Sushil Dissertation PDF

Part I I.
Introduction to Mergers and Acquisition

In this context, it would be essential for us to understand what corporate restructuring and mergers and acquisitions are all about. The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity.
Thus important issues both for business decision and public policy formulation have been raised. No firm is regarded safe from a takeover possibility. On the more positive side Mergers & Acquisitions may be critical for the healthy expansion and growth of the firm. Successful entry into new product and geographical markets may require Mergers & Acquisitions at some stage in the firm's development.
Successful competition in international markets may depend on capabilities obtained in a timely and efficient fashion through Mergers & Acquisitions. Many have argued that mergers increase value and efficiency and move resources to their highest and best uses, thereby increasing shareholder value. To opt for a merger or not is a complex affair, especially in terms of the technicalities involved. We have discussed almost all factors that the management may have to look into before going for merger.
Considerable amount of brainstorming would be required by the managements to reach a conclusion. e.g. a due diligence report would clearly identify the status of the company in respect of the financial position along with the net worth and pending legal matters and details about various contingent liabilities. Decision has to be taken after having discussed the pros & cons of the proposed merger & the impact of the same on the business, administrative costs benefits, addition to shareholders' value, tax implications including
1|SUSHIL REGMI, MBA IV Sem (2009-11)
stamp duty and last but not the least also on the employees of the Transferor or Transferee Company.
Merger Merger is defined as combination of two or more companies into a single company where one survives and the others lose their corporate existence. The survivor acquires all the assets as well as liabilities of the merged company or companies. Generally, the surviving company is the buyer, which retains its identity, and the extinguished company is the seller. Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company stand transferred to Transferee Company in consideration of payment in the form of: Equity shares in the transferee company, Debentures in the transferee company, Cash, or A mix of the above modes. In business or economics a merger is a combination of two companies into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done purely for political or marketing reasons. Merger is a financial tool that is used for enhancing long-term profitability by expanding their operations. Mergers occur when the merging companies have their mutual consent as different from acquisitions, which can take the form of a hostile takeover. The business laws in US vary across states and hence the companies have limited options to
protect themselves from hostile takeovers. One way a company can protect itself from hostile takeovers is by planning shareholders rights, which is alternatively known as poison pill. If we trace back to history, it is observed that very few mergers have actually added to the share value of the acquiring company and corporate mergers may promote monopolistic practices by reducing costs, taxes etc. Managers are concerned with improving operations of the company, managing the affairs of the company effectively for all round gains and growth of the company which will provide them better deals in raising their status, perks and fringe benefits. There are major three types of mergers. They are: Horizontal Merger: This is the combination of two or more firms across similar products of services. Often use as a way for the company to increase its market share by merging with a competing company. Vertical Merger: This a combination of two or more firms involved in different stages of production or distribution. This is often used as a way to gain competitive advantage within the market place. Conglomerate Merger: This is a combination of firms engaged in unrelated lines of business activity or merging or two firms in completely different industries. A typical example of merging of different business like manufacturing of cement products, fertilizers products, electronic products, insurance investment and advertising agencies. It is usually used as way to smooth out wide fluctuations in earnings and provide more consistency in long term growth.
There are different Categories of Merger which are given below: Transnational Merger: This is merger between two companies that are domiciled in different countries. Cross-Frontiers Merger: This is merger between two companies that are domiciled in neighbouring countries. Downstairs Merger: This takes place when Mother Company is acquired by Daughter Company or subsidiary.
Geographic Market Extension Merger: When companies produce the same type products but supply it on different geographic markets.
There are major three types of mergers. They are: Horizontal Merger: This is the combination of two or more firms across similar products of services. Often use as a way for the company to increase its market share by merging with a competing company. Vertical Merger: This a combination of two or more firms involved in different stages of production or distribution. This is often used as a way to gain competitive advantage within the market place. Conglomerate Merger: This is a combination of firms engaged in unrelated lines of business activity or merging or two firms in completely different industries. A typical example of merging of different business like manufacturing of cement products, fertilizers products, electronic products, insurance investment and advertising agencies. It is usually used as way to smooth out wide fluctuations in earnings and provide more consistency in long term growth.
There are different Categories of Merger which are given below: Transnational Merger: This is merger between two companies that are domiciled in different countries. Cross-Frontiers Merger: This is merger between two companies that are domiciled in neighbouring countries. Downstairs Merger: This takes place when Mother Company is acquired by Daughter Company or subsidiary. Geographic Market Extension Merger: When companies produce the same type products but supply it on different geographic markets.
There are major three types of mergers. They are: Horizontal Merger: This is the combination of two or more firms across similar products of services. Often use as a way for the company to increase its market share by merging with a competing company.
Vertical Merger: This a combination of two or more firms involved in different stages of production or distribution. This is often used as a way to gain competitive advantage within the market place.
Conglomerate Merger: This is a combination of firms engaged in unrelated lines of business activity or merging or two firms in completely different industries. A typical example of merging of different business like manufacturing of cement products, fertilizers products, electronic products, insurance investment and advertising agencies. It is usually used as way to smooth out wide fluctuations in earnings and provide more consistency in long term growth.
There are different Categories of Merger which are given below: Transnational Merger: This is merger between two companies that are domiciled in different countries. Cross-Frontiers Merger: This is merger between two companies that are domiciled in neighbouring countries. Downstairs Merger: This takes place when Mother Company is acquired by Daughter Company or subsidiary. Geographic Market Extension Merger: When companies produce the same type products but supply it on different geographic markets.
Acquisition An Acquisition usually refers to a purchase of a smaller firm by a larger one. Acquisition, also known as a takeover or a buyout, is the buying of one company by another. Acquisitions or takeovers occur between the bidding and the target company. There may be either hostile or friendly takeovers. Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company.
Methods of Acquisition: An acquisition may be affected by (a) agreement with the persons holding majority interest in the company management like members of the board or major shareholders commanding majority of voting power; (b) purchase of shares in open market; (c) to make takeover offer to the general body of shareholders; (d) purchase of new shares by private treaty; (e) Acquisition of share capital through the following forms of considerations viz. means of cash, issuance of loan capital, or insurance of share capital.
There is different type of acquisition:A. Reverse takeover: - Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover. a. Reverse takeover occurs when the target firm is larger than the bidding firm. In the course of acquisitions the bidder may purchase the share or the assets of the target company. b. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. B. Reverse merger: - A deal that enables a private company to get publicly short time period. a. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company, usually one with no business and limited assets. listed in a
b. Achieving acquisition success has proven to be very difficult, while various studies have showed that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome.
Takeover: In business, a takeover is the purchase of one company (the target) by another (the acquirer, or bidder). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.
A takeover is acquisition and both the terms are used interchangeably. Takeover differs from merger in approach to business combinations i.e. the process of takeover, transaction involved in takeover, determination of share exchange or cash price and the fulfillment of goals of combination all are different in takeovers than in mergers. For example, process of takeover is unilateral and the offer or company decides about the maximum price. Time taken in completion of transaction is less in takeover than in mergers, top management of the offered company being more co-operative
There are different types of takeover:1. Friendly takeovers 2. Hostile takeovers 3. Reverse takeovers
1. Friendly takeovers Before a bidder makes an offer for another company, it usually first informs that company's board of directors. If the board feels that accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. In a private company, because the shareholders and the board are usually the same people or closely connected with one another, private acquisitions are usually friendly. If the shareholders agree to sell the company, then the board is usually of the same mind or sufficiently under the orders of the shareholders to cooperate with the bidder. This point is not relevant to the UK concept of takeovers, which always involve the acquisition of a public company. Hostile takeovers 2. Hostile takeovers A hostile takeover allows a suitor to bypass a target company's management unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer without informing the target company's board beforehand. A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. Tender offers in the USA are regulated with the Williams Act. An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simple majority, to replace the management with a new one which will approve the takeover. Another method involves quietly purchasing enough stock on the open market, known as a creeping tender offer, to effect a change in management. In all of these ways, management resists the acquisition but it is carried out anyway.
3. Reverse takeovers A reverse takeover is a type of takeover where a private company acquires a public company. This is usually done at the instigation of the larger, private company, the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. However, under AIM rules, a reverse
take-over is an acquisition or acquisitions in a twelve month period which for an AIM company would:

