M&As motives: Evidence from the European financial services industry

The most cited M&As motives have been synergy, agency problems and hubris. However, the literature on European bank M&As does not document any direct test for the existence of these explanations, consequently this motivated our study in which we examine a sample of 76 M&As in the European banking industry between 1987 and 1999. We found that synergy is the major motive for these mergers especially those with total positive gains although there is evidence for the simultaneous existence of hubris in these deals. The evidence of agency problems is thin and is more apparent in deals with negative total gain. Our results are robust and were confirmed after controlling for various deal characteristics; however, the agency problems motive becomes more apparent in equity exchange deals that result in negative total gains.