M&A (Mergers and Acquisitions) are consolidation of two companies; mergers is two companies’ combination to form one and acquisition is a company taken over by some other company. Mergers and acquisitions are prominent and significant aspects of corporate finance, corporate strategy, and management. Syndicated loans involve a lenders’ group united by a common legal document set for the purpose of funds provision to single borrower. The process of syndication typically starts with a borrower that awards the mandate to a lead arranger, who advises and administers the syndicate. The responsibility of lead arranger is to analyze credit quality, key terms negotiation with a borrower before inviting banks group to participate, and allocating loan shares among the banks that are participating.

Since the early 1990s, syndicated bank loans are the major financing type in the world. In the mid of the 2000s such loans became the main principal of financing source for business in USA. In 2008 their role in economic and financing was affected in great amount and by the Global financial crises. That brought a sharp decrease in the number of loans granted and the overall credit facilities. In 2007, the number of syndicated loans were about 9,270 US dollars that were granted in a whole world down to  in 2008 and the worldwide syndicated loan credit facilities in 2007 were $44,615,000 down to $24,760,000 in 2008. Two or more lenders, in a syndicated loan, provide funds jointly to a borrowing company. A main focus of this paper is to analyze the effects of mergers and acquisitions on the structure of loan syndicates

 

Research Objectives

Amid to analyze the effects of mergers and acquisitions on the structure of loan syndicates, the objectives of this research are:

·         To determine the effects of mergers and acquisitions on the structure of loan syndicates.

·         To examine the relationship among mergers and acquisitions and the structure of loan syndicates.

·         To develop possible recommendations to mergers and acquisitions for a better structure of loan syndicates.

Question for Research

On the bases of research objectives that has been mentioned above these questions are expressed for this research:

·         What are the effects of acquisitions and mergers on the structure of loan syndicates?

·         What is the relationship among mergers and acquisitions and the structure of loan syndicates?

·         How mergers and acquisitions can contribute for a better structure of loan syndicates? 

Significance of the Research

This research will be a significant contribution in literature as there is hardly any research available in the literature that has focused the effects of acquisitions and mergers on the structure of loan syndicates. This research will provide valuable insights to mergers and acquisitions that how they can positively contribute to structure of loan syndication. Furthermore, this research will provide a significant knowledge to a common man regarding mergers and acquisitions and structure of loan syndication.

Literature Review of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

A thorough reviews the previous literature is conducted as it provides the research background and illustrates that the research is knowledgeable about the theory scope. Various peer-reviewed articles, dissertations, and reports have been reviewed related to the topic and one of those is summarized below:

From literature it is come to know that lenders observe their borrowers because it is very important for lenders to monitor borrower’s decisions for borrowing firm’s value. In order to achieve ideal platform for investigation, one of the most important corporate decisions is M&A. It is found that M&As  under goes post-merge performance, and this problem can be resolved if lenders’ pay full attention to the borrowers and M&As financed by syndicated loans, and it is clearly viewed that  M&As who are supported by  syndicated loan has minimized their post –merge underperformance problem compared to those who are not supported  by syndicated loan. It is vast examined by Huang et al. (2012) that shareholders will get benefit by the banks who provided loans to fund M&A. It is contrary from usual theory that they are unable to find 10 that bank-financed M&A deals that have better stock and accounting performance than non-bank-financed M&A deals. Nevertheless, this does not mean the observing and monitoring of all lenders in syndicated loans do not add importance to the borrowers. It would be interesting to further investigate different types of lenders’ monitoring roles and their borrowers’ corresponding post-merger operating performance in the context of M&A. We will further review the literature on different lender types. By using M&A as an arena, we can also look into acquirers’ post-merger creditworthiness, which is an area that has been relatively underexplored.

From the studies the relationship banking as the provision of financial services by a financial intermediary is explained by Boot (2000) that expends money with expectations in order to get specific information about customer and through multiple connections with the same customer over time evaluates the profitability of the investments.

By the bank’s screening, monitoring and observing services, the information obtained can be used with the same customer in multiple interactions by benefiting from the intertemporal information reusability which gives the bank incentive to screen and monitor its borrowers (Greenbaum & Thakor, 2007). Quite the opposite, transaction banking cannot get benefit from intertemporal information reusability if they do not intend at a relationship that is information intensive with a customer this is because through single transaction of the customer compared with the multiple identical transactions with different customers is only focused by transaction banking  (Boot & Thakor, 2000).

