This paper presents an empirical investigation of the merger process among mutuals, using a large pooled cross section/time series sample of UK building societies between 1981 and 1993.The financial services industry is probably unique in having a substantial mutual sector coexisting with, and competing against, joint-stock firms. However, given the severely attenuated system of ownership claims in the financial mutual, it has been widely predicted that this form will exhibit strong behavioural differences from the stock sector. It is surprising, therefore, that despite the important governance role accorded to mergers in the corporate literature, the merger process among financial mutuals has been almost totally ignored. This paper explores the mutual merger process via an examination of the targets' characteristics. It finds little support for the ‘natural selection’ view of mutual acquisitions, but it does reveal the importance of the regulatory process. Above all, the results show a surprising similarity to those from studies of the merger process in joint-stock firms.

This paper presents an empirical investigation of the impact of acquisition activity on financial intermediary productivity. Specifically, it uses an augmented production function approach to investigate the impact of acquisition, after controls for input changes. The model is estimated on an unbalanced panel of 93 UK building societies over the period 1981–1993, using data on their core financial intermediation activities which, it is suggested are particularly appropriate for our purposes. In contrast to much of the existing merger literature, which for the most part uses financial performance data, our results DO indicate significant and substantial productivity gains following acquisition. These are consistent with an acquisitions process in which less efficient firms are acquired and reorganized. The post-merger gains appear to increase substantially in the post-deregulation period, when pressures to minimize cost are widely considered to have increased.

Hilary Ingham, Steve Thompson, Deregulation, Firm Capabilities and Diversifying Entry Decisions: The Case of Financial Services, The Review of Economics and Statistics, Vol. 77, No. 1 (Feb., 1995), pp. 177-183