INTRODUCTION TO MERGER AND ACQUISITION

Mergers A merger occurs when two or more companies combines and the resulting firm maintains the identity of one of the firms. One or more companies may merger with an existing company or they may merge to form a new company. Usually the assets and liabilities of the smaller firms are merged into those of larger firms. Merger may take two forms1. Merger through absorption

2. Merger through consolidation.

Absorption Absorption is a combination of two or more companies into an existing company. All companies except one loose their identity in a merger through absorption.

Consolidation A consolidation is a combination if two or more combines into a new company. In this form of merger all companies are legally dissolved and a new entity is created. In consolidation the acquired company transfers its assets, liabilities and share of the acquiring company for cash or exchange of assets.

Acquisition A fundamental characteristic of merger is that the acquiring company takes over the ownership of other companies and combines their operations with its own operations.

An acquisition may be defined as “an act of acquiring effective control by one company over the assets or management of another company without any combination of companies”.

Takeover A takeover may also be defined as obtaining control over management of a company by another company.

Horizontal merger is a co centric merger.TYPES OF MERGERS Mergers are of many types. Concentric Merger Horizontal merger Horizontal merger is a combination of two or more corporate firms dealing in same lines of business activity. often as competitors offering the same good or service. would be horizontal in nature. Horizontal merger is a business consolidation that occurs between firms who operate in the same space. marketing research. which are added in the process of the existing product or service lines. research and development. Horizontal Merger 2. economies of scale in production. A merger occurring between companies in the same industry. Example A merger between Coca-Cola and the Pepsi beverage division. production process. marketing and management are the motives underlying such mergers. putting an end to price cutting. The goal of a horizontal merger is to . for example. development and management. Mergers can be a distinguished into the following four types:1. vertical Merger 3. Elimination or reduction in competition. Conglomerate Merger 4. as competition tends to be higher and the synergies and potential gains in market share are much greater for merging firms in such an industry. Mergers may be differentiated on the basis of activities. Horizontal mergers are common in industries with fewer firms. which involves combination of two or more business units related to technology.

would be guaranteed a steady stream of business. A vertical merger occurs when two or more firms. Conglomerate Merger Conglomerate merger is the combination of two or more unrelated business units in respect of technology. Because the merging companies' business operations may be very similar. An automobile company joining with a parts supplier would be an example of a vertical merger.create a new. assured supplies and market increasing or creating barriers to entry for potential competition or placing them at a cost disadvantage. in turn. Example A vertical merger joins two companies that may not compete with each other. Most often the logic behind the merger is to increase synergies created by merging firms that would be more efficient operating as one. In . larger organization with more market share. The vertical Mergers chief gains are identified as the lower buying cost of material. there may be opportunities to join certain operations. and reduce costs. Minimization of distribution costs. Vertical Merger Vertical merger is the joining of two or more firms in different stages of production or distribution that are usually separate. operating at different levels within an industry's supply chain. Such a deal would allow the automobile division to obtain better pricing on parts and have better control over the manufacturing process. A merger between two companies producing different goods or services for one specific finished product. production process or market and management. such as manufacturing. merge operations. but exist in the same supply chain. Bank of Mathura with ICIC bank. The parts division.

. A merger between firms that are involved in totally unrelated business activities. the two are quite unique in their competitive structures. If the activities of the segments brought together are so related that there is carry over on specific management functions. manufacturing and personnel.Although both industries serve the transportation needs of their customers. while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions. Such as marketing research. merges with a soft drink firm. financing. Marketing. Example A leading manufacturer of athletic shoes.other words. firms engaged in the different or unrelated activities are combined together. The resulting company is faced with the same competition in each of its two markets after the merger as the individual firms were before the merger. Diversification of risk constitutes the rational for such merger moves. There are two types of conglomerate mergers: pure and mixed. Example If an auto manufacturer and a motorcycle manufacturer merge. Concentric Merger Concentric merger are based on specific management functions where as the conglomerate mergers are based on general management functions. the merger is a concentric one. One example of a conglomerate merger was the merger between the Walt Disney Company and the American Broadcasting Company. Pure conglomerate mergers involve firms with nothing in common.