exceed 100% in any of the class tests; or result in a fundamental change in its business, board or voting control; or in the case of an investing company, depart substantially from the investing strategy stated in its admission document or, where no admission document was produced on admission, depart substantially from the investing strategy stated in its pre-admission announcement or, depart substantially from the investing strategy
I.a. History of Mergers and Acquisitions Tracing back to history, merger and acquisitions have evolved in five stages and each of these are discussed here. As seen from past experience mergers and acquisitions are triggered by economic factors.
The macroeconomic environment, which includes the growth in GDP, interest rates and monetary policies play a key role in designing the process of mergers or acquisitions between companies or organizations.
First Wave Mergers The first wave mergers commenced from 1897 to 1904. During this phase merger occurred between companies, which enjoyed monopoly over their lines of production like
railroads, electricity etc. The first wave mergers that occurred during the aforesaid time period were mostly horizontal mergers that took place between heavy manufacturing industries. End of 1st Wave Merger Majority of the mergers that were conceived during the 1st phase ended in failure since they could not achieve the desired efficiency. The failure was fuelled by the slowdown of the economy in 1903 followed by the stock market crash of 1904. The legal framework was not supportive either. The Supreme Court passed the mandate that the anticompetitive mergers could be halted using the Sherman Act. Second Wave Mergers The second wave mergers that took place from 1916 to 1929 focused on the mergers between oligopolies, rather than monopolies as in the previous phase. The economic boom that followed the post World War I gave rise to these mergers. Technological developments like the development of railroads and transportation by motor vehicles provided the necessary infrastructure for such mergers or acquisitions to take place.
The government policy encouraged firms to work in unison. This policy was implemented in the 1920s. The 2nd wave mergers that took place were mainly horizontal or conglomerate in nature. Te industries that went for merger during this phase were producers of primary metals, food products, petroleum products, transportation equipments and chemicals. The investments banks played a pivotal role in facilitating the mergers and acquisitions.
End of 2nd Wave Mergers The 2nd wave mergers ended with the stock market crash in 1929 and the great depression. The tax relief that was provided inspired mergers in the 1940s.
10 | S U S H I L R E G M I , M B A I V S e m ( 2 0 0 9 - 1 1 )
Third Wave Mergers The mergers that took place during this period (1965-69) were mainly conglomerate mergers. Mergers were inspired by high stock prices, interest rates and strict enforcement of antitrust laws. The bidder firms in the 3rd wave merger were smaller than the Target Firm. Mergers were financed from equities; the investment banks no longer played an important role.
End of the 3rd Wave Merger The 3rd wave merger ended with the plan of the Attorney General to split conglomerates in 1968. It was also due to the poor performance of the conglomerates. Some mergers in the 1970s have set precedence. The most prominent ones were the INCO-ESB merger; United Technologies and OTIS Elevator Merger are the merger between Colt Industries and Garlock Industries.
Fourth Wave Merger The 4th wave merger that started from 1981 and ended by 1989 was characterized by acquisition targets that wren much larger in size as compared to the 3rd wave merger. Mergers took place between the oil and gas industries, pharmaceutical industries, banking and airline industries. Foreign takeovers became common with most of them being hostile takeovers. The 4th Wave mergers ended with anti takeover laws, Financial Institutions Reform and the Gulf War. Fifth Wave Merger
The 5th Wave Merger (1992-2000) was inspired by globalization, stock market boom and deregulation. The 5th Wave Merger took place mainly in the banking and telecommunications industries. They were mostly equity financed rather than debt financed. The mergers were driven long term rather than short term profit motives. The 5th Wave Merger ended with the burst in the stock market bubble. Hence we may conclude that the evolution of mergers and acquisitions has been long drawn. Many economic factors have contributed its development.
I.b. Advantages of Mergers
(1) From the standpoint of shareholders

Investment made by shareholders in the companies subject to merger should enhance in value. The sale of shares from one companys shareholders to another and holding investment in shares should give rise to greater values i.e. the opportunity gains in alternative investments. Shareholders may gain from merger in different ways viz. From the gains and achievements of the company i.e. through
(a) Realization of monopoly profits; (b) Economies of scales; (c) Diversification of product line; (d) Acquisition of human assets and other resources not available otherwise; (e) Better investment opportunity in combinations.
One or more features would generally be available in each merger where Shareholders may have attraction and favor merger.
(2)From the standpoint of managers

Managers are concerned with improving operations of the company, managing the affairs of the company effectively for all round gains and growth of the company which will provide them better deals in raising their status, perks and fringe benefits. Mergers where all these things are the guaranteed outcome get support from the managers. At the same time, where managers have fear of displacement at the hands of new management in amalgamated company and also resultant depreciation from the merger then support from them becomes difficult.
(3)Promoters gains
Mergers do offer to company promoters the advantage of increasing the size of their company and the financial structure and strength. They can convert a closely held and private limited company into a public company without contributing much wealth and without losing control.
(4) Benefits to general public

(a) Consumer of the product or services; (b)Workers of the companies under combination; (c) General public affected in general having not been user or consumer or the worker in the companies under merger plan.
(a) Consumers
The economic gains realized from mergers are passed on to consumers in the form
of
lower prices and better quality of the product which directly raise their standard of living and quality of life. The balance of benefits in favor of consumers will depend upon the fact whether or not the mergers increase or decrease competitive economic and productive activity which directly affects the degree of welfare of the consumers through changes in price level, quality of products, after sales service, etc.
(b) Workers community The merger or acquisition of a company by a conglomerate or other acquiring company may have the effect on both the sides of increasing the welfare in the form of purchasing power and other miseries of life. Two sides of the impact as discussed by the researchers and academicians are: firstly, mergers with cash payment to shareholders provide opportunities for them to invest this money in other companies which will generate further employment and growth to uplift of the economy in general. Secondly, any restrictions placed on such mergers will decrease the growth and investment activity with corresponding decrease in employment. Both workers and communities will suffer on lessening job Opportunities, preventing the distribution of benefits resulting from diversification of production activity.
I.c. Purpose of Mergers & Acquisitions

The purpose for an offeror company for acquiring another company shall be reflected in the corporate objectives. It has to decide the specific objectives to be achieved through acquisition. The basic purpose of merger or business combination is to achieve faster growth of the corporate business. Faster growth may be had through product improvement and competitive position.
Other possible purposes for acquisition are short listed below: (1) Procurement of supplies:
1. To safeguard the source of supplies of raw materials or intermediary product;
2. To obtain economies of purchase in the form of discount, savings in transportation costs, overhead costs in buying department, etc.; 3. To share the benefits of suppliers economies by standardizing the materials.
(2) Revamping production facilities:

1. To achieve economies of scale by amalgamating production facilities through more intensive utilization of plant and resources; 2. To standardize product specifications, improvement of quality of product, expanding 3. Market and aiming at consumers satisfaction through strengthening after sale Services; 4. To obtain improved production technology and know-how from the offered company 5. To reduce cost, improve quality and produce competitive products to retain and improve market share.
(3) Market expansion and strategy:

1. To eliminate competition and protect existing market; 2. To obtain a new market outlets in possession of the offeree; 3. To obtain new product for diversification or substitution of existing products and to enhance the product range; 4. Strengthening retain outlets and sale the goods to rationalize distribution; 5. To reduce advertising cost and improve public image of the offeree company; 6. Strategic control of patents and copyrights.
(4) Financial strength:

1. To improve liquidity and have direct access to cash resource; 2. To dispose of surplus and outdated assets for cash out of combined enterprise;
3. To enhance gearing capacity, borrow on better strength and the greater assets backing; 4. To avail tax benefits;
(5) General gains: 1. To improve its own image and attract superior managerial talents to manage its affairs; 2. To offer better satisfaction to consumers or users of the product.
DIFFICULTIES IN M&A
For achieving a greater extent of corporate governance, merger & acquisition is one of the ways. But its not so easy; various types of problems are faced by the organization in this type of procedure. There difficulties are: 1. SECRECY Secrecy is maintained from bankers, suppliers, employees, customers & others so that the negative reactions can be minimized.
2. SLOW, EXPENSIVE & DIFFICULT A transaction generally requires six to nine months & many steps to meet all the legal procedure.
3. HARD TO FIND BUYER its very difficult to find a potential buyer for the multimillion dollar corporations, so that adequate consideration can be measured.
4. NEGOTIATION & POTENTIAL OF THE COMPANY More difficulty arises at the time of the negotiation & the measurement of the net worth of the business.
5. EXPENSIVE SERVICES Professional middleman (intermediaries, business brokers & investment bankers)
Significant Mergers and Acquisitions of the History

In 1987, an Australian Company named Stephen Jaques Stone James, which was a partnership company with 79 partners, merged with the company named Mallesons. After the Merger, the new joint company was known as Mallesons Stephen Jaques. This Merger contributed significantly to the telecommunication sector development in Australia. In 1988, Tower Federal Savings Bank of Indiana acquired two financial institutions of Michigan. Then in 1991, the Standard Federal Bank strengthened their position in Ohio by acquiring a financial institution of Toledo. These two acquisitions had great impact on the banking Sector of USA.
In 2001, a merger between Association of European Universities and the Confederation of European Union Rectors' Conference took place in Spain. This merger provided more power to the University community of Europe.
I.d. Merger and Acquisition in India

