Write a 10 page essay on Royal Bank of Scotland Is Acquiring Their Competitors on the Horizontal Line.
RBS was recognised to be smaller than the target company. It took a great effort from RBS’s end to complete the deal and rewarded it the reputation of one of the leaders in the British Banking Industry (Larsen, 2007).
With this concern, the paper will examine the entire process of acquisition considering the various aspects, such as strategic fitness of NatWest, regulatory factors influencing the process, justification of the valuation of acquisition, defence tactics applied, implementation of integration and risks involved in the acquisition.
According to the experts, the strategic fitness of the target company in M&A is considered to be one of the most significant aspects while determining the plan. Because underneath every M&A the observed motive of the acquiring company or the merging companies is to increase the value of the two companies together which would be more than the sum of the total values of both the companies. Strategic fit of the target company, thus, holds a significant position to increase the overall value of the acquirer (Lee & Pennings, 1996).
The strategic fit of the acquisition and the target company can be analysed in depth considering the fact that M&As are often termed as a part of the strategic objective of the acquirer to attain growth and higher competency (Edinburgh Business School, 2008). The objective can be well identified in the acquisition of NatWest by RBS. It was a horizontal acquisition, which means that the target company and the acquirer belonged to the similar product line and also to a similar cultural background. This reduced the constraints in terms of cultural divergences.
The prime objective of the acquisition depended on the fact that RBS was facing major difficulties in terms of shrinking stock prices to approx 32% and required growth. Similarly, with an increased competition and reducing market share led by the falling stock price and increased operational costs. NatWest opted to go for an M&A in order to survive in the industry