Экономические науки/2. Финансы и банковское дело

Asel Ericovna Bedelbayeva, master of economy and business
Zhetysu State University named after I.Zhansugurov

NEED OF MERGES AND ABSORPTION FOR THE BANKING SECTOR OF THE REPUBLIC OF KAZAKHSTAN

In recent years banking systems as in developed, and developing countries were involved in restructuring and consolidation process that strongly changed the nature of banking business. Changes in regulation of banking business and technological achievements sharply strengthened the competition in bank activity, having opened at the same time for expansion the new markets. In many countries bank crises or bankruptcies of the largest backbone banks gave an additional impulse of restructuring and to process of the international merges and merger of banks. Progress in development of information technologies and proceeding globalization of the markets of the capital and management of risks led to consolidation also in investment bank and insurance businesses.

Merge (merger) is such merger of companies or banks at which one is formed of several companies. Speaking to legal language, such merger of companies at which the part of actions of one company exchanges on all actions of other company is called as "merge" and, as a result one is formed of two (or several) legal entities. Merge can be carried out also by an exchange of actions of two or several banks for actions of again created legal entity. From the point of view of the legislation of leading foreign countries two main types of merges are allocated: absorbing and consolidating (combinational). At absorbing type of merges one of participants of merges (the company or bank) receives weight assets and obligations of the companies (banks) joining it which then, in turn, are disbanded (are liquidated). As a result of consolidating merges the new company accumulating assets and obligations of all merging companies (banks) which are subject subsequently to voluntary elimination will be created[1].

Merges in economy happen waves. It is most characteristic on a substantial scale these waves of merges occurred in the USA. In this regard it is necessary to analyse waves of merges on the example of the USA for understanding of development of processes of merges and absorption, and also influence of macroeconomic factors on activity of merges in separately taken country.

In the USA at a turn of last and these centuries large "wave" of merges first in the history both banks, and banks and the industrial companies was observed almost. By then the set of small firms began to test apparent defect of investment resources that complicated expansion of production and didn't allow to count on a survival in fight against competitors. Meanwhile, so necessary resources actively accumulated the small American baizes which number was huge. Thus, merges appeared then almost the only logical exit from current situation[]2.

Consolidation process among commercial banks of the USA from 1985 for 1995 number of commercial banks in the USA was the most considerable was reduced by one third with nearly 15000 to less, than 10000. Consolidation in bank branch took place most intensively in comparison with other branches in economy. Similar processes took place during this period and in bank branch of the European countries and in Japan [3].

Present situation in the banking sector of Kazakhstan remains uncertain. According to National Bank, since September of last year banks of the second level monthly give out the credits for total amount of 8 trillion tenges against 17 trillion before crisis. External loans ceased to give to the Kazakhstan banks therefore they have no opportunity to increase the assets such rates to which all got used in the last some years. Because of this factor volumes also decreased. Banks are compelled to credit clients by means of or own means, or giving out at the expense of deposits which they attract, or at the expense of internal means somehow: help of the state, means of National Bank, mezhbankovky credits, etc. But these volumes can't replace foreign markets[4].

Implementation of the program of merge rather difficult and long process demanding considerable financial and intellectual efforts. By results of the numerous researches conducted by the consulting companies and economists, it is possible to draw a conclusion that the number of successful merges doesn't exceed 50% of their total number. Merges as a result of which there is an acceleration of growth of profit or cost of the joint structure can be understood as the successful. One of the most common causes of unsuccessful merges is too high award which pays bank buyer. Exist as well other factors, such as a superoptimistical assessment of market potential of absorption, revaluation of advantages of joint activity, unsuccessful integration after merge. Action of one or several of the listed factors leads to that the joint structure starts functioning less effectively that conducts to decrease in profit and a stock value in the market, process of merges and absorption as part of corporate strategy demands the accounting of a large number of factors and the correct assessment of expenses and potential advantages[5].

Actually process of merge and absorption includes some stages. All process begins with the stage preceding absorption which is reduced to scrupulous introspection of activity of bank and market conditions in which he acts. Process by carefully planned integration after merge which is carried out whenever possible quickly to compensate the award paid for absorption comes to the end.

At the first stage of preparation for merge it is necessary to carry out the greatest volume of work. One of the basic principles is privacy observance throughout all process of implementation of merge or absorption. If on the market hearings about possible attempts of absorption get, the price of bank target can rise so that it will break the transaction. Further it is necessary to carry out an assessment of own bank by determination of cost of its separate business units and identification of opportunities of improvement.

At the second stage it is necessary to make selection of potential candidates for merge. For this purpose it is necessary to develop selection criteria of candidates and to define investment bank which will act as the main consultant for merge, and also a role of consulting and law firms in the course of merge. Candidates for merge can present and the investment bank, however own criteria are necessary for identification of the most suitable candidates.

At the third stage it is necessary to carry out a careful assessment of the selected candidates. At an assessment it is necessary to consider a difference between the market cost of bank target and the price which should be paid bank buyer. At estimation of cost of absorption or merge it is necessary to add to the cost of bank buyer bank target cost without the award paid at the transaction. Then it is necessary to estimate real advantages from joint activity taking into account time necessary for achievement of these advantages. After subtraction of expenses for implementation of the transaction the cost of the joint structure after transaction implementation will turn out. The prize in cost owing to implementation of the transaction represents the cost of the joint structure minus the cost of the closest alternative (usually it is bank buyer cost provided that the transaction isn't carried out) and minus the price paid for absorption.

The pas the fourth stage, a stage of negotiations, especially in case of appearance of competitors on purchase, the main thing for management of bank buyer is not to raise the price in comparison with the cost of absorption determined at the third stage for bank buyer. The negative effect of an overpayment can nullify all potential prizes from merge.

At the fifth last stage of merge, an integration stage, it is necessary to hold the events directed on achievement of potential advantages from merge, revealed at the previous stages. Successful overcoming of this stage will allow bank buyer to pay back the investments spent for absorption. However, as shows experiment, not always it works well. Distinctions in corporate cultures of two banks, styles of work of managers, difficulties with integration or abolition of duplicating divisions, е association of client base and the nomenclature of services affect.

References:

1. Astapovich A.Z. Belyanova E.V, Myagkov E.G. International experience of restructuring of a banking system. M, 2003.

2. Sarkisyants A.G. Merges and bankruptcies of banks. World experience. "World economy and international relations", 2013, No. 10.

3. Kruglov V. V. Bases of the international monetary and credit relations. M, 2004.

4. Basarova L. Association of banks - the most real opportunity to return "crisis" money to National fund//the Vremya newspaper site.

5. Kazkom's merge and BTA of Bank will happen after transaction closing. [Electronic resource] BNews.kz