Consequent to the economic liberalization, financial deregulation, globalisation and technological revolution, unprecedented changes have taken place in markets worldwide. The volatility of the business environment has altered the ways and means by which transitions are carried out. Perpetual existence of an enterprise has become very difficult, given the complex and fluctuating nature of the surrounding environment. There is thus, a need for almost continuous streamlining of business organization.
Prior to the 1991, there were some certain restrictions on Merger and Acquisitions placed by the India Law. Although going through the history we find some hostile takeover done by
some business. Until 1970s the Merger and Acquisition was a rarely seen and it used to be arranged either by government agencies or by government agencies or by the financial institutions within the framework of a regulated regime. In 1980s we can see many merger and acquisitions taken place in manufacturing sector. The business houses like Goenka group, or the Manu Chhabarai group grew largely though acquisition during this period. Since 1986 onwards, both friendly takeover bids on negotiated basis and few hostile bids too, though hectic buying of equity shares of selected companies from stock market have been reported.
With liberalization and softening of the Industrial licence/permit control regime a wave of M&As began in 1988-1990. After dilution of MRTP and FERA regulations and the abolition of the necessity of the prior permission of the Government from mergers in 1991 an upswing in the merger wave took place. During the period of 1988-92, 121 successful M&A had taken place, although 37 attempts were unsuccessful. In 1992 the government of India constituted Securities and Exchange Board of India (SEBI) as the capital market regulator for smooth functioning of the market. In 1994 SEBI issued a takeover code for the regulation of takeovers occurring in Indian economy.
Till recent past, the incidence of Indian entrepreneurs acquiring foreign enterprises was not so common. The situation has undergone a sea change in the last couple of years. Acquisition of foreign companies by the Indian businesses has been the latest trend in the Indian corporate sector. There are different factors that played their parts in facilitating the mergers and acquisitions in India. Favorable government policies, buoyancy in economy, additional liquidity in the corporate sector, and dynamic attitudes of the Indian entrepreneurs are the key factors behind the changing trends of mergers and acquisitions in India. The Indian IT and ITES sectors have already proved their potential in the global market. The other Indian sectors are also following the same trend. The increased participation of the Indian companies in the global corporate sector has further facilitated the merger and acquisition activities in 18 | S U S H I L R E G M I , M B A I V S e m ( 2 0 0 9 - 1 1 )
India. Mergers and acquisitions become the major force in the changing environment. The policy of liberalization, decontrol and globalization of the economy has exposed the corporate sector to domestic and global competition. It is true that there is little scope for companies to learn from their past experience.
Therefore, to determine the success of a merger, it is to be ascertained if there is financial gain from mergers. Mergers, acquisitions and corporate control have emerged as major forces in the
modern financial and economic environment. Mergers, a source of corporate growth, have been the subject of careful examination by scholars. The mergers and acquisitions in India have changed dramatically after the liberalization of Indian economy.
The policy of liberalization, decontrol and globalization of the economy has exposed the corporate sector to domestic and global competition. Low cost products, with good quality have become essential for a company to survive in the competitive market. Factors like low interest rates, cheap labor, and liberal government policy, have helped the Indian corporate sector to reduce their cost. It is in this context that corporate sectors view mergers for further cost reduction through technology advancement or to make their presence felt in the market. The liberalization policy of Government of India has witnessed an unprecedented number of mergers and acquisitions in the country. In terms of the growth rate in mergers and acquisitions deals, India occupies the second position in the world. There are different factors that played their parts in facilitating the mergers and acquisitions in India. Favorable government policies, buoyancy in economy, additional liquidity in the corporate sector, and dynamic attitudes of the Indian entrepreneurs are the key factors behind the changing trends of mergers and acquisitions in India. A survey among Indian corporate managers in 2006 by Grant Thornton found that Mergers & Acquisitions are a significant form of business strategy today for Indian Corporates.
Drivers of M&A
Indian M&A transactions are primarily driven by the desire for growth. Indian companies are leveraging their low-cost advantage to create efficient global business models; they are seeking entry into fast-growing emerging markets and market-share in profitable developed economies; they are looking to augment their knowledge, reach and capabilities through acquisitions of companies for their brands, technology, and talent and product portfolios. Moreover, the competition to achieve these benefits is intense, heightening the need for speed. Companies from Latin America, Eastern Europe, Africa, and the Middle East and across Asia are in a race to build their global businesses. Indian companies have been active and visible players within this new M&A trend. According to Accentures analysis of data from Thomson Financial, as many as 543 M&A deals were completed by Indian companies both at home and abroad in 2007, with a total value of US$30.4 billion. This represents a compound annual growth rate (CAGR) of 28.3 percent in deal value over the period 2000-2007. Figure 1 illustrates the increase in both the number and size of deals over this period.
I.e. Merger and Acquisition in Banking Sector of India Present Structure of Indian Banking System
A. Public Sector Banks
o State Bank of India and its 7 associate Banks, together called State Bank Group
o Nationalized Banks (19 in number) o Regional Rural Banks sponsored by Public sector Banks
B. Private Sector Banks

o Old Generation Private Banks o New Generation Private Banks o Foreign Banks in India o Scheduled Co-operative Banks o Non Scheduled Banks
C. Co-Operative Sector Banks o Central Co-operative Banks o State Co-operative Banks o Land Development Banks o Primary agriculture Credit Societies o Urban Co-operative Banks o State Land Development Banks
D. Development Banks o Export-Import Bank of India (EXIM Bank) o Industrial Finance Corporation of India (IFCI) o Industrial Development bank of India (IDBI) o National Bank for Agriculture & Rural Development (NABARD)
At the top of the Indian banking system is the Central bank of India known as Reserve Bank of India. The Reserve Bank of India is responsible for the Indian Banking system since 1935.The commercial banks in India are segregated into public sector banks, private banks and foreign banks. All these banks fall under Reserve Bank of India (RBI) classification of Scheduled Commercial Banks (SCBs). PSBs, Private and Foreign Banks are known as Scheduled Commercial Banks as they are included in the Second Schedule of the Reserve Bank of India Act, 1934). The public sector was wholly owned by the government of India before the reforms. The PSBs are the biggest players in the Indian banking system and they account for 70 % of the assets of SCBs in India.Indian banking was highly regulated before the reforms of 1991 .In the discussion I segment the Indian banking into an era of pre reforms that is before 1991 and post 1991 reforms which was the reforms era .During the pre reforms era banks were instructed to maintain a high reserve ratio, the interest to be given out by the banks on the deposits and the interest to be charged on loans was also guided by government. Government had created priority sectors and banks had to lend out money to these priority sectors as per the guidelines which was 40 % of the total credit. This had lead to the growth of the PSB and PSBs accounted for 90.8% of aggregate deposits of SCBs. This was the period of low profitability, increasing number of nonperforming assets and operational inefficiencies .In the post reform era, after the reforms were brought out on the recommendations of the Narasimham Committees I and
II, the Indian banking sector started to grow leaps and bounds. This was the time of growth of the private banks like ICICI, Axis Bank, HDFC bank. It is not that merger did not happen in the pre reforms era, they did happen but most of these mergers where directed by RBI .
These were generally the mergers in a weak bank which was about to go flat on its tummy was taken over by a strong bank on the directions of RBI .There were around 55 pre reform era mergers .But the underlying motives of the mergers have changed in the present day context. The competitive market dynamics are driving the present day mergers .It will be described in detail about the motives of mergers in the below given paragraphs. Globalization is showing its impact on the Indian Banking system. Another important development which is going to take place is when government will open the banking sector in India .This will bring in large number of foreign player into the sector which will increase the competition. "Consolidation alone will give banks the muscle, size and scale to act like world-class banks. I have to think global and act local and seek new markets, new classes of borrowers. It is heartening to note that Indian Banks Association is working out a strategy for consolidation among banks. "
- P Chidambaram
Increasing Competition and Efficiency

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks, 29 private banks and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. To remain competitive in such a market space the banks needed to go to the basics of profitability which is increase in the revenue and decrease in the cost.
There are two hypotheses regarding the competitiveness effect due to the banking consolidation which lead to the increase in revenue and reduction in cost. The two hypotheses are Structure conduct performance paradigm given by Mason (1939) and Bain (1956), and other one is efficient structure hypothesis related to Demsetz (1973) and Peltzman (1977). (Carletti, Hartmann, Spagnolo, 2002)
A merger has two effects on the industry: First, it the market share of the merged firms is increased and as the market share increases so does the poor; second, it leads to gains in these efficiency which in turn results in reduction in the costs of the merged firms and increase in the revenue. The first effect leads increase in prices. As you are the market leader so it creates a monopoly for you in the market and you can charge high spread for the products from the customer for the services which you provide. Like if a bank is offering 10 products, after merging with a bank which complements its product range it can offer many more products to the customer. And for these services it can charge high value to the customer.
In some cases it can even become the monopoly player and this leads to increase in revenue and becomes one of the important catalysts in the for the merger .But banks do not merge only with the increase in revenue in mind as the law of the land protects the monopoly state to occur and thus restricts the high growth in revenue.
The second effect tends to reduce prices. This is because as the size increases the efficiency of the system also increases. This is the effect of economies of scale. The number of branches can also increase which helps the banks increase their spread .Like for example the case of the HDFC and Centurion Bank merger .Centurion Bank is strong with around 390 branches in North and South of India, and HDFC with around 1100 branches mainly in north and Istern India will give the new entity a much wider spread. Also efficiency comes in the system due to wider choice of better suitable human resource for the purpose of doing the job. In fact efficiency at all the 3 levels of people, process and product can be achieved through merger .This lead to decrease in cost which may be passed to the customer so as to increase the customer base.
These standard results in industrial organization apply of course to banking markets as well. This is another reason for the merger of the banks.
Stability
Indian banking system is highly fragmented. Even Indias largest bank does not have any standing among the top banks in the world .Only five banks have been able to cross the market capitalization of Rs.50 billion including the Bank of Baroda, State of India, PNB, ICICI, and HDFC. Moreover the trend has also shown that the top 5 banks have been eroding in Ialth and it is getting spread among other banks which are an indication that the stability of the top banks is in question. Even though it may be good to have a fragmented banking state for the customers because of low cost due to lack of any one bank having the monopoly .But for the financial stability of the country it is not good that its banking system is not stable This is another catalyst for the merger of the banks in India
Regulatory Requirement
Indian economy is growing at the rate of 8 10 % to maintain such amount of growth Indian banking system needs Rs. 590 billion. An obvious way to meet this requirement would be by industry consolidation.
Basel II which is going to be implemented in all the banks operating in India aims at determining the capital requirement based on risk weighted average of the capital of the bank. As per the Basel II norms banks have to meet the requirements of the capital for the operational risk as well .As a result of these regulatory requirements the banks will have to increase their capital base to support their assets and as per the estimates the additional requirements of capital will be 2-3% of the risk based assets of banks.
Thus, this need to keep the additional capital to meet Basel II norms and to maintain the needs of the growing economy, consolidation of the banks for larger credit pool is also one of the catalysts. Also the trade barriers are getting removed under WTO and Indian Banking System is going to open up for the global competitors by 2009 .As a result of this lot of foreign banks will enter into Indian markets . When these banks will enter India, to keep pace with the fast running financial sector in India these banks will try and grow through inorganic means of merger and acquisition in Indian arena .As a result many Indian banks which are weak are going to be soft target of these foreign banks. Also big banks in India will have a stiff competition from these foreign banks and to be prepared for such competition the bigger banks in India will fasten the pace of merger and acquisition in Indian banking sector.
Risk
As per the study by Hannan and Pilloff, 2006 the merger also helps the banks to reduce the bankruptcy risk if the merger is carried over in a controlled manner. Craig and Santos also in their research report have validated that risk gets reduced due to the diversification in the merger of the banks .This has been validated by the z score test done on default probability and by stock return volatility.
History of Consolidation in the Indian Banking Sector

