BANK ACQUISITION : THE CASE OF DBSBANK AND POSBANK

Abstract

As the Singapore banking industry becomes more open, bank mergers and acquisitions activities are likely to increase. According to surveys performed in the United States, most banks are motivated to merge and consolidate their positions for reasons such as gaining larger market share, reducing risk through diversification and deriving synergy from mergers and acquisition. In the case of Singapore, the government initiative to merge POSBank with DBS Bank has generated many debates. The most important issues discussed are the effects of the merger and whether the transaction is a good deal to the DBS Bank. The effects of the merger is likely to bring about greater benefits to the customers of POSBank as they could expect greater variety of banking services and higher interest rates on savings. ln addition, the DBS Bank is expected to gain from acquiring POSBank as the analysis performed in the thesis shows that POSBank is worth more than the purchase price. Moreover, synergy has been created and the shareholders of the DBS Banks would stand to gain from the acquisition. The substantial assets of the POSBank would also enable the DBS bank to expand its operation in the region. Other intangible benefits such as a fall in the risk of the merged entity through diversification and increased bargaining power are also generated through the merger.