The Impact of the Financial Mechanism for Mergers and Acquisitions on the Profitability of the Bank After the Deal

Nowadays the topic of Mergers and Acquisitions is one of the most studied areas in finance. Mergers and Acquisitions in the banking sector also happen quite often, and the main distinctive feature of the banking sector is the close relationship with virtually all the economic processes in any country. Depending on the circumstances and expected results, banks use various mechanisms for financing Mergers and Acquisitions. As for the study of the effect of the transaction financing mechanism on the financial performance of the acquiring bank, there is practically no analysis of transactions made in the second decade of the twenty-first century in the European market. In this paper, a study was conducted of 150 M&A transactions across Europe between 2013 and 2015, where banks always acted as an acquiring company. As a result, the specification of the ROA (Return on Assets) model of the bank two years after the transaction was chosen and the positive effect of cash payment on the profitability of the acquiring bank was confirmed, as well as the positive nature of the impact of the bank's profit margin on the return on its assets two years after transaction’s completion. In addition, the absence of influence of such factors as stock financing, mixed financing, LBO (Leveraged Buyout), participants’ country and industry was also identified.