An Examination of Gains to Acquirers of Mutual Thrifts in Merger Conversions

This paper examines the wealth impact of acquiring mutual thrifts in merger conversions. We find that these transactions produced wealth gains both before and after the passage of FIRREA. These gains, however, are statistically significant only in the post-FIRREA period, indicating that regulatory changes resulting from FIRREA made such mergers more appealing. Cross-sectional analyses indicate that merger conversions enhance value by providing an opportunity to expand into potentially lucrative markets. Acquisitions of mutuals that present substantial opportunities for branch closings lead to larger gains. In addition, acquirer gains increase with the relative size of the transaction and are larger for acquisitions in markets served by competing firms that are small relative to the merged entity. Contrary to popular belief, variations in bidder gains appear to be unrelated to changes in the regulatory capital position resulting from the merger conversion.