The Acquisition Bid for UFJ Holdings

After the merger, MTFG would have access to UFJ's extensive branch network, individual customer base and its top corporate clients like Toyota. UFJ's core area of operations comprised retail business and small and enterprises, which MTFG lacked. Though MTFG had a stronger presence in corporate lending, the revenues from this business were stagnating and net interest margins were less. Moreover, after the merger, MTFG would emerge as the leader in the mortgage business, in which it lagged behind Mizuho and SMFG. Analysts also pointed out that both the entities would benefit from the complementary nature of their branch network and operations. Most of MTFG's branches were in and around Tokyo, Eastern Japan, whereas UFJ had a strong presence in Western Japan in the regions of Osaka and Nagoya...

The formation of UFJ faced a lot of personnel problems and cultural conflicts. Industry observers felt UFJ's union with MTFG would involve a lot of risk due to the diversity in core areas of operations. The merger could backfire if both of them failed to settle restructuring problems like pay roll cuts, branch closures, personnel and organizational shuffling and linking computer systems. In spite of UFJ's strong retail clientele and economies of scale after the merger, analysts expressed doubts about the profitability of the merged entity. UFJ's significant non-performing loans was expected to affect MTFG's balance sheet. Most banks in Japan were burdened by huge quantum of bad loans, and the Japanese government had to bail them out by injecting public funds...