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Such cost advantages, diversity of business mix and asset quality, all emphasise the sheer quality of HBOS’s earnings power. But more than anything else, it was Halifax and Bank of Scotland’s shared vision of how best to exploit this quality, which brought them together as HBOS; in all their markets they aim to have customer propositions, which offer value, transparency and service. The merger of the Bank of Scotland and Halifax opens up huge opportunities. Combining the strengths of both businesses provides an excellent base for a strong challenge to the four clearing banks. Halifax will build on strong foundations with the Bank of Scotland brand. Potential customers will perceive them as a bank with an established track record of experience, stability, credibility and innovation.

Following the merger the banks now have a nation-wide presence on the high street and can maximise those opportunities previously unavailable to them. “This combination of the Halifax retail network along with Bank of Scotland’s business banking experience is the essential catalyst for the creation of the ‘New Force in Business Banking’.” (Atherton, M. 2001: 5)

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HBOS’s product offer will reflect the individual strengths of each brand. North of the border Bank of Scotland will focus on banking and consumer credit and the Halifax on mortgages and savings. All customers in Scotland will benefit from a wider, more competitive product range and even greater convenience. Halifax products will be available in five times as many Scottish branches as they are now. “HBOS will be the most aggressive high street bank operating in the UK.” (Wheatcroft, P, 2001: 29). It aims to consolidate its position as the clear No.1 in mortgages and savings in the UK marketplace. At the same time it will also continue its attack on the so-called ‘Big Four’ in their traditional markets of current accounts and credit cards.

Method I plan to undertake the research by using a wide range of appropriate methods. The methods include primary and secondary research. Secondary Research involves using existing sources of information such as Books, Journals, Newspapers and Websites. Majority of the project will be based on secondary data. A. Proposed Books There are wide ranges of books, which are useful for my project. I have decided to use the text book ‘Mergers, Motives, Modes, Methods’ by Goldberg (1983) as he describes how most mergers are controlled by multiple motives rather than by a single one, because several parties are involved, each of them usually having several different objectives in mind to be achieved by means of merger. The author is also able to identify from a managerial perspective how one can ‘distinguish management of post-merger integration from pre-merger planning’ (Goldberg, 1983: 219). The text book is important and relevant as the information will be used as a basis for the literature on mergers for the project and will be used in reference to the merger between Halifax and The Bank of Scotland to identify the motives of the merger and to help conclude that one of the key tasks during post-merger integration is to establish effective mechanisms for handling conflicts (which are frequent in a newly merged company).

Needham and Dransfield (1996) are able to provide adequate and appropriate information about how a firm expands horizontally when it increases the scale of its operations by combining with another firm in the same line of business in the text book ‘Business Studies’, This is directly relevant to the merger between the Banks. The authors are able to provide the business opportunities available due to a strategy of horizontal integration, such as ‘changes to the organisation’s structure’ (Needham & Dransfield, 1996: 66). This will be relevant when examining how successful the Banks have been in terms of profitability post-merger.

Culture is considered ‘powerful, enduring and pervasive influence on human behaviour’ (Martin, 1985: 57). The author describes how culture is reflected in many ways, and influences not only structure and managerial style, but also the way in which an organisation conducts its business in the widest sense. His Text Book ‘Culture, collisions in mergers & acquisitions’ is a valuable source to depict how the merger influenced the culture in the Banks and how it affected employee performance.

Astrachan (1990) describes the impact of mergers on an individual in the text Book ‘Mergers, Acquisitions & Employee Anxiety’, the likely effects of mergers on those people taken over. Mergers are about ‘power, differing perceptions, cultures and definitions of the situation’ (Astrachan, 1990: 33), and so is potentially confliction, the social and cultural ramifications extending beyond the boardroom. The author also describes how mergers raise employee anxiety and how, in turn, this anxiety affects behaviour, satisfaction, productivity and effectiveness. This source will be appropriate to use when analysing the effects of the merger on employees and the impact of the merger on the organisation as a whole.

Bendry et al (2001) is able to provide adequate information on how to interpret financial statements in the textbook ‘Accounting & Finance in Business’, a profit and Loss account and Balance Sheet. A Profit and Loss account ‘measures performance over a period’ (Bendry et al, 2001: 116). At the end of the period it shows what profit has been achieved whereas a balance sheet shows the ‘financial position of the business’ (Bendry et al, 2001: 26) at the end of the period. Ratio analysis is a key technique for interpreting the financial statements of the organisation. Investment ratios will be carried out to see if the resulting success or failure of the merger was due to good or bad investment choices. All the data will be critically analysed and observations and results will be drawn appropriately. The Investment ratios will also be carried out from the annual accounts of the two Banks before the merger and after the merger. The calculations of the ratios can highlight where there are weaknesses and where management can take action. This textbook is very important for interpreting and analysing the data from the company’s consolidated accounts to find out about the company’s performance whether it’s doing well or bad after the merger.

Journals will also be used as a means of gathering data. Urban and Pratt (2000) explore the motives for bank mergers and the increased competition in the Banking Industry in the Journal ‘Perceptions of banking services in the wake of bank mergers’. The authors describe how a ‘successful marketing approach’ (Urban & Pratt, 2000) can help banks in maintaining their customers and enhance quality of services, which will then help to increase market share. The journal is relevant, as it will be used for the literature review for the project.

Morall (1996) describes from the customer’s perspective, how bank mergers can result in consumers receiving more services, in the Journal ‘Managing a merger without losing customers’. Some of these services include ‘larger loan limits, more branches, and more ATMs’ (Morall, 1996). This is important and pertinent information when conducting the literature review and analysing the effectiveness of the merger for customers as it shows how Mergers can improve service delivery through the means of increasing their capability to offer electronic banking and other technological service enhancements.

Newspapers will also be a relevant source of information.’ The Times Newspaper’ depicts the motives of the merger between Bank of Scotland and Halifax. The merger was predicted to deliver ‘�690m of synergies’ (Merell, 05/05/2001: 52) from the time of the merger to 2004. The most important reason for the merger was the fact that both banks shared a common philosophy. Each had an objective of aggressive growth by providing a first-class service to their customers. The newspaper article is necessary to draw conclusions upon the various motives of the banks.

The Writer also describes how the Directors have decided to introduce a ‘Share Dividend Plan’ (Merrell, 05/05/2001: 53) and to offer ordinary shareholders the choice of electing under the Plan to receive the whole of their dividends in new ordinary shares credited as fully paid instead of cash in respect of the proposed final dividend for the year ended 31 December 2001 and for future dividends. In-depth study can be gained from this article concerning the impact of the merger on shareholders.

‘The Sunday Times Newspaper’ describes how Halifax’s strong franchise in savings and mortgages provides ‘clear competitive advantages’ (Hamilton, 06/05/2001: 3) relative to other retail groups, and the acquisition of the Halifax Equitable sales force in 2001 gives HBOS the opportunity to extend these advantages to its professional and business customers as it moves forward and how Halifax’s merger with the Bank of Scotland will pave the way for the creation of the UK’s fifth biggest bank. This newspaper article is also going to be accessed to draw conclusions upon the various motives of the banks.

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