Most of the benefits of relationship banking is also recognized by Boot (2000) .Information exchange between the lender and the borrower is firstly facilitates by relationship banking   because the borrower may be more capable to expose more information to the relationship lender than to a transactional lender and the relationship 11 lenders may have powerful incentives to expend money with the expectation to get money in costly production information. Secondly, Relationship banking also increases the available credit to inform responsive borrowers (Boot, 2000). In addition, Boot and Thakor (2000) also evaluate the difference between relationship lending and transactional lending by highlighting that relationship lenders use their skills to get better the borrowers’ project payoff, whereas pure funding transaction is provided by transactional lenders , a product that is commodity without investments of  specific sector that is connected with relationship lending.                                                                                        Bharath et al. (2009) he was involved in checking the impact of relationships by lowering information asymmetries between borrowers and lenders and found that repeated borrowing from the same lender helps in lowering loan spreads. They also estimated the cut-off point between relationship lending and transactional lending.

An intermediary, such as a bank, is delegated the role of costly monitoring the borrower. Close relationships is developed over time by bank with borrowers such that this proximity between the bank and the borrower facilitates observing, monitoring and screening and problems of asymmetric information (Boot, 2000) will ultimately overcomes. Amongst the many financing options, syndicated loans are important of analysis because they represent a hybrid of private and public debt and because the syndicated loans market where a loan is divided among more than one lender is large and rising quickly. (Dennis & Mullineaux, 2000).

Research Design and Methodology of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

The budget will be developed for secondary research as secondary sources will be used so that final results could be attained. The available and credible data, literature, and the other existing knowledge will be explored as the secondary data, on the other hand, two research methods will be explored i.e. Qualitative: this research approach provides the understanding of fundamental reasons, and opinions, and help the researcher to develop innovative ideas for the current research, this technique is suitable to quantify the behaviors, opinions, and attitudes, and Quantitative: this technique is helpful to measure the problems of research by generating the numerical data and transform it into usable statistics. 

Methodology of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

Mixed method approach will be used in the research that includes both qualitative and quantitative research approaches. For the qualitative approach, the data will be collected through the ground theories, case studies, narratives, and other previous literature. For the quantitative approach, the data will be collected from the official bank websites.

Model for the Research of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

This research adopts the model develop by Panetta, et al. (2009):

In above equation:

r = interest rate, MERGE = dummy variable, SCORE = default risk measure, CONC = bank loans

The above equation will be analyzed following the structure explained by Panetta, et al., (2009) and data will be collected from official bank websited

Data Analysis of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

The systematic approach will be adopted in the research in ensuring that data is collected accurately. The process will involve the data collection, immersion, reduction, data categorization, data processing, and final data evaluation. SPPS software will be used to analyze and interpret the data so that chances of data manipulation could be minimized. The findings and results will be presented and summarized in the tables and graphs form to describe the trends and relationship between dependent and independent variables.

Quality Levels

Within the research, in order to ensure the high-quality levels, the findings of the research will be correlated to previous researches with the aim of forming the relationship between them. Aspects of personal judgment will also be taken into account in this research. Furthermore, in order to ensure the good quality levels within the research, the triangulation method will be used by taking series method into account so that bias could be minimized with the single method use. Well-structured estimation, desk research, and personal judgment will be the main methods used to ensure the high-quality levels within the research. The deficiencies associated with one method of use will be reduced by the strength of another method (Patton, 2005).

Resources of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

Time and money both are required to conduct the research, thus these are the most valuable resources that should be budgeted in advance. The total budget of $500 will be allocated for fata collection, data analysis, and printing expenses of reports.

Timescale

A thorough review of literature
	Contacting banks to collect required data	Completing the review of literature
			Completing the data collection procedure
				Analysing and interpreting the data
					Report writing

Dissemination

The research will serve as the pilot for the relevant courses at the respective institution and the other university and colleges throughout the country. The evaluation results will be disseminated on the website of the university as well as a university library. Additional dissemination will be conducted through the presentations at conferences, and through articles published in impact factor and peer-reviewed journals.

Ethical Considerations of Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

The author of the research will adhere to the ethical standards so that the public could believe in and support the research as ethical considerations are critical and so important in the research. Appropriate guidelines will be followed while collecting data. Voluntary participation will be based on the informed consent and each and every work taken from work of others will be properly cited. The use of unethical, discriminatory and offensive language will be strictly avoided throughput the research and every previous research will be appropriately acknowledged.

Conclusion on Effects of Mergers and Acquisitions on the Structure of Loan Syndicates

In the conclusion, the research will be combined, both quantitative and qualitative, so as to accomplish the insightful analysis of significant facts and figures derived from the research. Conclusions will be drawn and findings will be summarized in accordance with the research objectives and research questions. Last but not least, the recommendations will be drawn in accordance with the conclusion