Merger and Acquisition of HDFC and Cbop

MERGER & ACQUISITION OF HDFC & CBOP
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ACKNOWLEDGEMENT
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MERGER AND ACQUISITION
Mergers and acquisitions (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. An acquisition, also known as a takeover or a buyout, is the buying of one company (the
target!) by another. "he acquisition process is very comple# and various studies shows that only
$%& acquisitions are successful. An acquisition may be friendly or hostile. 'n a friendly takeover a company!s cooperate in negotiations. 'n the hostile takeover, the takeover target is unwilling to be bought or the target(s board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. )ometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. "his is known as a reverse takeover. Although merger and amalgamation mean the same, there is a small difference between the two. 'n a merger one company acquires the other company and the other company ceases to
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e#ist. 'n an amalgamation, two or more companies come together and form a new business entity. Mergers and acquisitions (M&A) and corporate restructuring are a big part of the corporate finance world. *very day, +all )treet investment bankers arrange M&A transactions, which bring separate companies together to form larger ones. +hen they(re not creating big companies from smaller ones, corporate finance deals do the reverse and break up companies through spinoffs, carve,outs or tracking stocks. -ot surprisingly, these actions often make the news. .eals can be worth hundreds of millions, or even billions, of dollars. "hey can dictate the fortunes of the companies involved for years to come. /or a 0*1, leading an M&A can represent the highlight of a whole career. And it is no wonder we hear about so many of these transactions2 they happen all the time. -e#t time you flip open the newspaper!s business section, odds are good that at least one headline will announce some kind of M&A transaction. )ure, M&A deals grab headlines, but what does this all mean to investors3 "o answer this question, this tutorial discusses the forces that drive companies to buy or merge with others, or to split,off or sell parts of their own businesses. 1nce you know the different ways in which these deals are e#ecuted, you(ll have a better idea of whether you should cheer or weep when a company you own buys another company , or is bought by one. 4ou will also be aware of the ta# consequences for companies and for investors. MERGERS - A merger is a combination of two companies into one larger company, which involves stock swap or cash payment to the target.
ACQUISITION - +hen one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.
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GOVERNING LAW
"he 0ompanies Act, 56$7 does not define the term (Merger( or (Amalgamation(. 't deals with schemes of merger8acquisition which are given in s.96%,96: (A(, 96$, 967 and 967 (A(.
CLASSIFICATIONS OF MERGERS
Horizontal m r! r ; is the merger of two companies which are in produce of be again classified into large hori<ontal merger and
)ame products."his can
)mall hori<ontal merger.=ori<ontal merger helps to come over from the competition between two companies merging together strengthens the company to compete with
other companies. =ori<ontal merger between the small companies would not effect the
industry in large. >ut between the larger companies will make an impact on the economy
and gives them the monopoly over the market. =ori<ontal mergers between the two
small companies are common in 'ndia. +hen large companies merging together we
need to look into legislations which prohibit the monopoly. V rti"al m r! r ; 'f a merger between two companies producing different
goods or services for one specific finished product. ?ertical merger takes between the customer and company or a company and a supplier. '- this a manufacture may merge with the distributor or supplier of its products. "his makes other competitors difficult to access to an important component of product or to an important channel of distribution which are called as @vertical foreclosure@ or @bottleneck@ problem. ?ertical merger helps to avoid sales ta#es and other marketing e#penditures. Mar# t- $t n%ion m r! r - is a merger of two companies that deal in same products in different markets. Market e#tension merger helps the companies to have access to the bigger market and bigger client base.
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&ro'("t- $t n%ion m r! r ) takes place between the two or more companies which sells different products but related to the same category. "his type of merger enables the new company to go in for a pooling in of their products so as to serve a common market, which was earlier fragmented among them. "his merger is between two companies that sell different, but somewhat related products, in a common market. "his allows the new, larger company to pool their products and sell them with greater success to the already common market that the two separate companies shared. "he product e#tension merger allows the merging companies to group together their products and get access to a bigger set of consumers. "his ensures that they earn higher profits. Con!lom ration - "wo companies that have no common business areas. A conglomeration is the merger of two companies that have no related products or markets. 'n short, they have no common business ties. 0onglomerate merger in which merging firms are not competitors, but use common or related production processes and8or marketing and distribution channels. 0o generic mergerA Merger between firms in the same general industry but having no Mutual buyer, seller relationship, such as a merger between a bank and a leasing company.
&(r"*a% m r! r% - this kind of merger occurs when one company purchases another. "he purchase is made with cash or through the issue of some kind of debt instrument2 the sale is ta#able. Acquiring companies often prefer this type of merger because it can provide them with a ta# benefit. Acquired assets can be written,up to the actual purchase price, and the difference between the book value and the purchase price of the assets can depreciate annually, reducing ta#es payable by the acquiring company. Con%oli'ation m r! r% - +ith this merger, a brand new company is formed and both companies are bought and combined under the new entity. "he ta# terms are the same as those of a purchase merger. A unique type of merger called a reverse
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merger is used as a way of going public without the e#pense and time required by an 'B1. Accretive mergers are those in which an acquiring company(s earnings per share (*B)) increase. An alternative way of calculating this is if a company with a high price to earnings ratio (B8*) acquires one with a low B8*
RESEARCH METHODOLOG+
O,-ECTIVES
5. "o study the merger and acquisitions in the banking sector. C. "o study the risk involved in merger and acquisition. 9. "o study the benefits of merger and acquisition of =./0 A-. 0>1B.
LIMITATION OF THE STUD+

