A boom in M&A for the world’s financial institutions was widely expected a year ago, when the biggest European cross-border acquisition in financial services was announced. The tale of how Barclays lost the hand of ABN Amro, and how Fortis, Santander and RBS won it, needs no retelling here, but that merger was forecast to change the banking landscape. Growth-enhancing mergers, which would create product and geographical scale, would surely follow. Instead of that rosy picture we have a world of acquisition triggered by desperation, with the terms dictated by one party’s weakness. That Bear Stearns would end up in the arms of JPMorgan in such circumstances is remarkable, and perfectly illustrates the new harsh environment.
It is clear that the strong can dictate their terms but there are so few that meet the criterion. Even with a revised and increased offer, JPMorgan was still able to pick up a leading US broker cheaply. But which other institutions are set to take over the desperate position of the weak? Very few companies are well situated today. The strong have lots of capital and liquidity. They are also in the right businesses – that means limited investment banking and consumer finance and lots of retail banking.