The company can acquire existing company or companies with requisite infrastructure and skills and grow quickly. In addition such a strategy is often less costly than the alternative of developing the necessary production capability and . The firm may achieve the same objective in a short period of time by merging with an existing firm. Specially. Growth or diversification Companies that desire rapid growth in size or market share or diversification in the range of their products may find that a merger can be used to fulfill the objective instead of going through the tome consuming process of internal growth or diversification.ADVANTAGES OF MERGERS AND ACQUISITIONS Accelerating a company's growth Accelerating a company's growth. Internal growth requires that a company should develop its operating facilities. particularly when its internal growth is constrained due to paucity of resources. for entering in new products/markets. marketing.manufacturing. Enhancing profitability A combination of two or more companies may result in more than average profitability due to cost reduction and efficient utilization of resources. But. Hence. lack or inadequacy of resources and time needed for internal development may constrain a company's pace of growth. research. etc. a company can acquire production facilities as well as other resources from outside through mergers and acquisitions. the company may lack technical skills and may require special marketing skills and a wide distribution network to access different segments of markets.

synergy may also arise from enhanced managerial capabilities. This is because a merger of two companies can bring stability of cash flows which in turn reduces the risk of insolvency and enhances the capacity of the new entity to service a larger amount of debt iii. R&D and market coverage capacity due to the complementarily of resources and skills and a widened horizon of opportunities Merger may result in financial synergy and benefits for the firm in many ways:i. Moreover when a firm expands or extends its product line by acquiring another firm. ii. It refers to benefits other than those related to economies of scale. If a firm that wants to expand operations in existing or new product area can find a suitable going concern. It may avoid many of risks associated with a design. the merged firm is able to borrow at a lower rate of interest. By lowering the financial costs.capacity. it also removes a potential competitor. But apart from operating economies. By eliminating financial constraints By enhancing debt capacity. manufacture the sale of addition or new products. Synergy Implies a situation where the combined firm is more valuable than the sum of the individual combining firms. This is because due to financial stability. Operating economies are one form of synergy benefits. innovativeness. creativity. .

any merger. Risk could be reduced because the assets were already in place and an organization of people knew how to operate them and market their products. Many of the mergers can be financed by cash tender offers to the acquired firm’s shareholders at price substantially above the current market. .Purchase of Assets at Bargain Prices Mergers may be explained by opportunity to acquire assets. personnel or technical expertise. at lower cost than would be incurred if they were purchased or constructed at the current market prices. If the firm cannot hire the management or the technology it needs. If the market price of many socks have been considerably below the replacement cost of the assets they represent. regardless of specific motive for it. Increased Managerial Skills or Technology Occasionally a firm will have good potential that is finds it unable to develop fully because of deficiencies in certain areas of management or an absence of needed product or production technology. it might combine with a compatible firm that has needed managerial. developing mines or buying equipments often have found that the desired assets could be obtained where by heaper by acquiring a firm that already owned and operated that asset. The basic factor underlying this apparently is that inflation in construction costs not fully rejected in stock prices because of high interest rates and limited optimism by stock investors regarding future economic conditions. plant and equipment. the assets can be acquired for less than their current casts of construction. particularly land mineral rights. Even so. expanding firm considering construction plants. should contribute to the maximization of owner’s wealth. Of course.

companies need to stay on top of technological developments and their business applications. Or. a manufacturer can acquire and sell complementary products. a combined firm may eliminate duplicate channels of distribution. a combination of two or more firms may result in cost reduction due to operating economies. a bank buying a stock broker could then sell its banking products to the stock broker's customers. a combined firm may avoid or reduce over-lapping functions and consolidate its management functions such as manufacturing. while the broker can sign up the bank's customers for brokerage accounts. ii. i. iv. Operating economies:-arise because. Economy of scale: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations. Cross-selling: For example. Increased revenue or market share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power (by capturing increased market share) to set prices. lowering the costs of the company relative to the same revenue stream. or introduce an integrated planning and control system iii. By buying a smaller company with unique technologies. or crate a centralized training center. In other words. For example. marketing. a large company can maintain or develop a competitive edge. thus increasing profit margins.Acquiring new technology To stay competitive. . R&D and thus reduce operating costs.

which was established in 1865. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947. By the 1900s. Calcutta was the most active trading port. At that point of time. mainly due to the trade of the British Empire. as procedural has been laid down.MERGERS AND ACQUISITION IN INDIA Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. . The first fully Indian owned bank was the Allahabad Bank. In the companies act. A couple of decades later. in 1906. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. Both these banks are now defunct. the Reserve Bank was nationalized and given broader powers. BEFORE LIBERALISATION In India the companies’ act 1956 and the monopolies and restrictive trade practices act. 1969 are statutes governing mergers among companies. in terms of which the merger can be effectuated. and due to which banking activity took roots there and prospered. the market expanded with the establishment of banks such as Punjab National Bank. Sanction of the company court is essential perquisite for the effectiveness of a scheme of merger. in 1895 in Lahore and Bank of India. in Mumbai both of which were founded under private ownership. This was followed by Bank of Hindustan.