In the context of consolidation in the Indian banking sector, it may be recalled that the Report of the Committee on Banking Sector Reforms (the Second Narasimham Committee - 1998) had suggested, inter alia, mergers among strong banks, both in the public and private sectors and even with financial institutions and NBFCs. Indian banking sector is no stranger to the phenomenon of mergers and acquisition across the banks. Since 1961 till date, under the provisions of the Banking Regulation Act, 1949, there have been as many as 77 bank amalgamations in the Indian banking system, of which 46 amalgamations took place before nationalization of banks in 1969 while remaining 31 occurred in the post-nationalization era. Of the 31 mergers, in 25 cases, the private sector banks were merged with a public sector bank while in the remaining six cases both the banks were private sector banks.
To get a perspective on the recent developments lets look first at what's happened between 1969, when the first set of 14 private banks was nationalized, and now. During these years, the banking landscape changed dramatically. In 1969, India had 89 commercial banks. By March 2004, this number had climbed to 290. In 1969, there were 73 scheduled commercial banks (SCBs).
Now, there are 90 of them, excluding the 196 regional rural banks (RRBs). The total number of branches during the three-and-a-half decades jumped over eight-fold, from 8,262 to 69,071. The growth has been phenomenal in rural India where the number of branches zoomed from 1,833 to 32,227. In contrast, the number of branches in the metropolitan cities grew at a slower pace, from 1,503 to 9,750. The total deposits of all scheduled commercial banks shot up by almost 332 times and their advances soared 240.50 times.
Yet, nobody denies that India is under-serviced. A country of 1.1 billion people has only about 250 million account holders. But if one excludes those with multiple accounts, especially in metropolitan and urban bank branches, the number would drastically come down. Despite lazy banking (a term Reserve Bank of India deputy governor Rakesh Mohan coined for commercial bankers who prefer to invest money only in zero risk government securities), the industry has been growing by 15-17 per cent annually, versus the 1-2 per cent growth rate of European banks.
So enormous opportunities exist. India's financial sector is going to boom in a growing economy where millions of people will join the workforce and need bank accounts. Banks will, therefore, need to plan for all this and learn basic survival skills.
Globalization in the context of financial markets does not mean only acquiring the ability to protect their turfs when foreign banks invade India but also going abroad and competing in other markets. One useful prerequisite for that is size.
In terms of size and scale, the big Indian banks are pygmies. The combined assets of the five largest Indian banks - the State Bank of India, ICICI Bank, Punjab National Bank, Canara Bank and Bank of India - on March 31, 2003 were less than the assets of the largest Chinese bank, China Construction Bank, which is roughly 7.4 times the size of the State Bank of India. The Banker's list of the top 1000 banks of the world (July 2004) has 20 Indian banks. Only six of them come in the top 500 group. The State Bank is positioned 82nd, ICICI Bank 268th, Punjab National Bank 313th, Canara Bank 405th, Bank of Baroda 425th and Bank of India 474th. Even in the Asian context, only one Indian bank - State Bank of India - figures in the top 25 banks based on Tier I capital, even though Indian banks offer the highest average return on capital among Asian peers. No wonder the focus is on scale.
The net NPAs of Indian banks have dropped substantially over the last few years not on account of any dramatic improvement in the quality of assets or better credit appraisal and monitoring but because of huge provisioning. So in a rising interest rate scenario, banks will face a double whammy. In the absence of high treasury income, their profitability will be hit and they will not be able to make large provisions to bring down their net NPAs further. If they want to continue to make large provisions for NPAs, their profitability will be squeezed even more. So, the soft underbelly of the Indian banking system may once again be exposed as interest rates rise. By pushing consolidation and merging some of the Iak banks with stronger ones the government is trying to create a situation where it does not need to dole out public money to bail out banks.
List of Indian commercial banks merged since January 1990 under the provisions of the Banking Regulation Act 1949
S.No. Target Bank 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Bank of Tamilnad Ltd. Bank of Thanjavur Ltd. Parur Central Bank Ltd. Purbanchal Bank Ltd. Kashi Nath Seth Bank Ltd. Bari Doab Bank Ltd.
Bidder Bank Indian Overseas Bank Indian Bank Bank of India Central Bank of India State Bank of India
Year 20.02.1990 20.02.1990 20.02.1990 29.08.1990 01.01.1996 08.04.1997 08.04.1997 03.06.1999 22.12.1999 26.02.2000 10.03.2001 20.06.2002 01.02.2003 25.06.2004 14.08.2004 01.10.2005 02.04.2005 02.09.2006 03.10.2006 31.3.2007 19.4.2007
Oriental Bank of Commerce Punjab co-operative Bank Oriental Bank of Ltd. Commerce Bareilly Corporation Bank Bank of Baroda Ltd. Sikkim Bank Ltd. Union Bank of India Times Bank Ltd. HDFC Bank Ltd. Bank of Madura Ltd. ICICI Bank Ltd. Benaras State Bank Ltd. Bank of Baroda Nedungadi Bank Ltd. PNB South Gujarat Local Area Bank Of Baroda Bank Global Trust Bank Ltd. OBC Bank of Punjab Ltd Centurion Bank IDBI Bank Ltd. IDBI Ltd. The Ganesh Bank of The Federal Bank Kurundwad Ltd. United Istern Bank Ltd. IDBI Ltd. Bharat Overseas Bank Indian overseas Bank The Sangli Bank Ltd ICICI Bank Ltd. (Voluntary)
22.
Lord Krishna Bank Ltd.
23
Centurion Bank of Punjab Ltd. (voluntary) Centurion Bank of Punjab HDFC Bank I.f. SWOT Analysis of Indian Banking Sector Strength
29.8.2007
27.3.2008
Increase in Profitability. Fall in cost income of the banks. Improvement in technology. More financial Resource. More customer satisfaction. Many resources under one roof. Large number of borrowers and depositors. Economies of scale Tax Saving
Weakness
Retrenchment and settlement problem of the employees. Difficult in integration of different culture banks. Problem of excessive staff. Inadequate Evaluation of Target Large or Extraordinary Debt Inability to Achieve Synergy Managers Overly Focused on Acquisition
Opportunities
High competitive strength Large scale operation Strong Financial sector. Easy market penetration Increased capital base and customers. Advanced Technology Basel Norms Geographical spread
Threats
Problem in cultural integration of banks. Collapse of small banks. Opposition from employee unions. Chances of monopoly. Customer dissatisfaction Marginalization of small customers Regulatory hurdle
Regulations governing Merger and Acquisition in India

o The provision of the Companies Act,1956 o The Foreign Exchange Management Act, 1999. o The Income Tax Act,1961 and o The Securities and Controls (Regulations) Act, 1956. o The Competition Act, 2002 o The Banking Regulation Act 1949
Legal procedures
o Permission for merger: Two or more companies can amalgamate only-when the amalgamation is permitted under their memorandum of association. Also, the acquiring company should have the permission in its object clause to carry on the business of the acquired company. In the absence of these provisions in the memorandum of association, it is necessary to seek the permission of the shareholders, board of directors and the Company Law Board before affecting the merger.
o Information to stock exchange: The acquiring and the acquired companies should inform the stock exchanges (where they are listed] about the merger.
o Approval of board of directors: The board of directors of the individual companies should approve the draft proposal for amalgamation and authorize the managements of the companies to further pursue the proposal.
o Filing Application in the High Court: An application for approving the draft amalgamation proposal duly approved by the board of directors of the individual companies should be made to the High Court.
o Shareholders and creditors' meetings: The individual companies should hold separate meetings of their shareholders and creditors for approving the amalgamation scheme. At least, 75 percent of shareholders and creditors in separate meeting, voting in person or by proxy, must accord [heir approval to the, scheme
o Sanction by the High Court: After the approval of the shareholders and creditors, on the petitions of the companies, the High Court will pass an order, sanctioning the amalgamation scheme after it is satisfied that the scheme is fair and reasonable. The date of the court's hearing will be published in two newspapers, and also, the regional director of the Company Law Board will be intimated.
o Filing of the Court order: After the Court order, its certified true copies will be filed with the Registrar of companies.
o Transfer of assets and liabilities: The assets and liabilities of the, acquired company will be transferred to the acquiring company in accordance with the approved scheme, with effect from the specified date.
o Payment by cash or securities: As per the proposal, the acquiring company will exchange shares and debentures and/or cash for the shares and debentures of the acquired company. These securities will be listed on the stock exchange
I.g. Future Prospects of M&A in Indian banking Sector

