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The Merger of Union Bank of Switzerland and Swiss Bank Corporation (A): The Proposed Merger
Bruner, Robert F.; Chan, Jessica Case F-1421 / Published November 11, 2003 / 39 pages.
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In December 1997, the CEOs of Union Bank of Switzerland and Swiss Bank Corporation are evaluating the proposed terms of the merger of their two firms. This transaction promised to change the competitive landscape among commercial banks, investment banks, and asset managers, not only in Europe, but also globally. The case relates the strategic pressures toward consolidation in the global financial services industry, the histories of the two firms, the prospective economic benefits of merger, and the terms of merger. The tasks for the students include: 1. Strategic assessment. Students must evaluate the forces of change in the industry and why a combination of these two firms might dominate strategic alternatives. 2. Economic and valuation analysis. Students must appraise the economic consequences of the proposed deal from the standpoint of shareholders of the two firms. At the heart of this analysis is a careful valuation of proposed synergies. The size and sources of the synergy values are particularly instructive. 3. Deal structure analysis. Students must summarize the terms of the combination from the standpoints of appropriateness and fairness. In particular, this deal was structured as a "merger of equals," with a low acquisition premium, sharing of power, and blending of the two sides. Whether such a structure was more appropriate than an outright acquisition is an important point of instruction in the case. 4. Communication strategy. Finally, students should address the challenges of how to present the deal to the various constituencies of the two firms: shareholders, regulators, customer, and employees. The (B) case in the series describes the communication strategy and planning for post-merger integration. The (C) case summarizes the integration effort and the economic results over the five years following the transaction. It is recommended that the instructor distributes the (A) case for advance preparation by students and holds the (B) and (C) cases for discussion after the (A) case. The cases about the UBS-SBC merger were prepared to serve a number of learning objectives: A. Exercise skills of valuation and strategic analysis. The cases assume that students have been exposed to standard concepts in these areas and are ready to apply them. B. Survey the often arduous process by which M&A deals are developed and then implemented. These cases give detailed insight into the risks and difficulties of transaction management. C. Explore the terms of merger and the wide range of choice in transaction design. A key lesson here is that "a deal" consists of much more than price. Students will see that issues regarding form of payment, governance, and social terms are vital aspects of a deal. D. Consider the enormous challenges of post-merger integration. The case reports the integration strategies adopted in various lines of business and thereby affords the opportunity for comparing the motives and effects of different integration strategies.


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  • Overview

    In December 1997, the CEOs of Union Bank of Switzerland and Swiss Bank Corporation are evaluating the proposed terms of the merger of their two firms. This transaction promised to change the competitive landscape among commercial banks, investment banks, and asset managers, not only in Europe, but also globally. The case relates the strategic pressures toward consolidation in the global financial services industry, the histories of the two firms, the prospective economic benefits of merger, and the terms of merger. The tasks for the students include: 1. Strategic assessment. Students must evaluate the forces of change in the industry and why a combination of these two firms might dominate strategic alternatives. 2. Economic and valuation analysis. Students must appraise the economic consequences of the proposed deal from the standpoint of shareholders of the two firms. At the heart of this analysis is a careful valuation of proposed synergies. The size and sources of the synergy values are particularly instructive. 3. Deal structure analysis. Students must summarize the terms of the combination from the standpoints of appropriateness and fairness. In particular, this deal was structured as a "merger of equals," with a low acquisition premium, sharing of power, and blending of the two sides. Whether such a structure was more appropriate than an outright acquisition is an important point of instruction in the case. 4. Communication strategy. Finally, students should address the challenges of how to present the deal to the various constituencies of the two firms: shareholders, regulators, customer, and employees. The (B) case in the series describes the communication strategy and planning for post-merger integration. The (C) case summarizes the integration effort and the economic results over the five years following the transaction. It is recommended that the instructor distributes the (A) case for advance preparation by students and holds the (B) and (C) cases for discussion after the (A) case. The cases about the UBS-SBC merger were prepared to serve a number of learning objectives: A. Exercise skills of valuation and strategic analysis. The cases assume that students have been exposed to standard concepts in these areas and are ready to apply them. B. Survey the often arduous process by which M&A deals are developed and then implemented. These cases give detailed insight into the risks and difficulties of transaction management. C. Explore the terms of merger and the wide range of choice in transaction design. A key lesson here is that "a deal" consists of much more than price. Students will see that issues regarding form of payment, governance, and social terms are vital aspects of a deal. D. Consider the enormous challenges of post-merger integration. The case reports the integration strategies adopted in various lines of business and thereby affords the opportunity for comparing the motives and effects of different integration strategies.

  • Learning Objectives