Keywords: Divestiture, bank, merger, acquisition, antitrust, competition, branch
Abstract: In their competitive analysis of proposed bank mergers, the Federal Reserve
Board, Department of Justice, and other agencies accept branch divestitures
as an antitrust remedy in local markets where there is substantial overlap
between the acquirer and target. The results of this study, which examines
the performance of 751 branches that were divested between June 1989 and
June 1998 in conjunction with a merger that raised possible competition issues,
suggest that the policy of accepting branch divestitures as an antitrust remedy
has been successful. Divested branches operate for lengths of time that are
comparable to all branches, and even though they experience substantial deposit
runoff around the time of the merger, divested branches subsequently exhibit
deposit growth rates that are comparable to those of other similar branches.
Cross-sectional analysis does not find any significant relationships between
either deposit runoff or subsequent growth and various characteristics of the
branch being sold or the firm that purchased it, except for some evidence that
post-divestiture growth may increase with the size of the purchaser.
Full paper (94 KB PDF)
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