were used to the 4-6-4 method (Borrow at 4%. After the amendments the status does not regulate mergers. People not just demanded more from their banks but also received more. namely. This move. All this led to the retail boom in India. The regulatory provisions in the MRTP act were removed through the 1991 amendments. where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%. ICICI Bank and HDFC Bank. which came to be known as New Generation tech-savvy banks. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment. with a view to giving effect to the new industrial policy of liberalization and deregulation.Go home at 4) of functioning. private banks and foreign banks. which has seen rapid growth with strong contribution from all the three sectors of banks. till this time. The new policy shook the Banking sector in India completely. government banks. Lend at 6%. along with the rapid growth in the economy of India.The other statue regulating mergers was the hitherto monopolies and restrictive trade practices act. aimed at achieving economies of scale for ensuring higher productivity competitiveness. which included banks such as UTI Bank (the first of such new generation banks to be set up). Bankers. . Liberalization In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation and gave licences to a small number of private banks. kick started the banking sector in India.

and Orissa and North east part of the country. A bank’s size should be in the range of 1000 to 1500 branches. Manubhai shah suggested the reduction in the number of existing banks and making the smallest nationalized banks bigger so as to have strong regional character in states of UP. Bihar. Streamlining of the rural and semi urban branches. SBI group should be converted into holing company with 5 zones subsidiaries and 3. 3) The third and fourth set of banks will be trade and industry banks and foreign exchange banks and located at urban and metropolitan centers catering to designate clientele only. James Raj Committee appointed by RBI in June 1997 recommended that:1. N. 250 crores or more. MP. a commission under the chairmanship of Sh. 2) National saving banks which will be located only in urban and metropolitan towns. . 1) There should be district banks having the network of around 300 branches and Rs.Vagul suggested the restructuring on the basis of location and functioning of the bank and recommended four sets of banks in the public sector. 2. Their functions similar to that of commercial banks.Sarrriya Committee In 1972 examined the restructuring of banks in greater depth and recommended that there should be three all India banks and 5 or 6 regional banks plus a network of cooperative or rural banks in the rural areas. In July 1976.

 Rural banks (including RRB’s) whose operations would be confined to the rural areas and whose business would be predominantly engaged in financing of agricultural and allied activities. Mergers of public sector banks should emanate from the managements of banks with the govt. Such mergers however can be worthwhile if they lead to rationalization of workforce and branch network otherwise the mergers of public sector banks would tie down the management with .  Local banks whose operations would be generally confined to a specific region. Narasimhan Committee (1998) The second report of the Narasimhan committee on the banking sector reforms on the structural issues made following recommendations’ “Merger between banks and between banks and DFI’s and NBFC’s need to be based on synergies and locational and business specific complimentary of the concerned institutions and must obviously make sound commercial sense. as the common shareholder playing a supportive role.  8 to 10 national banks with a network of branches throughout the country engaged in universal banking.Narasimhan Committee Report The first report of the Narasimhan committee on the financial system had recommended a broad pattern of the structure of the banking system as under:  3 or 4 larger banks (including the State Bank of India) which could become international in character. The Narasimhan committee was of the view that the move towards this revised system should be market driven and based on profitability considerations and brought about through a process of mergers and acquisitions.

Mergers between strong banks/FIs would make for greater economic and commercial sense and would greater than the sum of its parts and have a force multiplier effect. Mergers should not be seen as a means of bailing out weak banks. It can hence be seen from the recommendations of Narasimhan Committee that mergers of the public sector banks were expected to emanate from the management of the banks with government as common shareholder playing a supportive role. the competitive benefits that would accrue and the scope and potential foe employees’ own professional advancement in a larger institution.operational issues and distract attention from the real issue. Management should initiate discussion with the representatives of staff and would need to convince their employees about the intrinsic soundness of the idea. . It would be necessary to evolve policies aimed at right sizing and redeployment of the surplus staff either by the way of retraining them and giving them appropriate alternate employment or by introducing a VRS with appropriate incentives. This would necessitate the corporation and understanding of the employees and towards this direction.