"he analysis is purely based on the secondary data. )o, any error in the secondary data might also affect the study.
SIGNIFICANCE OF THE STUD+

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"he study which ' have under taken is significant and useful as it has given me an e#perience and knowledge about the recent merger and acquisitions in banking sector and what was its impact on the performance of the company.
DATA COLLECTION
"he data!s which is collected from various secondary sources like internet, Dournals and other publications.
REVIEW OF LITERATURE
1. AN EXAMINATION OF BANK SECTOR
"his article helps to discuss various regulations which are faced by banks in order to enter the merger and acquisition phase. 'n the banking sector, market entry is generally governed by a specific banking regulator .Actual mergers of equals don(t happen very often. Esually, one company will buy another and, as part of the deal(s terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition.
2. CHALLENGES THE INDIAN BANKS FACE

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This article is about the various challenges faced by Indian banking sector. It discussed the position of banks after merger and acquisition. It discusses the challenges such as: interest rates risk, credit risk by private banks. "he first mega merger in the 'ndian banking sector that of the =./0 >ank with "imes >ank, has created an entity which is the largest private sector bank in the country.
3. MOTIVES FOR MERGERS AND ACQUISITIONS IN THE INDIAN BANKING SECTOR - A NOTE ON OPPORTUNITIES & IMPERATIVES
Fecent reports on banking sector often indicate that 'ndia is slowly but surely moving from a regime of (large number of small banks( to (small number of large banks(. "he aim of this paper is to probe into the various motivations for mergers and acquisitions in the 'ndian >anking sector. "hus, literature is reviewed to look into the various motivations behind a banks( merger8 acquisition event. Given the increasing role of the economic power in the turf war of nations, the paper looks at the significant role of the state and the central bank in protecting customer(s interests vis,H,vis creating players of international si<e. +hile, ga<ing at the mergers & acquisitions in the 'ndian >anking )ector both from an opportunity and as imperative perspectives, the paper also glances at the large implications for the nation.
/. MERGERS AND ACQUISITIONS - THE INDIAN ,ANKING SCENARIO

"his article studies M&A activities in the 'ndian banking sector and says that even though the obDective of present bank mergers is to place the weak banks in safe hands, the future mergers will focus more on strategic issues like increasing geographical reach and improving product mi#.
0. M1AS IN THE INDIAN ,ANKING SECTOR - STRATEGIC AND FINANCIAL IM&LICATIONS

