distribution, negative binomial regression, and

variance analyses tools. As a result, she found that UK and US are the main acquirers of

South Africa firms. Moreover, as determinants of M&A, she found the share price, market

size, and macroeconomic stability are main factors in the country in M&A activities.

Table 4: Summary of Empirical Research Results in Africa


Badreldin &

Kalhoefer (2009) Egypt

10

Bank

M&As

2002-

2007 Comparative Analysis

There is no evidence that M&A has impact on

banks profitability.

Govender (2010) South

Africa

797

M&As

2001-

2009


T-test

1. The value acquirers outperformed the

glamour acquirers in the post-acquisition

period.

Akinbuli &

Kelilume (2013) Nigeria

10

Banks

2004-


The M&As helps improve financial distress

only on temporary basis.

Omah et al

(2013) Nigeria

20

Banks

2001-


There is a marginal positive impact of M&As

on shareholders value creation.

Wilson (2013) South

Africa

1072

M&As

1991-

2011


Regional Analysis

Poisson Distribution

Negative Binomial

Regression

Variance

1. United Kingdom and United States of

America are the main acquirers of South Africa

firms.

2. Share prices, Market size, return rate, and

macroeconomic stability are important

determinants of location of M&A activity.


2.4. Empirical Researches in Asia

Cloodt et al (2006) in their research about impact of M&As on innovative performance of

firms in high-tech industries, found that non-technological M&As have negative impact on

acquirers performance due to its extra costs in repairing the disruptions that occurred in

adoption period. They pursued this research through 2429 M&A events in America, Asia, and

Europe over the period of 1985-1994 by utilizing regression analysis.

Kumar and Bansal (2008) investigated the impact of M&A activities on Indian firms

performance, through sampling 74 M&A events related to the period of 2000-2003. By

comparing the gathered data, the found that %60 of acquirers improved their performance in

post-acquisition period. Meantime, the authors state that the working capital and gearing ratio

are increased in post-acquisition period.

Khan (2011) in his research aimed to explore the rationales and driving forces of M&A

activities in India banking sector, by focusing on 4 bank M&A events over the period of

2005-2011 via t-statistic test tool. As a result, he found significance difference between pre

and post merger ratios such as NP (net profit), ROCE, ROE, and DE(debt-equity).

Sensarma and Jayadev (2010) explored the same country by the sample of 27 bank merger

events over the period of 1986-2003. He aimed to assess the efficiency, economic scale, and

valuation effect of these merger events by exercising regression analysis. As a result, he

found that in forced mergers, none of the shareholders gain value, but in voluntary mergers,

the bidders shareholders gain more that targeted ones.

Poornima and Subhashini (2013) pursued an investigation aiming to assess the impact of the

type of M&As on Indian firms performance by observing 33 M&A events in the period of

2009-2010. They utilized the paired t-test analysis, and found that the type of mergers is

irrelevant to the acquirers performance in Indian industries.

Finally, Salleh et al (2013) in their study, measured the efficiency of M&As in Malaysian

telecommunication industry by applying multiple regression analysis to the 6 banks data

relating the period of 2005-2010. As a result, they found that asset efficiency of acquirers

tend to decrease after M&A. Moreover, they observed that high sequence of acquisitions

decreases the asset efficiency of acquirers.

Table 5: Summary of Empirical Research Results in Asia


Cloodt et al

(2006)

America,

Asia,

Europe

2429

M&As

1985


Non-technological M&As have negative

impact on acquirer's performance due to its

extra resources to repair the disruptions.

Kumar &

Bansal (2008) India

74

M&As

2000-

2003 Comparative Analysis

Acquirers performance has been improved in

post-M&A period.

Khan (2011) India 4 Banks 2005-

2011 t-test

There is significance difference between the

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

Sensarma &

Jayadev (2010) India

27

Banks

1986-


In forced mergers, none of shareholders

(bidder/target) gain value. In voluntary

mergers, the bidder's shareholders gain more

than the targeted ones.

Poornima &

Subhashini

(2013)

India 33

M&As

2009-

2010 Paired t-test

The type of mergers does not have impact on

acquirer's performance.

Salleh et al

(2013) Malaysia

6 Bank

M&As

2005-

2010 Multiple Regression

1. Asset efficiency of acquirers tend to

decrease after M&A.

2. High sequence of acquisitions decreases the

asset efficiency of acquirers.


3. RESEARCH METHODOLOGY

3.1. Type of Research

Starting with theoretical bases, and following the empirical research results, this research will

make an observation as parallel with the characteristics of deductive reasoning approach. As

the impacts of M&A on key financial ratios in UK bank sector over the period of 2000-2013,

are aimed to be measured, the type of this research should be based on quantitative approach.

3.2. Data Description & Analysis

All banks which involved to the M&A activities in the period of 2000-2013 should be sorted

out, and their data should be gathered from annual reports that is the secondary data source.

As key financial indicators the profitability, efficiency, and structural ratios are involved to

the analysis. These ratios are described below.

a) Profitability Ratios: Net Profit (NP), ROE, ROA, ROCE

b) Efficiency Ratios: Current Ratio (CR), Liquidity Ratio (LIQ)

c) Structural Ratios: Debt-Equity (DE), Total Debt to Total Capital (DC)

At least 25 M&A events are aimed as observation number for this research, and taking into

consideration of twelve-years data, that will formulate a table with 350 rows of data. All the

related data are aimed to be sorted out, and penetrated through the regression and correlation

analysis to observe the impacts.

3.3. Research Framework

First concept of the research is based on pre and post M&A periods. Five-years pre M&A

period, and five-years post M&A period would be satisfactory to compare and assess the

M&A impacts on banks key financials. Second concept of the research is based on evaluating

the impacts with regression and correlation analysis without classifying as pre and post

periods. In addition, both of these concepts would involve the examination of the most

accurate valuation techniques in UK banking M&A activities.

3.4. Research Hypothesis

The following hypotheses are formulates as research questions.

H1: There is a significant impact of M&As on profitability of the banks.

H2: There is a significant impact of M&As on efficiency of the banks.

H3: There is a significant impact of M&As on capital structure of the banks.

H4: All valuation methods of banks in UK have similar results, therefore their preference are

irrelevant.

3.5. Research Difficulties

According to the Sovbetov (2013), the banks have different structure than other financial

institutions. The differences in regulatory regime, and the rules described in the Basel

Accords, distinct the banks from others. One another limitation is the lack of transparency of

the bank reports, as Sovbetov (2013) underlined. The reliability of this research would base

on annual published reports of the related banks. In addition, as a final limitation, the

metaphor of too big to fail gives to banks a privilege effigy with government backing

supports and tolerance. Therefore, investigate these firms become more difficult than other

financial institutions.

4. TIMESCALE

In order to manage the time efficiently, the following grant chart was formulated by the

author of this research proposal.

Figure 1: Time Schedule of this Research Proposal

Source: (Designed by author)

Literature Review

Market Observation

Empirical Results

Methodology

Data Collection

Data Analysis

5. REFERENCES

Akben-Selcuk, E. & Altiok-Yilmaz, A. (2011). The Impact of Mergers and Acquisitions on

Acquirer Performance: Evidence from Turkey. Business and Economics Journal, Vol.11,

No.22, pp.1-8.

Akgobek, I. (2012). Mergers and Acquisitions as a Growth Strategy. International

Conference on Business, Economics, and Behavioral Sciences. April. Pattaya.

Akinbuli, S.F. & Kelilume, I. (2013). The Effects of Mergers and Acquisition on Corporate

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