Strategic Acquisitions Amongst Financiers in the Intangible Economy

The banking industry has seen significant growth in mergers and acquisitions
(M&A) and intangible assets over the last decades. This paper investigates how the
accumulation of intangible assets influences bank M&A strategies. We first reveal
three key empirical findings: (i) the intangible asset ratio in the banking industry has
increased five-fold over the last thirty years, (ii) there is strong assortative matching in
M&A transactions, with acquirer banks tending to merge with target banks that share
similar characteristics, such as size, loans, net interest income, and intangible assets,
and (iii) considering the cyclicality of bank M&A activity and assortative matching,
this matching appears to be a general phenomenon rather than a time-specific pattern.
Next, we conduct a causal analysis using a difference-in-differences framework
to estimate the effect of bank M&As on performance through the channel of intangible
asset synergies. We find that M&A activity has a positive causal impact on bank
loan growth and operating efficiency gains, particularly for transactions with higher
intangible asset synergies. Further, we employ a search model to ground our empirical
evidence and outline the conditions under which assortative matching occurs
pre-merger and how intangible asset synergies lead to efficiency gains post-merger.