6 First, bigger banks may gain access to cost-saving technologies or spread their fixed costs over a larger base, thus reducing average costs. Efficiency gains may also result from economies of scope: the deal may allow the merging parties to enter new markets and cross-sell their products to a wider customer base. Finally, consolidation may improve managerial efficiency.
However, the extent of exploitable scale and scope economies might be smaller than commonly thought, and efficiency gains resulting from better management might be elusive in large, complex institutions. The direct costs arising from M&As can take several forms: consolidating different organisations is not an easy task and may lead to inefficiencies. There are also external costs. These can take several forms.