Iike all business entities, banks want to safeguard against risks, as well as e#ploit available opportunities indicated by e#isting and e#pected trends. M&As in the banking sector have
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been on the rise in the recent past, both globally and in 'ndia. 'n this backdrop of emerging global and 'ndian trends in the banking sector, this article illuminates the key issues surrounding M&As in this sector with the focus on 'ndia. 't seeks to e#plain the motives behind some M&As that have occurred in 'ndia post,C%%%, analyse the benefits and costs to both parties involved and the consequences for the merged entity. A look at the future of the 'ndian banking sector, and some key recommendations for banks, follow from this analysis.
DISTINCTION ,ETWEEN MERGERS AND ACQUISITIONS

Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. +hen one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. /rom a legal point of view, the target company ceases to e#ist,the buyer @swallows@ the business and the buyer(s stock continues to be traded.
'n the pure sense of the term, a merger happens when two firms, often of about the same si<e, agree to go forward as a single new company rather than remain separately owned and
operated. "his kind of action is more precisely referred to as a @merger of equals.@ >oth companies( stocks are surrendered and new company stock is issued in its place. /or e#ample, both .aimler,>en< and 0hrysler ceased to e#ist when the two firms merged, and a new company, .aimler0hrysler, was created. 'n practice, however, actual mergers of equals don(t happen very often. Esually, one company will buy another and, as part of the deal(s terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it(s technically an acquisition. >eing bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable. A purchase deal will also be called a merger when both 0*1s agree that Doining together is in the best interest of both of their companies. >ut when the deal is unfriendly , that is, when the target company does not want to be purchased , it is always regarded as an acquisition. +hether a purchase is considered a merger or an acquisition really depends on
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whether the purchase is friendly or hostile and how it is announced. 'n other words, the real difference lies in how the purchase is communicated to and received by the target company(s board of directors, employees and shareholders.
MERGERS AND ACQUISITIONS IN INDIA

Merger and acquisitions are on the rise. ?olume of mergers and acquisitions in 'ndia in C%%J are e#pected to grow two fold from C%%7 and four times compared to C%%$. 'ndia has emerged as one of the top countries with respect to merger and acquisition deals. 'n C%%J, the first two months alone accounted for merger and acquisition deals worth K:% billion in 'ndia. "he estimated figures for the entire year proDected a total of more than K 5%% billion worth of mergers and acquisitions in 'ndia. "his is twofold growth from C%%7 and a growth of almost four times from C%%$.
MERGERS AND ACQUISITIONS IN DIFFERENT SECTORS IN INDIA