Till now Indian banking sector has remained safeguarded at number of occasions from the crisis in the financial markets, be it the 1997 Asian Crisis or be the resent Sub Prime Crisis where the exposure of the Indian banks as of now seems to be negligible. Indian banking is entering into a new orbit and it is going to change a lot in the next 3 years .During the period of 5 years from 2000 to 2005 the assets of the banking sector grew by $255 billion and the profits grew to $ 5 billion .It is estimated through the news report reports that the total profits will be between $ 10 to $12 billion by 2010 (Sinha, 2006). After 2009 when the Indian banking system opens for the markets player from across the globe things are moving and will starting moving even faster in the Indian banking sector .According to the report by Mckinsey there are 3 potential scenarios which will emerge in the Indian banking sector, which are :First a high performance scenario where in the regulatory bodies will not intervene in the working of the banks and leave them independent .The regulatory body will intervene only when it has to safeguard the interests of the customers and maintain the stability of the system. Second scenario which the report talks about which may evolve is that it will be pro market but it will also be a little cautious in working for reforms. In this market driven scenario the success of the management of the banks will depend on the upgrading capabilities of the bank which match the market dynamics, Growth and expansion through Merger and acquisition and developing business models to tap the untapped markets. This will be the evolution phase and the sector will emerge as an important driver of economy and Earth by 2010.After the opening up of Indian banking sector in 2009 the foreign backs will catch pace with the fast growing markets in India and will lead the merger wave.
The third scenario which may occur is the stage of stagnation where in policy maker will employ lot of restrictive conditions on the banks and the consolidation activity instead of being driven by market condition will be restrictive .This will impede the growth of the banks.
The future presents both threats and opportunities for the PSBs. The banking industry structure will undergo some basic changes in respect of overall growth capability, risk management potential and competitive pressures. These changes, taken together, will imply an enhanced complexity in the banking industry structure and performance. In the last few years the Indian GDP has been growing at a fast rate of 7-8%. Demand for industrial and agricultural credit have accordingly grown faster than that in the 1990s and the demand for credit by the retail sector, export sector and the infrastructure sector have been growing at significantly higher rates.
This provides an opportunity as well as a threat for the PSBs. Growth will create flexibility in asset structure, higher capital base and market share and therefore enable PSBs to generate adaptive efficiency.
On the other hand, without efficient adaptation to the growth process, the PSBs cannot sustain their competitive edge and asset leverage and therefore will not be able to exploit the opportunities afforded by the domestic and the international market.
Indian PSBs have long been burdened with the responsibility of development banking through mobilizing deposits at the countryside and providing finance to agriculture and small scale industries at subsidized rates.
It is time to marry the social responsibility of these banks with proper commercial orientation so that they can survive and prosper in an environment of high growth, competition and risks. For some PSBs today, this implies the need for mergers. For a bank that has the capacity to grow in terms of its intrinsic comparative advantage but is constrained due to the problems of inter-regional penetration, merger with a similar bank (in terms of comparative advantage and portfolio) will provide an avenue to grow optimally Similarly, a bank of the size and experience of SBI can aspire to become a universal bank by acquiring smaller banks with lucrative retail and wholesale portfolio and through strategic alliances with investment banks, insurance companies and asset management firms.
PART-II REVIEW OF LITERATURE

