Determinants of premiums paid in European banking mergers and acquisitions

This study is aimed at analysing the determinants of premiums paid in European banking mergers and acquisitions (M&A). This analysis will highlight the reasons for the wave of bank M&A during the 1990s. The empirical study analyses a sample of 81 European banking M&A from 1994 to 2000. The results show that there are different variables that make the target bank attractive to the acquirer, such as the percentage of equity, the percentage of loans and financial profitability. However, geographical and product diversification have not been considered by the acquirers as a reason to pay higher premiums.