IntroductionThe Abbey bank of the UK and Banco Santander of Spain decided to integrate through an acquisition agreement in early 2004. In the agreement, Banco Santander would utilize the financial and technological strength it has all over the world to boost business in the UK. The Abbey bank on the other hand would benefit from technological programs and other beneficial services from the Spanish giant. This paper will therefore examine the reasons why Banco Santander Central Hispano acquired Abbey bank at a price which was lower than its peak market value.
It will also examine which of the stakeholders in the two banks have so far benefited from the acquisition. It will particularly look at the way the acquisition was arrived at and what really happened; who was for the idea and who was not. On the 26th of July, 2004, Banco Santander Central Hispano and the Abbey national plc came up to an agreement that the Abbey bank would become a subsidiary of the Spanish bank. Although there was extensive consultation before the final agreement was reached, many of the stakeholders of Abbey bank felt that the deal would short-change them as the price was too low.
The 8.9 billion euros was not enough to convince the shareholders of Abbey that Banco Santander would bring in new services and technology to the benefit of Abbey bank. The meeting called to discuss this issue was very stormy and there was vocal opposition for the deal. In fact, the stakeholders were forced to vote on the issue because the people could not reach a consensus. The vote count gave a 95% support for the deal and thereafter it got a legal backing when the courts approved the acquisition of Abbey bank by Banco Santander The merger acquisition of Abbey bank by Banco Santander in 2004 was one of the major milestones in the banking industry.
Although it is only three years since the acquisition took place, a lot of expectations and uncertainties have been going on and it would be very unfair to criticize or praise the move by Banco Santander. However, few indicators have shown that the company is on track to success with earnings shooting over by 24% as at the end of 2005.
The acquisition was however marked by controversy because of the value of acquisition that was noticed in that the price that Banco Santander bought the bank was really low compared to its peak market value as at the end of 2003. This issue was however overlooked because of the fact that the benefits that would be achieved after the acquisition would be greater considering a long term perspective Financial service businesses have adopted mergers and acquisitions as strategies to improving financial bases and market values in this coimp0etitive 21st century.
This has therefore resulted in the consolidation of businesses units with a view to benefiting the two companies’ involved. This particular example is a case in hand which has been anticipated to fail but a lot is changing in the financial services sector and anything can benefit the business if it is well analyzed