The two important issues examined by several academic studies relating to bank mergers are: first, the impact of mergers on operating performance and efficiency of banks and second, analysis of the impact of mergers on market value of equity of both bidder and target banks. Berger et.al (1999) provides an excellent literature review on both these issues. Hence in what follows we restrict the discussion to reviewing some of the important studies.
The first issue identified above is the study of post merger accounting profits, operating expenses, and efficiency ratios relative to the pre-merger performance of the banks. Here the merger is assumed to improve performance in terms of profitability by reducing costs or by increasing revenues. Cornett and Tehranian (1992) and Spindit and Tarhan (1992) provided evidence for increase in post-merger operating performance. But the studies of Berger and Humphrey (1992), Piloff (1996) and Berger (1997) do not find any evidence in post-merger operating performance. Berger and Humphrey (1994) reported that most studies that examined pre-merger and post-merger financial ratios found no impact on operating cost and profit ratios.
The reasons for the mixed evidence are: the lag between completion of merger process and realization of benefits of mergers, selection of sample and the methods adopted in financing the mergers. Further, financial ratios may be misleading indicators of performance because they do not control for product mix or input prices. On the other hand they may also confuse scale and scope efficiency gains with what is known as X-efficiency gains. Recent studies have explicitly employed frontier X-efficiency methods to determine the X-efficiency benefits of bank mergers. Most of the US based studies concluded that there is considerable potential for cost efficiency benefits from bank mergers (since there exists substantial X-inefficiency in the industry), but the data show that on an average, such benefits were not realized by the US mergers of the 1980s (Berger and Humphrey, 1994).
Some studies have also examined the potential benefits and scale economies of mergers. Landerman (2000) explores potential diversification benefits to be had from banks merging with non banking financial service firms. Simulated mergers between US banks and non-bank financial service firms show that diversification of banks into insurance business and securities brokerage are optimal for reducing the probability of bankruptcy for bank holding companies.
Wheelock and Wilson (2004) find that expected merger activity in US banking is positively related to management rating, bank size, competitive position and
geographical location of banks and negatively related to market concentration. Substantial gains from mergers are expected to come from cost savings owing to economies of scale and scope. In a survey of US studies, Berger and Humphrey (1994) concluded that the consensus view of the recent scale economy literature is that the average cost curve has a relatively flat U-shape with only small banks having the potential for scale efficiency gains and usually the measured economies are relatively small. Studies on scope economies found no evidence of these economies. Based on the literature, Berger and Humphrey (1994) conclude that synergies in joint products in banking are rather small. The second issue identified above is the analysis of merger gains in terms of stock price performance of the bidder and target banks on announcement of merger. A merger is expected to create value if the combined value of the bidder and target banks increases on the announcement of the merger. Pilloff and Santomero (1997) conducted a survey of the empirical evidence and reported that most studies fail to find a positive relationship between merger activity and gains in either performance or stockholder wealth. But studies by Baradwaj, Fraser and Furtado (1990), Cornett and Tehranian (1992), Hannan and Wolkan (1989), Hawawini and Swary (1990), Neely (1987), and Trifts and Scanlon (1987) report a positive reaction in the stock prices of target banks and a negative reaction in the stock prices of bidding banks to merger
announcements. A recent study on mergers of Malaysian banks shows that, forced mergers have destroyed wealth of acquired banks (Chong et. al., 2006).
Again the reasons for mixed evidence are many. A merger announcement also combines information on financing of the merger. If the merger is financed by equity offerings it may be interpreted as overvaluation of issuer. Hence, the negative announcement returns to bidding firm could be partly attributable to negative signalling unrelated to the value created by the merger (Houston et. al., 2001). Returns to bidder firms shareholders are significantly greater in bank mergers financed with cash than in mergers financed with stock (Houston and Ryngaert, 1997). The other short coming of event study analysis of abnormal returns is that if a consolidation wave is going on, mergers are largely anticipated by shareholders and stock market analysts. Potential candidates for mergers are highlighted by the financial press and analysts. In such cases event study analysis of abnormal returns may not capture positive gains associated with mergers.
In sum, the international evidence does not provide strong evidence on merger benefits in the banking industry. However it may be useful to note that these findings from the academic literature usually conflict with consultant studies which typically forecast considerable cost savings from mergers. Berger and Humphrey (1994) suggest why most academic studies do not find cost gains from mergers whereas consultants tend to advocate mergers. This is because of the following reasons: Consultants focus on potential cost savings which do not always materialize, whereas economists study actual cost savings, Consultants tend to highlight specific operations of the banks where there may be merger benefits but ignore those where there are scale diseconomies, whereas economists study overall costs, Consultants prescribe potential cost saving practices which are not necessarily implemented, whereas economists study data on banks that implement as well as those who do not implement the cost saving practices, Consultants often refer to the successful cases, but ignore the unsuccessful ones, whereas economist study all banks, Consultants portray merger benefits as large whereas they may be small in relative terms to the total costs of the consolidated entity. On the other hand, economists employ standard measures from academic literature that do suffer from this limitation.
The academic studies motivate the examination of two important issues relating to mergers in Indian banking. First, do mergers in Indian banking improve operational performance and efficiency of banks? But in India, guided by the central bank, most of the weak banks are being merged with healthy banks in order to avoid financial distress and to protect the interests of depositors. Hence the motivation behind the mergers may not be increase in operating efficiency of banks but to prevent financial distress of weak banks. Hence we do not examine the long term performance and efficiency gains from bank mergers. The other issue emerging from the academic literature is the analysis of abnormal returns of bidder and target banks upon merger announcement by examining the stock price data. We develop testable form of hypotheses for bank mergers in the Indian context as follows: In the case of forced mergers since target firms are given an inducement to accept an acquisition they are expected to earn abnormal returns during the announcement, regardless of the motivation of the acquisition.
Hence the expected impact of forced mergers is target banks abnormal returns should be positive. This also supports the safety net motive. Forced mergers are expected to create value for target banks. In the case of voluntary mergers, merger motives are market power, scale economies and cost efficiency. Thus merger announcements are expected to yield abnormal returns to both target and bidder banks as shareholders of both the banks are perceiving benefits out of the merger. Next we conduct a questionnaire survey to ascertain the views of bank managers. Finally we present arguments for why big banks are needed for Indian and other emerging economies. Before that, in the next section we present some consolidation trends in banking. The study entitled Effect of mergers on corporate performance in India, written by Vardhana Pawaskar (2001), studied the impact of mergers on corporate performance. It compared the pre- and post- merger operating performance of the corporations involved in merger between 1992 and 1995 to identify their financial characteristics. The study identified the profile of the profits. The regression analysis explained that there was no increase in the post- merger profits. The study of a sample of firms, restructured through
mergers, showed that the merging firms were at the lower end in terms of growth, tax and liquidity of the industry.
The merged firms performed
better than
industry in
terms
ofprofitability.
Mansur.A.Mulla (2003) in his case study Forecasting the viability and operational efficiency by use of ratio analysis: A case study, assessed the financial performance of atextile unit by using ratio analysis. The study found that the financial health was never in the healthy zone during the entire study period and ratio analysis highlighted that managerial incompetence accounted for most of the problems.
It also suggested toning up efficiency and effectiveness of all facets of management and put the company on a profitable footing. Pramod Mantravadi and Vidyadhar Reddy (2007) in their research study Mergers and operating performance: Indian experience, attempted to study the impact of mergers on the operating performance of acquiring corporate in different periods in India, after the announcement of industrial reforms, by examining some pre- and post-merger financial ratios, with chosen sample firms, and all mergers involving public limited and traded companies of nation between 1991 and 2003. The study results suggested that there are minor variations in terms of impact on operating performance following mergers in different intervals of time in India.
A survey of the available literature on M&As and its impact on the different aspects of corporate entities has been carried out. Further, research studies specific to India and their limitations and research dimensions for the present study has been found out. Evaluating the performance of corporations involved in M&As has been the subject of a great deal of research. Khemani (1991) states that there are multiple reasons, motives, economic forces and institutional factors that can be taken together or in isolation, which influence corporate decisions to engage in M&As. It can be assumed that these reasons and motivations have enhanced corporate profitability as the ultimate, long-term objective. It seems reasonable to assume that, even if this is not always the case, the ultimate concern
of corporate managers who make acquisitions, regardless of their motives at the outset, is increasing long-term profit.
However, this is affected by so many other factors that it can become very difficult to make isolated statistical measurements of the effect of M&As on profit. The "free cash flow" theory developed by Jensen (1988) provides a good example of intermediate objectives that can lead to greater profitability in the long run. This theory assumes that corporate shareholders do not necessarily share the same objectives as the managers. The conflicts between these differing objectives may well intensify when corporations are profitable enough to generate "free cash flow," i.e., profit that cannot be profitably re-invested in the corporations. Under these circumstances, the corporations may decide to make acquisitions in order to use these liquidities.
It is therefore higher debt levels that induce managers to take new measures to increase the efficiency of corporate operations. According to Jensen, long-term profit comes from the reorganization and restructuring made necessary by takeovers. Most of the studies on impact of M&As can be categorized according to whether they take a financial or industrial organization approach. One way to measure the performance is to monitor the share prices after the M&A deal is struck. Empirical studies of this type indicate that a target firms shareholders benefit and the bidding firms shareholders generally lose (Franks & Harris, 1989).
The most commonly employed financial approach examines trends in the share prices of corporations involved in M&As and compares them with a reference group of corporations. Corporate performance is considered to have improved if the returns to shareholders are greater after the M&As. The results obtained using this approach, largely in the United States and also in Canada, show that corporate takeovers generally have favorable consequences for shareholders of the target companies.
Another set of studies evaluate the impact of M&As in various measures of profitability before and after M&As. This type of industrial organisation studies normally considers longer time horizons than the share price studies. Most of the firms do not show significant improvement in long term profitability after acquisition (Scherer, 1988). There are some studies which have concluded that conglomerate M&As provide more favourable results than horizontal and vertical M&As (Reid, 1968; Mueller, 1980). Many researchers have investigated, whether related mergers in which the merging companies have potential economy of scale perform better than unrelated conglomerate mergers.
The evidence is inconclusive in terms of return to shareholders (Sudersanam et al., 1993). In terms of accounting profitability, Hughes (1993) summarises evidence from a number of empirical studies to show that conglomerate mergers perform better than horizontal mergers. Poor corporate performance in post-merger period has been attributed to numerous reasons manager's desire for position and influence, low productivity, poor quality, reduced commitment, voluntary turnover, and related hidden costs and untapped potential (Buono, 2003). Ghosh ((2001) examined the question of whether operating cash flow performance improves following corporate acquisitions, using a design that accounted for superior pre- acquisition performance, and found that merging firms did not show evidence of improvements in the operating performance following acquisitions. Kruse, Park and Suzuki (2003) examined the long-term operating performance of Japanese companies using a sample of 56 mergers of manufacturing firms in the period
1969 to 1997.
By examining the cash-flow performance in the five-year period following mergers, the study found evidence of improvements in operating performance, and also that the pre and postmerger performance was highly correlated. The study concluded that control firm adjusted long-term operating performance following mergers in case of Japanese firms was positive but insignificant and there was a high correlation between pre and post-merger performance.
Marina Martynova, Sjoerd Oosting and Luc Renneboog (2007) investigated the long-term profitability of corporate takeovers in Europe, and found that both acquiring and target companies significantly outperformed the median peers in their industry prior to the takeovers, but the profitability of the combined firm decreased significantly following the takeover. However, the decrease became insignificant after controlling for the performance of the control sample of peer companies. Due to the existence of strict government regulations, Indian companies were forced to go to new areas where capabilities are difficult to develop in the short run. In pursuit of this growth strategy, they often change their organization and basic operating characteristics to meet the diversified businesses and management.
In a study by Prahalad and others (1977), it has been found that, Indian enterprises in both the private and public sectors are much diversified. This diversification led to M&As. They also found that India has a large percentage of unrelated diversifiers as compared to the USA, UK, France, Germany, and Italy (Kaul 1991, 2003). The work of Rao and Rao (1987) is one of the earlier attempts to analyse mergers in India from a sample of 94 mergers orders passed during 1970-86 by the MRTP Act 1969. In the post 1991 period, several researchers have attempted to study M&As in India. Some of these prominent studies are; Beena (1998), Roy (1999), Das (2000), Saple (2000), Basant (2000), Kumar (2000), Pawaskar (2001) and Mantravedi and Reddy (2008). There are few other studies which analyses mergers as case studies only.
Healy, Palepu, and Ruback examined post-acquisition performance for 50 largest U.S.mergers between 1979 and 1984 by measuring cash flow performance, and concluded that operating performance of merging firms improved significantly following acquisitions, when compared to their respective industries. Ghosh examined the question of whether operating cash flow performance improves following corporate acquisitions, using a design that accounted for superior pre-acquisition performance, and found that merging firms did not show evidence of improvements in the operating performance following acquisitions.
Weston and Mansingka studied the pre and post-merger performance of conglomerate firms, and found that their earnings rates significantly underperformed those in the control sample group, but after 10 years, there were no significant differences observed in performance between the two groups. The improvement in earnings performance of the conglomerate firms was explained as evidence for successful achievement of defensive diversification. Marina Martynova, Sjoerd Oosting and Luc Renneboog investigated the long-term profitability of corporate takeovers in Europe, and found that both acquiring and target companies significantly outperformed the median peers in their industry prior to the takeovers, but the profitability of the combined firm decreased significantly following the takeover. However, the decrease became insignificant after controlling for the performance of the control sample of peer companies. Katsuhiko Ikeda and Noriyuki Doi studied the financial performances of 43 merging firms in Japanese manufacturing industry and found that the rate of return on equity increased in more than half the cases, but rate of return on total assets was improved in about half the cases. However, both profit rates showed improvement in more than half the cases in the five-year test, suggesting that firm performances after mergers began to be improved along with the internal adjustment of the merging firms: there was a necessary gestation period during which merging firms learnt how to manage their new organizations.
PART-III: RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the problem. It may be understood has a science of studying how research is done scientifically. In it we study the various steps that all generally adopted by a researcher in studying his research problem along with the logic behind them. The scope of research methodology is wider than that of research method.
III.a. Research Design- Analytical Research III.b. Objectives of the study To study why the banks are going towards Merger & Acquisitions. To study the measures taken by the government to increase Merger & Acquisition in Banking Sector. To trace it out the related issues in both pre and post merger case. To find out whether merger results are beneficial to banks.
III.c. Data Collection Method My Research is based on Secondary Data sources. Sources tapped under Secondary data include websites, published/printed information, literature and other relevant databases to gather related data on the subject. Various newspapers, magazines, and periodicals have been studied as well. Also my secondary sources include RBI and SEBI report, Books relating Merger and Acquisition and Annual reports of Selected Banks. III.d. Justification of the Study
My study is confined to merger and acquisition in India- with reference to Banking Sector. Following
are the mergers and acquisitions considered for my study: ICICI and Bank of Madura ICICI Ltd. and ICIC Bank Merger Punjab National Bank and New Bank of India OBC and Global Trust Bank
PART-IV: DATA ANALYSIS AND INTERPRETATION IV.a. ICICI Bank and Bank of Madura Merger
Bank of Madura (BOM) was a profitable, well-capitalized, Indian private sector commercial bank operating for over 57 years. The bank had an extensive network of 263 branches, with a significant presence in the southern states of India. The bank had total assets of Rs. 39.88 billion and deposits of Rs.33.95 billion as on September 30, 2000. The bank had a capital adequacy ratio of 15.8% as on March 31,2000. The Banks equity shares were listed on the Stock Exchanges at Mumbai and Chennai and National Stock Exchange of India before its merger. ICICI Bank then was one of the leading private sector banks in the country. ICICI Bank had total assets of Rs. 120.63 billion and deposits of Rs. 97.28 billion as on September 30, 2000. The banks capital adequacy ratio stood at 17.59% as on September 30, 2000. ICICI Bank was Indias largest ATM provider with 550 Branches as on June 30, 2001. The equity shares of the bank were listed on the Stock Exchanges at Mumbai, Calcutta, Delhi, Chennai, Vadodara and National Stock Exchange of India. ICICI Banks American Depository Shares were listed on the New York Stock Exchange.
In February 2000, ICICI Bank was one of the first few Indian banks to raise its capital through American Depository Shares in the international market, and received an overwhelming response for its issue of $ 175 million, with a total order of USD 2.2 billion. At the time of filling the prospectus, with the US Securities and Exchange Commission, the Bank had mentioned that the proceeds of the issue would be used to acquire a bank.
As on March 31, 2000, bank had a network of 81 branches, 16 extension counters and 175 ATMs. The capital adequacy ratio was at 19.64% of risk-weighted assets, a significant excess of 9 % over RBI Benchmark. ICICI Bank was scouting for private banks for merger, with a view to expand its assets and client base and geographical coverage. Though it had 21% of stake, the choice of Federal bank, was not lucrative due to employee size (6600), per employee business was as low as Rs. 161 lakh and a snail pace of technical up gradation. While, BOM had an attractive business per employee figure of Rs. 202 lakh, a better technological edge and a vast 47 | S U S H I L R E G M I , M B A I V S e m ( 2 0 0 9 - 1 1 )
base in southern India as compared to Federal Bank. While all these factors sound good, a cultural integration was a tough task ahead for ICICI Bank. ICICI Bank had then announced a merger with the 57 year old BOM, with 263 branches, out of which 82 of them were in rural areas, with most of them in southern India. As on the day of announcement of merger (09-122000), Kotak Mahindra group was holding about 12% stake in BOM, the Chairman BOM, Mr. K.M. Thaigarajan, along with his associates was holding about 26% stake, Spic group had about 4.7%, while LIC and UTI were having marginal holding. The merger was supposed to enhance ICICI Banks hold on the south Indian market.
The swap ratio was approved in the ratio of 1:2- two shares of ICICI Bank for normal every one share of BOM. The deal with BOM was likely to dilute the current equity capital by around 2%. And the merger was expected to bring 20% gains in EPS of ICICI Bank and a decline in the banks comfortable Capital Adequacy Ratio from 19.64% 17.6%.
Table: - Financial standing of ICICI Bank & Bank of Madura (Rs in crores) Parameters ICICI Bank 1998-1999 Net worth Total Deposit Advances Net Profit Share Capital 308.33 6072.94 3377.60 63.75 165.07 Bank of Madura 1999-2000 1998-1999 1999-2000 1129.90 9866.02 5030.96 105.43 196.81 19.64% 211.32 3013.00 1393.92 30.13 11.08 18.83% 247.83 3631.00 1665.42 45.58 11.08 14.25%
Capital Adequacy 11.06% Ratio Gross Advances / 4.72% Gross NPs Net Advances / Net NPs 2.88%
2.54%
8.13%
11.09%
1.53%
4.66%
6.23%
Source: Compiled from Annual Report (March 2000) of ICICI Bank & Bank of Madura. Table: Mean pre-merger and post-merger Ratios for ICICI
Financial ratios Pre Merger 75.56 18.23 13.1 8.71 3.22 3.31 0.92 Post Merger 83.14 22.43 -0.04 0.2 1.27 1.42 6.05
Operating profit margin (%) Net profit margin (%) RONW (%) ROCE (%) Quick Ratio( times) Current Ratio(times) Debt Equity ratio(times)
The scheme of amalgamation was expected to increase the equity base of ICICI Bank to Rs. 220.36 crore. ICICI Bank was to issue 235.4 lakh shares of Rs. 10 each to the shareholders of BOM. The merged entity will have an increase of asset base over Rs. 160 billion and a deposit base of Rs. 131 billion. The merged entity will have 360 branches across the country and also enable ICICI Bank to serve a large customer base of 1.2 million customers of BOM through a wider network, adding to the customer base to 2.7 million.
The branch network of the merged entity increased from 97 to 378, including 97 branches in the rural sector. The Net Interest Margin increased from 2.46% to 3.55 %. The Core fee income of ICICI almost doubled from Rs 87 crores to Rs 171 crores. ICICI gained an additional 1.2 million customer accounts, besides making an entry into the small and medium segment. It possessed the largest customer base in the country, thus enabling the
ICICI group to cross-sell different products and services. With a combined asset base of 16000 crore, ICICI bank became one of the largest private sector banks in India which gave it the capability of greater resource/ deposit mobilization.
This merger although gave ICICI an edge in terms of branch network and geographic base but as we can see that after the merger all the ratios except the operating profit margin, net profit margin and debt equity ratio have declined. As can be seen that the liquidity ratios i.e. the current and the quick ratio have declined, this shows that the company's ability to pay short-term obligations has gone down. Also the increased debt equity ratio shows that ICICI has had taken more debt in comparison to the shareholders equity which may affect its operations if the cost of debt exceeds its earnings. The profitability has increased but the RONW & ROCE has decreased showing that it is not able to generate much profit out of the net worth and the capital employed.
IV.b. ICICI Ltd. and ICICI Bank Merger