)ector wise, large volumes of mergers and mergers and acquisitions in 'ndia have occurred in finance, telecom, /M0G, construction materials, automotives and metals. 'n C%%$ finance topped the list with C%& of total value of mergers and acquisitions in 'ndia taking place in this sector. "elecom accounted for 57&, while /M0G and construction materials accounted for 59& and 5%& respectively. 'n the banking sector, important mergers and acquisitions in 'ndia in recent years include the merger between '.>' ('ndustrial .evelopment bank of 'ndia) and its own subsidiary '.>' >ank. "he deal was worth K 5J:.7 million (Fs. J.7 billion in 'ndian currency). Another important merger was that between 0enturion >ank and >ank of BunDab. +orth KLC.5 million (Fs. 9.7 billion in 'ndian currency), this merger led to the creation of the 0enturion >ank of BunDab with C9$ branches in different regions of 'ndia. 'n the telecom sector, an increase of stakes by )ing"el from C7.67 & to 9C.L & in >harti "elecom was worth KC$C million (Fs. 5%.6 billion in 'ndian currency). 'n the /oods and
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/M0G sector a controlling stake of )haw +allace and 0ompany was acquired by Enited >reweries Group owned by ?iDay Mallya. "his deal was worth K9J5.7 million (Fs. 57.C billion in 'ndian currency). Another important one in this sector, worth K:L.C million (Fs C.5 billion in 'ndian currency) was the acquisition of 6%& stake in +illiamson "ea Assam by McIeod Fussell 'ndia 'n construction materials 7J & stake in AmbuDa 0ement 'ndia Itd was acquired by =olmic, a )wiss company for K79:.6 million (Fs CJ.9 billion in 'ndian currency).
HDFC >ank a"2(ir ' C nt(rion ,an# o3 &(n4a5
HDFC ,ANK OVERVIEW
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=./0 >ank Itd is a maDor 'ndian financial services company based in 'ndia, incorporated in August 566:, after the Feserve >ank of 'ndia allowed establishing private sector banks. "he >ank was promoted by the =ousing .evelopment /inance 0orporation, a premier housing finance company (set up in 56JJ) of 'ndia. =./0 >ank has 5,JC$ branches and over :,C9C A"Ms, in JJ6 cities in 'ndia, and all branches of the bank are linked on an online real,time basis. As of 9% )eptember C%%L the bank had total assets of Fs.5%%7.LC billion. /or the fiscal year C%%L,%6, the bank has reported net profit of C,C::.6 crore (E)K $%6.$6 million), up :5& from the previous fiscal. "otal annual earnings of the bank increased by $L& reaching at 56,7CC.L crore (E)K :.:$ billion) in C%%L,%6.
HISTOR+ OF HDFC ,ANK
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=./0 >ank was incorporated in 566: by =ousing .evelopment /inance 0orporation Iimited (=./0), 'ndia(s largest housing finance company. 't was among the first companies to receive an (in principle( approval from the Feserve >ank of 'ndia (F>') to set up a bank in the private sector. "he >ank started operations as a scheduled commercial bank in Manuary 566$ under the F>'(s liberalisation policies. "imes >ank Iimited (owned by >ennett, 0oleman & 0o. 8 "imes Group) was merged with =./0 >ank Itd., in C%%%. "his was the first merger of two private banks in 'ndia. )hareholders of "imes >ank received 5 share of =./0 >ank for every $.J$ shares of "imes >ank. 'n C%%L =./0 >ank acquired 0enturion >ank of BunDab taking its total branches to more than 5,%%%. "he amalgamated bank emerged with a base of about Fs. 5,CC,%%% crore and net advances of about Fs.L6,%%% crore. "he balance sheet si<e of the combined entity is more than Fs. 5,79,%%% crore.
,USINESS FOCUS =./0 >ank deals with three key business segments , W*ol %al ,an#in! S r7i" %8 R tail ,an#in! S r7i" %8 Tr a%(r9. 't has entered the banking consortia of over $% corporates for providing working capital finance, trade services, corporate finance and merchant banking. 't is also providing sophisticated product structures in areas of foreign e#change and derivatives, money markets and debt trading and equity research. WHOLESALE ,ANKING SERVICES "he >ank(s target market ranges from large, blue,chip manufacturing companies in the 'ndian corp to small & mid,si<ed corporates and agri,based businesses. /or these customers, the >ank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. "he bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management
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for its corporate customers. =./0 >ank has made significant inroads into the banking consortia of a number of leading 'ndian corporates including multinationals, companies from the domestic business houses and prime public sector companies. 't is recogni<ed as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock e#change members and banks. RETAIL ,ANKING SERVICES "he obDective of the Fetail >ank is to provide its target market customers a full range of financial products and banking services, giving the customer a one,stop window for all his8her banking requirements. "he products are backed by world,class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like A"Ms, Bhone >anking, -et>anking and Mobile >anking.NN OO=./0 >ank was the first bank in 'ndia to launch an 'nternational .ebit 0ard in association with ?')A (?')A *lectron) and issues the Mastercard Maestro debit card as well. "he >ank launched its credit card business in late C%%5. >y March C%%6, the bank had a total card base (debit and credit cards) of over 59 million. "he >ank is also one of the leading players in the Pmerchant acquiringQ business with over J%,%%% Boint,of,sale (B1)) terminals for debit 8 credit cards acceptance at merchant establishments.NN "he >ank is well positioned as a leader in various net based >C0 opportunities including a wide range of internet banking services for /i#ed .eposits, Ioans, >ill Bayments, etc. TREASUR+ +ithin this business, the bank has three main product areas , /oreign *#change and .erivatives, Iocal 0urrency Money Market & .ebt )ecurities, and *quities. "hese services are provided through the bank(s "reasury team. "o comply with statutory reserve requirements, the bank is required to hold C$& of its deposits in government securities. "he "reasury business is responsible for managing the returns and market risk on this investment portfolio.
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MERGER AND ACQUISITION OF HDFC AND C,O&
CENTURION BANK OF PUNJAB

