Restructuring bank networks after mergers and acquisitions: A capacitated delocation model for closing and resizing branches

During restructuring processes, due to mergers and acquisitions, banks frequently face the problem of having redundant branches competing in the same market. In this work, we introduce a new Capacitated Branch Restructuring Model which extends the available literature in delocation models. It considers both closing down and long term operations' costs, and addresses the problem of resizing open branches in order to maintain a constant service level. We consider, as well, the presence of competitors and allow for ceding market share whenever the restructuring costs are prohibitively expensive. We test our model in a real life scenario, obtaining a reduction of about 40% of the network size, and annual savings over 45% in operation costs from the second year on. We finally perform a sensitivity analysis on critical parameters. This analysis shows that the final design of the network depends on certain strategic decisions concerning the redundancy of the branches, as well as their proximity to the demand nodes and to the competitor's branches. At the same time, this design is quite robust to changes in the parameters associated with the adjustments on service capacity and with the market reaction. (C) 2014 Elsevier Ltd. All rights reserved.

Restructuring bank networks after mergers and acquisitions: A capacitated delocation model for closing and resizing branches Articles