The issue of bank restructuring assumes significance from the point of view of making Indian banking strong and sound apart its growth and development to become suitable. Throughout the world. This trend of global banking has been marked by twin phenomena of consolidation and convergence. The core objective of restructuring is to maintain long term profitability and strengthen the competitive edge of banking .NEED FOR MERGER AND ACQUISITION The South East Asian crisis and the earlier economic turmoil in several developing nations demonstrated that strong banking system is critical. it is rather difficult to find reasons that could prevent Indian banks from being swallowed by the powerful foreign banks in the long run. under the free for all environments. If we cannot consolidate our size. International evidence also strongly indicates greater gains to banking industries after the restructuring process. there is no difference between domestic and foreign currency. The trend towards convergence is driven by a move across industry to provide most of the financial services under one roof. The trend towards consolidation has been driven by the need to attain meaningful balance sheet size and market share in the face of intensified competition. With the impending capital account convertibility. banking industry has been transformed from highly protected and regulated to competitive and deregulated. Globalization coupled with technological development has shrinked the boundaries. As a result innovations and improvement assumed greatest significance in institutional performance. Indian banking experienced wide ranging reforms in the last decade and these reforms have contributed to a great extent in enhancing their competitiveness. Due to this. Trade has become transactional from international. cross border movement of financial capital would become a reality.

The pace of change in the financial market world over and in the external economic environment. Restructuring can have both internal and external dimensions. V. Throughout the world. banking industry has been transferred from a highly protected and regulated situation to competitive and deregulated. IBA on 28th aug. But it involves the sorting of various issues such as legal. Bank mergers would be the rule rather than exception in times to come and there is a need for banks to check their premises before embanking on their future plans. domestic and foreign currency. Leeladhar. human resource and capital can be reconciled. in which we work. a handful of regional banks which will gradually set to merger and some other players which will get to acquire special niche to serve limited market. Globalization coupled with technological development has shrinked the boundaries. Financial services and products are being provided to the customers across the length and breadth of the globe.business in the context of changes in the fundamental market scenario. Correspondingly innovations and improvements assumed greater significance in institutional performance. We could hence think of a situation where we have 4-5 global players which are really large. procedural etc. There are synergies to be leveraged through consolidation where factors such as size. shows no sign of slowing down. banking and non banking financial services are getting closer. History has improved beyond doubt that strong banking systems are critical for sound economic growth. It is important to improve the comprehensiveness and quality of the banking system to bring efficiency in the performance of the real sector in India. chairman. Commercial banks now have to think “global” to service the requirements of the highly sophisticated multinationals that are increasingly dominated the industrial world. regulatory. 2004. Due to this. technology. spread. This . This is statement of SH.

A bank’s size is really to be determined by the size of its balance sheet. therefore. even through they themselves belong to the public sector. The trend towards consolidation has been driven by the need to attain meaningful balance sheet size and market share in the face of intensified competition. insurance. 2) Competition from new Indian banks. Consolidation of banking industry is critical from several aspects. In order to compete with the new entrants effectively. The trend towards convergence is driven by a move across industry to provide most of the financial service viz. 5) The competencies required from a banker would be sharper information technology and knowledge centric. investment etc. emerging opportunities and deregulation of geographic.trend of global banking has been marked by twin phenomena of consolidation and convergence. Indian commercial banks need to posses matching financial muscle. to the customers in one roof. functional and product restrictions. It may also bring the performance of public sector banks to a remarkable level without variation between banks in public sector. excess capacity. as a fair competition is possible only among the equals. is how to acquire a competitive size. spend considerable time competing themselves without increasing . Mergers and acquisition route provides a quick step forward in this direction offering opportunities to share synergies and reduce the cost of product development and delivery. banking. 3) Disinter mediation and competition resulting into pressure or spread. Different type of banks. The factors inducing mergers and acquisition include technological progress. The question before major commercial banks. assumed critically. 4) Qualitative change in the banking paradigm. The following are the important aspects for staying in the market: 1) Competition from global majors. Size has therefore..

the focus on banks has shifted away from the areas of real productivity. Further in order to make them comparable with their competitors from abroad with regard to the size of their capital and asset base. The present system is not ideal for simultaneously retaining separate identities as well as preserving the very characteristics of competitiveness.. As a result. they would need to be more capitalized. If Indian banks are to be made more effective. The lesson here is to think of consolidation of our efficient banks to build up global scale institutions. even while strengthening their internal operations and systems.commensurate benefits to the system as a whole. Consolidations would also enable us to go for global technologies benefiting the customers and efficiency of our banks. it would be necessary to structure these banks. automated and technology oriented. Merger and acquisitions are considered useful to achieve the requisite size in the short run. Our banks are really small in terms of business size or capital when compared with banks in the west or even China. efficiency and comparable with their counterparts from abroad. .