"he C nt(rion ,an# o3 &(n4a5 (formerly C nt(rion ,an#) was an 'ndian private,sector bank that provided retail and corporate banking services. 't operated on a strong nationwide franchise of :%9 branches and had over $,%%% employees. "he >ank(s shares were listed on the maDor 'ndian stock e#changesand on the Iu#embourg )tock *#change. 1n C9 May C%%L =./0 >ank acquired 0enturion >ank of BunDab.
MERGER 1 ACQUISITION OF HDFC AND C,O&
566: 0enturion >ank was incorporated on 9% Mune 566: and received its certificate of 0ommencement of >usiness on C% Muly. 't was a Doint venture between C%th 0entury /inance 0orporation and its associates and Reppel Group of )ingapore through
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Rephinance 'nvestment (Mauritius). 0enturion had a network of ten branches, which grew to C6 branches the ne#t year.

566$ 0enturion >ank amalgamated C%th 0entury /inance 0orporation. C%%$ 1n C6 Mune C%%$, the >oards of .irectors of 0enturion >ank and >ank of BunDab agreed to a merger of the two banks. "he combined bank took as its name C nt(rion ,an# o3 &(n4a5. >ank of BunDab had been founded in 566$.
C%%7 0enturion >ank of BunDab acquired Rochi,based Iord Rrishna >ank. Iord Rrishna >ank had been established at Rodungallur in "hrissur .istrict,Rerala in 56:%. .uring the 567%(s, Iord Rrishna acquired three commercial banksA "hiyya >ank, Mosna >ank and Rerala Enion >ank.
C%%L =./0 >ank acquired 0enturion >ank of BunDab.
"he swap ratio is e#pected to be around 5AC$,9%,Q said a banking source. "he merger will make =./0 >ank the country!s seventh largest bank after >ank of 'ndia (>o') and ahead of '.>' >ank, from the current 5%th position. "he merger talks between the two banks began in Manuary C%%L after the principal shareholders of 0>oB ; >ank Muscat with 5:.%C per cent stake, )abre 0apital with 9.:L per cent stake and Rephinance 'nvestment (Mauritius) with 7.59 per cent S decided to e#it.
Procedure of Bank Merger
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"he procedure for merger either voluntary or otherwise is outlined in the respective state statutes8 the >anking regulation Act. "he Fegistrars, being the authorities vested with the responsibility of administering the Acts, will be ensuring that the due process prescribed in the )tatutes has been complied with before they seek the approval of the F>'. "hey would also be ensuring compliance with the statutory procedures for notifying the amalgamation after obtaining the sanction of the F>'. >efore deciding on the merger, the authori<ed officials of the acquiring bank and the
merging bank sit together and discuss the procedural modalities and financial terms. After the conclusion of the discussions, a scheme is prepared incorporating therein the all the details of both the banks and the area terms and conditions.
1nce the scheme is finali<ed, it is tabled in the meeting of >oard of directors of
respective banks. "he board discusses the scheme thread bare and accords its approval if the proposal is found to be financially viable and beneficial in long run. After the >oard approval of the merger proposal, an e#tra ordinary general meeting of
the shareholders of the respective banks is convened to discuss the proposal and seek their approval. After the board approval of the merger proposal, a registered valuer is appointed to
valuate both the banks. "he valuer valuates the banks on the basis of its share capital,market capital, assets and liabilities, its reach and anticipated growth and sends its report to the respective banks. 1nce the valuation is accepted by the respective banks , they send the proposal along
with all relevant documents such as >oard approval, shareholders approval, valuation report etc to Feserve >ank of 'ndia and other regulatory bodies such )ecurity & e#change board of 'ndia ()*>') for their approval. After obtaining approvals from all the concerned institutions, authori<ed officials of
both the banks sit together and discuss and finali<e share allocation proportion by the
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acquiring bank to the shareholders of the merging bank ()+AB ratio) After completion of the above procedures , a merger and acquisition agreement is
signed by the bank.
HR I%%( % in M r! r% 1 A"2(i%ition%
Beople issues like staffing decision, organi<ational design, etc., are most sensitive issues in case of M&A negotiations, but it has been found that these issues are often being overlooked. >efore the new organi<ation is formed, goals are established, efficiencies proDected and opportunities appraised as staff, technology, products, services and know,how are combined. >ut what happens to the employees of the two companies3 =ow will they adDust to the new corporate environment3 +ill some choose to leave3 +hen a merger is announced, company employees become concerned about Dob security and rumors start flying creating an atmosphere of confusion, and uncertainty about change. Foles, behaviors and attitudes of managers affect employees( adDustment to M&A. Multiple waves of an#iety and culture clashes are most common causes of merger failure. =F plays an important role in anticipating and reducing the impact of these cultural clashes.
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Iack of communication leads to suspicion, demorali<ation, loss of key personnel and business even before the contract has been signed. Gaining emotional and intellectual buy,in from the staff is not easy, and so the employees need to know why merger is happening so that they can work out options for themselves. MaDor stress on the accompany merger activity areA , T Bower status and prestige changes T Ioss of identity T Encertainty Enequal compensation may become issue of contention among new co,workers.
HIGHLIGHT THE MERGER- HDFC AND CENTURION ,ANK OF &UN-A,

