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Case Study Chase Manhattan

In: Business and Management

Submitted By Scabo
Words 2581
Pages 11
Contents
1. Evaluate the rationale for the merger................................................................................. 1 2. Relative merits of a merger and an acquisition ................................................................. 2 3. Present value of the gains from merger and costs of capital.............................................. 4 4. Exchange ratio for the shares ............................................................................................ 6 5. Reference list...................................................................................................................... 8

Tables
Table 1: Cash-flows................................................................................................................ 6 Table 2: Discounted cash-flows ............................................................................................. 6 Table 3: Banks strengths in comparison................................................................................. 7

1. Evaluate the rationale for the merger
After a period of record number of bank failures during the 1980s, the Banking Industry entered a period of record profits in the 1990s. Also the industry saw a large number of bank mergers that pointed out a new trend, leading to more concentrated and bigger banks holding a majority of total banks assets. Following this trend a Chemical/Chase merger became attractive. By accomplishing this merger Chase Manhattan would grow to the largest bank of the USA and the fourth largest in the world, which would sum up to total assets of $297.3 billions, a market capitalization of $22.9 billions and shareholder equity of $7.3 billion. A clear rationale for merging was the elimination of overlapping business activities, which would lead to massive cost savings of $1.5 billions per annum. This would be achieved through a reduction…...

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