1. Introduction
Merger and acquisition has been a trend in banking sector. Being a leading international bank, HSBC has been very active in acquisition all over the world. Their recent acquisitions include Bank of Bermuda in 2004; Household International, Kepple Insurance in 2003 and the Mexican bank Financiero Bital in 2002. Among the acquisitions, the Household deal is transformational and has the largest impact on HSBC.
This case study analyzes the benefits of the acquisition, as well as the major risks associated with the deal, in respect to HSBC. The purpose of the study is to understand how banks benefit from consolidation and how cross boundary acquisition can help the banks in internationalization.
The structure of the report is as follow: first, the background information is provided which includes the information of the two parties in the deal and the description of the transaction. The second part of the report explains why HSBC choose Household as their acquisition target and how the acquisition will help HSBC to accomplish their ~{!0~}Managing for Growth~{!1~} strategic plan. Then, the greatest concern by HSBC~{!/~}s share holders over the acquisition, i.e. the credit risk and reputation risk will be analyzed. Finally, in the conclusion, I will summaries the learning points from the case study.
2. Background Information
2.1 HSBC
HSBC is one of the largest banking and financial services organizations in the world. Its international network comprises over 9800 offices in 77 countries and territories in Europe, the Asia-Pacific region, Americas, the Middle East and Africa. HSBC is listed on stock exchanges in London, Hong Kong, New York and Paris. Its shares are held by around 190,000 sharehold ...