5) =./0 bank is merged with 0enturion >ank of punDab C) -ew entity is named as P=./0 bank itselfQ. 9) "he merger will strengthen =./0 >ank(s distribution network in the northern and the southern regions.
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:) HDFC ,an# ,oar' on :0t* F 5r(ar9 :;;< approved the acquisition of 0enturion >ank of BunDab (0>oB) for R% =80>; "ror .
,ENEFITS FROM THIS DEAL

"he corporate world is a place where only the vigilant, the sharp and the spontaneous can e#plore their way up the ladder, while the remaining admire or envy the success of the former . =ere, every second tests the mental acumen of the professionals by putting them into various odd situations which demand spontaneous, impromptu decisions to be crafted, keeping a long,term perspective in sight. "he e#pected merger of the =./0 >ank with the 0enturion >ank of BunDab (0>oB) is believed to broaden the scope and reach of =./0 by crediting to its already well, distributed network. "he =./0 >ank, which currently spans 'ndia with its chain of J:7 branches, will add to itself 96: branches of the 0>oB to itself, to make its network bigger and stronger. "he merger talks between the two banks began in Manuary C%%L, after the principal shareholders of 0>oB ; >ank Muscat with 5:.%C per cent stake, )abre 0apital with 9.:L per cent stake and the Rephinance 'nvestment (Mauritius) with 7.59 per cent stake decided to move away from this partnership. "he =./0 >ank is further e#pected to pay Fs 5%% billion to Fs 5C% billion in shares for acquiring the 0>oB. 'n what claims to be the largest ever private bank merger, the share swap ratio stands at 5AC6, that is every shareholder of 0>oB will get one share of =./0 >ank for every C6 shares of 0>oB owned. "hough this ratio is believed to have been worked out after rigorous discussions among the >oard of .irectors of both the banks, it has failed to receive a positive reaction from the 0>oB shareholders. 't has come as a yet another setback for them after a volatile period witnessing a decline in 0>oB shares and an unstable management. "he =./0 >ank which presently enDoys the 5%th position in the list of largest banks in 'ndia on the basis of assets, and with this merger, will now witness a Dump to the Jth position. At the same time, the current stake of =./0 in the 0>oB, which is C9.9L& is proDected to fall to about 56& on completion of the deal.Another important concern that rises with such mergers is the question of blending the two distinct and diverse
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styles of functioning and ensuring a smooth transition to a new work culture, absorbing the strengths of both the merging companies. 't is a meticulous task to ensure that the fundamental ways of working and the ideology of the two companies supplement the growth of each other rather than leaving any one of the potential organi<ations obsolete. "his merger has come after a series of activities marking an eventful past for 0>oB, which include acquiring the Iord Rrishna >ank and the >ank of BunDab. As the 0>oB stands at a new dawn, we wish it brings some reason to reDoice for the shareholders that have stood through its history of highs and lows.
*//*0" 1/ M*FG*F A-. A0UE')'"'1- 1/ =./0 A-. 0>1B

