Paving the Way to M&A Success : Legal Restructuring at the Core of Post Merger Integration

Despite fleeing from risky activities and scrambling for cash, banks have maintained high level of M&A activity throughout the latest financial crisis. Low prices may explain in part the appetite for acquisitions, but the outcome of these deals remains highly uncertain and success relies on an effective Post Merger Integration (PMI). We argue that a central element of PMI should be a review and restructuring of the new legal structure, as the merger of two banks with complex branch and subsidiary networks is likely to result in an inefficient overall legal model. Indeed, M&A benefits, as well as long-term growth and flexibility, are conditional on the new bank having a legal model fitted to its target business model. We highlight some of the challenges of changing the legal structure and put forward principles for overcoming them, including the need for a CEO-driven mandate. Finally, we encourage bankers and shareholders to consider the risks and opportunities of current legal models and, perhaps with the help of fresh financial economic research in this area, define the structures that will help businesses outperform competition