Mergers and Acquisitions Case Study Case Study

  • Length: 9 pages
  • Sources: 10
  • Subject: Economics
  • Type: Case Study
  • Paper: #77007818

Excerpt from Case Study :

One specific phase that the author uses that can be applied to RBS is that innovations may force banks into decisions that are micro-functional, but macro-dysfunctional. In the case of RBS, leadership focus on reductionist metrics that offered increases in efficiencies in certain business functions, however by focusing on micro-functional areas of improvement the organization lost perspective on the macro benefits or losses incurred by a more comprehensive analysis. Furthermore, when examining possible herding behavior by industry executives, if these executives became focused on achieving the same competitive advantage through short-term gains in micro-functional areas and this behavior could potentially spill over and produce a flood of similar behaviors industry wide. Hence, which ever metric became the prefer analysis tool by executives or speculators could influence an entire industry and shift the industry toward inefficiencies.

Governmental Boundaries

The final perspective in which this paper will reflect upon in this particular case is from the view of governmental bodies that possess the regulatory potential to enact policies that can influence markets. It has been argued that most of the academic work that looks into these relationships focuses on corporate governance from an insider's point-of-view i.e. A shareholder's or director's perspective (Kordel, 2008). This principle-agent focus is argued to misrepresent of perspectives; mainly looking at the scenario from the governments perspective. This view has increasing implications with the emerging concession that irrationality has a place in the market place as previously mentioned.

Furthermore, the end result of this business case involved the governments of the UK and also the Dutch government acting as the lender of last resort in their decisions to bail out the respective banks when they in fact failed. Therefore, with the assumptions that irrational behavior exists and also that governments have recently have had to intervene to save the failing institutions, it is reasonable to speculate that this perspective will have an increasing role to provide regulatory mechanisms in the future to prevent similar situations from reoccurring.

The question thus arises to what extent governments should intervene to apply protective measures to prevent irrational behaviors or corporate misconduct in hopes of mitigating the social burdens that emerge from the resulting market inefficiencies. The scope of the answer exceeds the capabilities of this body of research and possibly the current state of academia. However, looking forward it is reasonable to believe that this research will be relentlessly pursued in the wake of the financial crisis and the emergence of the new discipline that directly challenges the very foundation of neo-classical economic theory.

Conclusion

Discussions about the failed acquisition attempt made by RBS and its strategic partners to successfully acquire ABN AMRO have been presented by examining the tragedy from different perspectives. By no means does this study represent a comprehensive analysis of all of the relevant factors that worked to shape the deal. Instead it has pointed to a relatively few of the more interesting aspects involved with this acquisition and related them to contemporary themes in developing academic disciplines.

Though Sir Fred Goodwin was resigned to accept a bulk of the responsibility for the failed acquisition, the corporate culture and the resulting boundaries that the CEO must operate within can also be considered to be contributors to the drama. The old adage states that no one man is an island an in the same sense Sir Goodwin could not of shaped the events that transpired without the support of shareholders and the board of directors. However, it does not follow that Sir Goodwin should be exonerated from any misconduct or incompetence for his actions. Rather, a more comprehensive and realistic approach is required in viewing this case from a larger perspective and considering the culture that surrounded and permitted the CEO to play the lead role in the chain of events that brought RBS to its knees.

From an even broader perspective, you can also examine the commonalities shared by peer organizations within the industry to shed even more insight into this case. RBS was certainly not the only bank to improperly mitigate its exposure to the sub-prime market failure that ultimately resulted in many of the top global banks seeking governmental bail outs to cover their obligations. When viewing the industry from this level, the question remains to what extent of the crisis is systemic in nature caused by inefficiencies in the market. Hence, the perspective moves to that of governments and their role in regulating markets to prevent risks associated with such occurrences to escalate in the future of the global economy.

Works Cited

Bower, Joseph L. 2001. "Not All M&as Are Alike -- and That Matters." Harvard

Business Review 79, no. 3: 92-101. Business Source Premier, EBSCOhost

(accessed May 20, 2010).

Croft, Jane, and Andrew Bolger. 2009. 'Painful' ABN deal spelled doom. FT.com, April 3, http://www.proquest.com (accessed May 20, 2010).

Freek V. "How Acquisitions Can Revitalize Companies. " MIT Sloan

Management Review 46.4 (2005): 45. ABI/INFORM Global, ProQuest.

Web. 21 May. 2010.

Haiss, P.. "Bank Herding and Incentive Systems as Catalysts for the Financial

Crisis. " IUP Journal of Behavioral Finance 7.1/2 (2010): 30-58. ABI/INFORM

Global, ProQuest. Web. 21 May. 2010.

Kordel, G.. (2008). Behavioral Corporate Governance from a Regulatory Perspective:

Potentials and Limits of Regulatory Intervention to Impact the Conduct of Corporate Actors. European Business Organization Law Review, 9(1), 29-

62. Retrieved May 21, 2010, from ABI/INFORM Global. (Document

RBS Corporate Site. 2010. 22 May 2010 .

Skinner, Chris. "The Rise and Fall of RBS: How Fred Goodwin Went from Hero to Zero." 22 January 2009. Seeking Alpha. May 2010

.

Vermeulen, F. "How Acquisitions Can Revitalize Companies." MIT Sloan Management…

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