Banks encourage mergers to create healthier firms

Many companies have become heavily indebted and, worse still, find it increasingly difficult to repay their debts. This hurts not only them, but their creditors, the banks, which see the volume of non-performing loans ballooning, and are looking for a way out of the crisis. Banks have found themselves with large chunks of company stock as collateral, stock which could be worthless in the not-so-distant future. Even times of crises, such as this one, offer opportunities, though. To the extent that banks can influence corporate developments, they are trying to encourage the creation of bigger, healthier corporate groups through mergers and acquisitions, beginning in the sectors where the situation has come to a head. Increasingly, banks are finding themselves initiating merger and acquisition talks or acting as go-betweens, encouraging healthier companies to take over those in a difficult financial position. «We do not encourage the creation of dominant companies in each sector and we can’t force things,» says the head of one of the big commercial banks. «Our underlying logic is a coalition of all healthy forces.» One of his colleagues in one of the biggest banks adds: «We aim at providing the opportunity to big, and especially, (financially) healthy enterprises to strengthen their position, so as to facilitate recovery in their particular sector and the whole economy.» This second banker says that encouraging mergers is not an easy undertaking, despite the presence of significant tax incentives. Two of the sectors where banks are encouraging mergers are passenger shipping and aquaculture, where many companies are on the brink of bankruptcy. Other sectors with acute financial problems are information technology, wholesale and retail trade, publishing and printing, metals and holding companies. Bankers consider, however, that in these sectors, the conditions are not yet ripe for a thorough reorganization. «We are prepared not only to finance serious merger and acquisition proposals but also to act as consultants, preparing business plans and valuations of the acquisition targets. Of course, the one prerequisite (to our involvement) is that the businesses themselves have agreed beforehand on principle to the merger or acquisition,» says one of the bank chiefs. The biggest obstacle to such an operation is the businessmen’s mentality, says a bank specialist on mergers. With many companies still family concerns or freshly evolved from this stage, it is difficult for their main shareholders to envisage themselves in a role other than that of top dog. The idea of absorption into a big, anonymous corporation is a slowly maturing one in Greece, he says. The easy step is not to find a satisfactory share-swap ratio, says the bank manager, but to find ways for the businessmen in question to coexist. «An extreme, but not isolated, example is for a deal to be scuppered because they wouldn’t agree on which brands to keep, or whether to create a new brand, and how many syllables from the original brand names to include in the new one,» he says.