ABN Amro's long and apparently successful battle to secure a 30 percent controlling stake in Italy's Banca Antonveneta raises the prospect of more foreign takeovers in the European banking sector.1 If that does happen, the question will become how to create more value from such mergers. Indeed, the results of past European cross-border deals have been disappointing, especially compared with domestic bank mergers. The typical explanation is that synergies such as trimming the overlap in branch networks are not available when banks from two different territories merge. Moreover, cultural differences, as well as political and regulatory obstacles, tend to make the execution of cross-border deals more challenging.
No one should underestimate the challenge of successfully executing any sort of merger, particularly one that spans different countries, jurisdictions, and traditions. European banks that choose their targets well and negotiate firmly, however, can create plenty of value in the future. A chief insight from our research is the realization that companies, with the help of farsighted and determined managers, can anticipate and overcome the hostile behavior of home country stakeholders.
Since many European banks may ultimately consider the cross-border route, this issue is an important one. Large-scale domestic consolidation remains a...