The merger between ICICI Bank and ICICI Ltd. pioneered the concept of Universal Banking in India. Taking the reverse merger route ICICI Ltd. Merged with its erstwhile subsidiary, ICICI Bank. The swap ratio has been decided at 2:1 that is 1 share of ICICI Bank for every 2 shares held in ICICI Ltd. It was also supposed to include merger of two ICICI subsidiaries, namely, ICICI Personal Finance Services Limited and ICICI Capital Services Limited with ICICI Bank.
At the time of merger, ICICI Ltd was holding (held) 46 per cent stake in ICICI Bank. In the case of merger, instead of extinguishing the shares, the company has decided to transfer the stake to a Special Purpose Vehicle (SPV) to be created in the form of a trust. Post merger, this was to form about more than 16 per cent of the total capital. This is an intelligent move by the company, as it would serve many purposes. First of all it is not prudent to extinguish capital in a scenario where the cost of raising capital itself is very high. Secondly, by doing so the bank would be able to safeguard its capital adequacy ratio. Thirdly, the plan is to divest the stake to a strategic partner few years down the line,
which would fetch the bank considerable amount of cash. The shares would be transferred to the SPV at the price at which ICICI bought the shares i.e. Rs 12 per share.
Reason for Merger

Analysts say ICICI wanted to merge with its banking subsidiary to obtain cheaper funds for lending, and to increase its appeal to investors so that it can raise capital needed to write off bad loans. This merger was basically a survival; more for ICICI, as its core business didnt look too good and they needed some kind of a bank because only a bank has access to low-cost funds.
Cheap Cash was another reason for merger.
Main Concerns
A major concern in the road ahead to the merger was the reserve requirement that a bank was supposed to maintain. At that time these requirements were not applicable to ICICI Ltd. A bank has to maintain a Cash Reserve Ratio of 5.5 per cent with RBI and Statutory Liquidity Ratio of 25 per cent. ICICI required a total of Rs.18,000 crore to fulfill this requirement. This was a huge amount and given the scenario of that time and it was difficult for the institutions to raise such an amount. The group planned to raise the required funds partly through ICICI and partly through ICICI Bank.
Another issue was of fulfilling the priority sector lending requirement. This requirement at the time of merger was at 40 per cent i.e. 40 per cent of the lending was to be made to priority sectors.
Benefit to the Players
The main objective of adopting the path of Universal Banking is that financial institutions are finding it increasingly hard to survive in a scenario of high cost of borrowing and decreasing spread with interest rates going down. Cost of borrowing for a financial
institution through bonds is much higher than a bank, which can raise current and saving deposits. As per regulations, financial institutions cannot raise these deposits. Post merger it would be possible to do so.
Also increasing disintermediation had made things increasingly difficult for ICICI Ltd.
Some of the customers of ICICI Ltd. were in a position to access funds at much lower cost than from ICICI Ltd. and ICICI Ltd. could not afford to lend at that rate as its own cost
of funds was high. Once converted into a bank, its access to cheap funds would enable it to
lend at competitive rates. ICICI Ltd. as a combined entity would be better equipped to handle issues arising from potential asset liability mismatches due to more stable deposit base. Post merger ICICI Bank would be able to significantly enhance its fee based income based on the strength of its balance sheet. Before the merger, ICICI Ltd. could not carry out certain activities as it was not a bank and therefore loses out on the fee based income. ICICI Bank on the other hand was constrained because of the limited size of its balance sheet. The sheer size of the balance sheet post merger would boost the fee based income. The high margin retail loan portfolio before the merger was with the various subsidiaries. Post merger this was to be transferred to ICICI Bank.
The Negative Side of the Merger The assets quality of ICICI Bank, which has been its major strength, would be affected post merger. ICICI Ltd. had NPAs of 5.2 per cent for FY01 as against ICICI Banks NPAs of 1.4 per cent. Before the merger, ICICI Ltd. could claim a deduction upto 40 per cent of its profits from its long term lending by transferring the amount to special reserve. Post merger, this benefit was to stand withdrawn in the case of incremental loans.
Average cost of borrowing for ICICI Ltd. for financial year 2001 was 11.71 percent. Its Gross yield was 13.54 per cent for the same period. Either way ICICI Ltd. would have to take a hit in the bottom-line in the initial years. By bringing down its loan portfolio and diverting these funds for the reserve requirement it would have to forego some of the interest spread. CRR would get a return of 6.5 per cent and amount in SLR would generate a return of about 9.5 per cent. Even in the case of fresh funds the cost of borrowing would be higher and the return on those funds would be less.
Table: - Some Financial Parameters at the time of Merger
ICICI group has pioneered the concept of universal banking in India. IFCI Ltd is also in the process of merging with PNB. The concept of universal banking has found favor with many global players. Some of the international players, which have realized the benefits of universal banking, are ABN-AMRO, Citigroup, HSBC, UBS etc. No doubt in the times to come the benefits of this will start flowing in.
Iv.c. Punjab National Bank and New Bank of India Merger

