M&A and restructuring in the Asian banking industry

Abstract

Mergers and acquisitions(M&As) among financial institutions are occurring at a rapid pace in Asia after the financial crisis. Asian governments began to reshape their banking industries by closing or nationalizing insolvent banks, and forcing M&A deals between banks. This paper examines the key issues of M&A and restructuring in the Asian banking industry and is organized into three parts: theoretical approach, regional survey, and case study. The Asian banking industry since the financial crisis experienced a major restructuring and recapitalization through the introduction of new foreign capital or the adoption of aggressive M&A strategy. Korea's banking industry also faced the situation where the IMF forced the Korean government to lead the restructuring of the financial sector. The Korean banking industry experienced massive shutdowns and mergers of ailing financial institutions for the first time in its history. This paper also examines, through a case study, the takeover of Korea First Bank(KFB) by Newbridge Capital, which marked the first step to bring foreign competition into the Korean banking sector. Newbridge's takeover of KFB is expected to modernize the Korean banking system, promote transparency in bank management, and rebuild the relationship between business and government.