=./0 >ank(s ability to grow at over 9% per cent annually in the last nine years, along with superior credit risk management practices, which have helped it maintain asset quality, would ensure that it will be among the least affected in a slowdown.
"he bank(s focus on technology and superior margins with support from low,cost deposits will ensure profitable growth in the future. "he merger of retail focused,0enturion >ank of BunDab (0>1B) with =./0 >ank OGet UuoteN effective May C9, C%%L, will shore up revenues in the medium,term. =owever, the synergies from the merger with start reflecting over 5C,C: months, and boost profitability. But together, the gains from organic and inorganic initiatives will help the bank sustain growth rates in e#cess of its historical average of C6,9% per cent, and in a profitable manner.
&OST-MERGER
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"he inherent synergies of =./0 >ank and 0>1B in their retail focus was the driver for the merger, which added around :%% branches to =./0 >anks( branch strength of J7% (as on March C%%L) along with a 5$,C% per cent increase in the asset base to more than Fs 5.J lakh crore. +hile the merger has helped increase the si<e of =./0 >ank, it has also led to some pressure on key ratios (see Merger *ffects) for the combined entity2 0>oB ratios were lower than that of =./0 >ank. "he ne#t pertinent question is the pace of integration, and how fast =./0 >ank can ramp up efficiency levels of 0>1B to its own benchmarks. "he integration plan is on schedule. "he re,branding of 0>1B was completed in May itself2 training processes to assign all the employees of 0>1B in their new roles is marching ahead with almost 6% per cent of the people retrained. +ith regards the systems, treasury, wholesale banking and retail loan segments, they have already been integrated with =./0(s platform, while the overall retail banking is e#pected to be completed in the ne#t two months.
MERGER EFFECTS
Fs crore Net Int. Income Other Income Net Profit Cost/income ( ! NI" ( ! C#$# ( ! Net NP# ( ! C#% ( ! 0>1B TT 6 Mths 505 459 123 63.0 3.6 24.5 1.7 11.5 =./0 >ankTT 6 Mths 3,586 1,734 1,119 49.7 4.3 50.9 0.4 13.8 )tandalone /4 %L 5,228 2,283 1,590 49.9 4.4 55 0.5 13.6 Bost,merger =5 /4%6 3,590 1,237 992 55.4 4.2 44.0 0.6 11.4
"he actual benefits will start to filter in the ne#t 5C,C: months, with improved productivity in terms of net revenue (net interest income and other income) and 0A)A (the ratio of low cost deposits to total deposits) growth of 0>oB branches on par with =./0 outlets. >ut before that to happen, =./0 bank will have to shoulder the pressure in the medium,term.
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/or instance, on the efficiency front, the cost to income ratio has also increased from $% per cent in March, C%%L to around $$ per cent in UC /4%6 on the back of higher employee costs and integration costs, post the merger. "he integration of the two banks( technology,based platforms is e#pected to be completed by the end of this fiscal, and will improve the cost efficiencies going forward. Iikewise, the capital adequacy ratio (0AF) dropped to 55.: per cent in UC /4%62 this can partially be attributed to the merger blues and also organic growth of loan book. =owever, it is comfortably above the regulatory requirement of 6 per cent. -otably, 0AF will improve and provide capital for future growth, if the promoters e#ercise their right to convert warrants and infuse Fs 9,$%% crore (warrants already issued, conversion price of Fs 5,$%% per share, deadline is .ecember C%%6).
,i5lio!ra?*9
>ooksA 5. Merger and acquisition A, 0.=.FaDeshwar
Page 24

Baper "he *conomics times +*> www.wikipedia8acquisition.com
&&&.sm'rtm'n'(ementon)ine.com/"'('*ines/#rtic)es/"er(ers 20'n+ 20#c,-isitions/IP"#0025.htm
International Review of Business Research Papers Vol. 4 No.1 January 2008 httpA88www.rediff.com8money8C%%$8feb85Jguest.htm www.smartmanagementonline.com8Maga<ines8Articles8Mergers&C%and &C%Acquisitions8'BMA%%C$.htm httpA88teDas,iimb.org8articles8%5.php
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MERGER & ACQUISITION OF HDFC & CBOP