In year 1970 fourteen banks including PNB were nationalized. In 1980 six more banks including New Bank of India were nationalized. Both these banks were merged in 1993 by the Central Government. The New Bank of India was incurring losses and by the year 1991-92, its financial position had become so bad that its capital and deposits completely stood eroded.
Punjab National Bank commenced its operations on April 12,1895 from Lahore with an authorized capital of Rs. 2 lakhs and working capital limit of Rs. 20,000/- . The Bank has more than 100 years of history and has faced many financial and other crises in the Indian financial system over these years.
New Bank of India was a comparatively small bank among the nationalized banks. It had around 600 branches all over the country with 12,400 employees and was having 2,500 crores of deposits and advances Rs. 970 crores.
Whereas PNB was working with 3734 branches all over the country with total employees numbered 71,650. It was having total deposits of Rs. 25,280 crore and advances of Rs. 12,078 crore. This was the first case in the Indian History that one nationalized bank was merged with another nationalized bank.
The basic reasons for this merger were as follows:
The New Bank of India was in loss consecutively for last three years when merger took place on 4th September, 1993.
Productivity per employee of New Bank of India was low. Work ethics of the union(s) workers was low. Only option left out was either liquidation or merger with another bank.
Since it was a small bank having its head office in Delhi and also with the similarities of work culture of Punjab National Bank whose head office also happened to be in Delhi, Govt. of India under recommendations of Narasimham Committee report decided to merge New Bank of India with Punjab National Bank.
Table:- Financial Standings of PNB and NBI at time of Merger (1992-93)
Pararameters
The PNB and NBI merger has not been a marriage of convenience. It had the seeds of long-term detrimental effect to the health of PNB. The most ticklish problem which the amalgamated entity faced was the complete absorption of the sizeable NBI workforce into its own work-culture. The NBI was notorious for rampant indiscipline and intermittent dislocation of work due to fierce inter-union rivalries.
IV.d. Oriental Bank of Commerce and Global Trust Bank merger

OBC acquired GTB in 2004. For Oriental Bank of Commerce there was an apparent synergy post merger as the weakness of Global Trust Bank had been bad assets and the strength of OBC lay in recovery. In addition, GTB being a south-based bank gave OBC the much-needed edge in the region apart from tax relief because of the merger. GTB had no choice as the merger was forced on it, by an RBI ruling, following its bankruptcy.
Leaving aside the liabilities of GTB, OBC was awarded with a good network of GTB branches with trained employees, who were using the similar software for the banking operations. Table - Mean pre-merger and post-merger Ratios for OBC
Financial ratios Operating profit margin (%) Net profit margin (%) RONW (%) ROCE (%) Quick Ratio( times) Current Ratio(times) Debt Equity ratio(times)
Pre Merger 84.97 17 28.65 19.58 3.15 3.22 0.41
Post Merger 74.86 11.73 11.42 9.58 2.94 3.12 0.33
The above table shows that the merger has not had any positive impacts as can be seen by the declining ratios post merger. The profit margins have decreased significantly due to the increase in sticky assets and lowered net interest margin. The returns on the shareholders equity and on the total capital employed have also reduced. Decline in liquidity ratios show that the ability of OBC to pay the short term liabilities has reduced. The reason behind all these decrease in the operational performance could be that the merger resulted in a low CAR for OBC, which was detrimental to solvency. A capital adequacy ratio of less than 11 per cent also constrained dividend declaration, given the applicable RBI regulations. Also, many of the employees of GTB resigned after the merger due to the lack of synergy in the operations.
PART V FINDINGS
After doing all the analysis i.e. examining all the ratios pre and post merger of each of the 4 cases it can be said that for some companies the merger is a success but for some it has proven to be a failure. During my study I have found that in most of the cases Human resource related issues will affect merger and acquisition in banking sector of India. Many of the employees of GTB resigned after the merger due to the lack of synergy in the operations. Banks are
becoming more focused on their high net interest income activities and main reasons for their mergers are to scale up operations.
The branch network of the ICICI has increased after acquiring Bank of Madura especially in rural sectors i.e. 97 branches in rural sectors. Net Interest Margin also increases from 2.46% to 3.55 %.ICIC also increases its Customer Accounts. Also after analyzing merger of Punjab National Bank and New Bank of India and OBC and GTB reasons for going merger and Acquisition is bankruptcy. New Bank of India and GTB merged with PNB and OBC to save from bankrupt. In most of cases that I have analyzed is that Due to high NPAs of Acquired firm Combined Capital Adequacy Ratio is decreased of Acquiring firm such as ICICI merged entity was lower from 19% to 17%.Mergers led to higher level of cost efficiencies for the merging banks. After the analysis, it was inferred that the companies benefited from the merger in terms of greater stability in their business cycle, tax savings and improved debt-raising capacity.
PART VI
LIMITATIONS
The study scope is Limited to Secondary data. Another limitation could be lack of knowledge. Being a student I undertake this project as a learning experience. I have made many mistakes and then learned from them. I have tried my best to be as authentic and as accurate as possible in the research analysis taking the help of my project mentor on relevant data. There were very few academic journals available regarding my research. My main source of information the RBI websites and websites of individual banks.
PART VII
SUGGESTIONS:
Below are mentioned some steps which the Banks should consider before entering into a merger:1) Meticulous pre-merger planning including conducting proper due diligence, effective communication during the integration, committed and competent leadership, speed with which the integration plan is integrated are all very important for a successful merger.
2) While making the merger deals, it is necessary not only to make analysis of the financial aspects of the acquiring firm but also the cultural and people issues of both the firms for proper post-acquisition integration.
3) There is a need to note that merger or large size is just a facilitator, but no guarantee for improved profitability on a sustained basis. Hence, the thrust should be on improving risk management capabilities, corporate governance and strategic business planning.
4) Make use of the best practices of both the acquirer and the target firms to make most out of the merger.
5) RBI should activate the Prompt Corrective Mechanism which helps in identifying the sick banks and the timing of the merger may be advanced to avoid total collapse of the bank
6) Bank merger and Acquisition can be good thing for Indian Economy so GOI should provide conducive environment for Bank Merger and Acquisition.
7) The Government and policy makers should be more cautious in promoting merger as a way to reap economies of scale and scope.
PART VIII
BIBLIOGRAPY
Internet:
en.wikipedia.org/wiki/Merger and Acquisition in india www.a2zmbablogspot.com www.investopedia.com www.scribd.com
Books:
Merger and Acquisition: By I M Pandey India Banking 2010 -Towards a High-performing Sector Merger and acquisition: - C.H.Rajeshwar
Akhavein, J. D., Berger, A. N and Humphrey, D. B. (1997), "The Effects of Bank Mergers on Efficiency and Prices: Evidence from the Profit Function" Review of Industrial Organization, Vol. 12, pp. 95-139.
Berger, A. N., Demsetz, R. S. and Strahan, P. E. (1999), "The Consolidation of the Financial Service Industry: Causes, Consequences and Implications for the Future" Journal of Banking and Finance, 23 (2-4), pp. 135-94.

Sushil Dissertation PDF

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Sushil Dissertation PDF

Hochgeladen von

Copyright:

Verfügbare Formate

Part I I.

Introduction to Mergers and Acquisition

1|SUSHIL REGMI, MBA IV Sem (2009-11)

3|SUSHIL REGMI, MBA IV Sem (2009-11)

5|SUSHIL REGMI, MBA IV Sem (2009-11)

6|SUSHIL REGMI, MBA IV Sem (2009-11)

7|SUSHIL REGMI, MBA IV Sem (2009-11)

8|SUSHIL REGMI, MBA IV Sem (2009-11)

9|SUSHIL REGMI, MBA IV Sem (2009-11)

I.b. Advantages of Mergers

(1) From the standpoint of shareholders

(2)From the standpoint of managers

(4) Benefits to general public

I.c. Purpose of Mergers & Acquisitions

(2) Revamping production facilities:

(3) Market expansion and strategy:

(4) Financial strength:

Significant Mergers and Acquisitions of the History

I.d. Merger and Acquisition in India

B. Private Sector Banks

Increasing Competition and Efficiency

History of Consolidation in the Indian Banking Sector

Lord Krishna Bank Ltd.

Regulations governing Merger and Acquisition in India

I.g. Future Prospects of M&A in Indian banking Sector

PART-II REVIEW OF LITERATURE

The merged firms performed

PART-III: RESEARCH METHODOLOGY

IV.b. ICICI Ltd. and ICICI Bank Merger

Reason for Merger

Benefit to the Players

Table: - Some Financial Parameters at the time of Merger

Iv.c. Punjab National Bank and New Bank of India Merger

The basic reasons for this merger were as follows:

Table:- Financial Standings of PNB and NBI at time of Merger (1992-93)

IV.d. Oriental Bank of Commerce and Global Trust Bank merger

Pre Merger 84.97 17 28.65 19.58 3.15 3.22 0.41

Post Merger 74.86 11.73 11.42 9.58 2.94 3.12 0.33

Das könnte Ihnen auch gefallen