Mergers and acquisitions in banking sector

In the past few years, the relevant literature on banking has paid particular attention to mergers and acquisitions. Numerous research studies have covered the advantages and disadvantages of mergers and acquisitions, as well as the value of bank mergers. Main reasons for bank mergers are: costs reduction, range of products and services extension, increase of the market share, and participation in the privatization processes (in transition economies), improvement in solvency, and transfer of know-how. Bank mergers can increase the market value of the banks by reducing costs and/or increasing revenues. Cost reductions can be achieved by eliminating redundant managerial positions, closing branches, and consolidating some of the back office functions. Most research of mergers and acquisitions in the banking sector is focused on the United States. Results of empirical studies show that mergers after 1990 brought cost savings, and generated higher returns compared to the mergers that took place before 1990. Unlike the results of research performed in the USA, the research of bank mergers in the EU shows that there are improvements in performance following the mergers. The trend of mergers and acquisitions also spread into transition economies. Bank mergers and acquisitions are realized through the sale of the majority equity share of the state to foreign investors. In transition economies, the decrease in the number of banks, the liquidation of small banks and growth of he market share of foreign banks are evident. We present analysis of qualitative and quantitative aspects of finalized privatization and/or mergers and acquisitions of banks in Serbia. Financial crises will influence the decrease of number of banks operating in Serbia.