Another important merger was that between Centurion Bank and Bank of Punjab. inadequacies of resources. Nedungadi Bank Ltd. Some of the past merged banks are Grind lay Bank merged standard charated Bank. viz. important mergers and acquisitions in India in recent years include the merger between IDBI (Industrial Development bank of India) and its own subsidiary IDBI Bank. Merger in India between weak/unviable banks should grow faster so that the weak banks could be rehabilitated providing continuity of employment with the working force. Times Bank with HDFC Bank. Their existence remains under challenge in the absence of keeping pace with growing automation and techniques obsolescence and lack of product innovations.6 billion in Indian currency). In the banking sector. With Punjab National Bank and Global Trust Bank merged with Oriental Bank of Commerce. another merger was HDFC bank and Centurion bank of punjab.MERGER IN INDIAN BANKING SECTOR Mergers and acquisitions encourage banks to gain global reach and better synergy and allow large banks to acquire the stressed assets of weaker banks. faltering marketing efforts and weak financial structure. 7. bank of Madura with ICICI Bank. Worth $82.1 million (Rs. utilization of the assets blocked up in the weak/unviable banks and adding constructively to the prosperity of the nation through increased flow of funds. at times.6 billion in Indian currency). on systemized management pattern. These banks remain. this merger led to the creation of the Centurion Bank of Punjab with 235 branches in different regions of India. Their reorganization through consolidation/merger could . The small and medium sized banks are working under threats from economic environment which is full of problem for them. under threat from large banks. The deal was worth $ 174.6 million (Rs. 3. outdated technology.

strategies. The Banking and finance system will improve competitiveness through a process of consolidation either through mergers and acquisitions or through strategic alliances.J. It is expected that the Indian banking and finance system will be globally competitive. processes. A. automated and technology oriented so as to provide environment more competitive and customer friendly . In order to achieve the INDIAN VISION 2020 as envisaged by Hon’ble president of India Sh. As the entire Indian banking industry is witnessing a paradigm shift in systems. There is every reason to welcome the process of creating globally strong and competitive banks and let big Indian banks create big thunders internationally in the days to come. rather than to pay the way to initiate the banks to come forward on their own record for merger and amalgamation purely with a commercial view and economic consideration.offer succor to re-establish them in viable banks of optimal size with global presence. For this the market players will have to be financially strong and operationally efficient.P. There is need to restructure the banking sector in India through merger and amalgamation in order top makes them more capitalized. Capital would be key factor in the building a successful institution. it would warrant creation of new competencies and capabilities on an on going basis for which an environment of continuous learning would have to be created so as to enhance knowledge and skills.Addul Kalam much requires to be done by banking industry in this regard. Merger and amalgamation in Indian banking so far has been to provide the safeguard and hedging to weak bank against their failure and too at the initiative of RBI.

systems and the procedures followed in two banks may be vastly different. Therefore.RISKS ASSOCIATED WITH MERGER There are several risks associated with consolidation and few of them are as follows: 1) When two banks merge into one then there is an inevitable increase in the size of the organization. The erstwhile structures. personal management at the highest order with humane touch alone can pave the way. forbearance and resilience are required in ample measure to make any merger a success story. The increased size may become a drug rather than an asset. which explains why there are high rate of failures in mergers. a PSU bank or an old generation bank and that of a technologically superior foreign bank. A thorough overhauling and systems analysis has to be done to assimilate both the organizations. 4) The structure. All may not be up to the plan. . systems and procedures may not be conducive in the new milieu. 3) Consolidation mainly comes due to the decision taken at the top. depression and demotivation among the employees. for example. Mergers and acquisitions are sometimes followed by losses and tough intervening periods before the eventual profits pour in. Such a work force can never churn out good results. It is a topheavy decision and willingness of the rank and file of both entities may not be forthcoming. This is a time consuming process and requires lot of cautions approaches to reduce the frictions. 2) Consolidation does not lead to instant results and there is an incubation period before the results arrive. deprivation. This leads to problems of industrial relations. The size may get too widely and go beyond the control of the management. Patience. Big size may not always be better.

there is also a problem of brand projection. Goodwill is often towards a brand and its sub-merger is usually not taken kindly. The shareholder of existing entities has to be given new shares. 6) Further.5) There is a problem of valuation associated with all mergers. Till now a foolproof valuation system for transfer and compensation is yet to emerge. This becomes more complicated when existing brands themselves have a good appeal. Question arises whether the earlier brands should continue to be projected or should they be submerged in favour of a new comprehensive identity. .

it is felt that. While the State Acts specifically provide for merger of co-operative societies registered under them.  The request for merger can emanate from banks registered under the same State Act or from banks registered under the Multi State Co-operative Societies Act (Central Act) for takeover of a bank/s registered under State Act. for sanctioning a scheme of amalgamation or reconstruction. the position with regard to take over of a co-operative bank registered under the State Act by a co-operative bank registered under the CENTRAL  Although there are no specific provisions in the State Acts or the Central Act for the merger of a co-operative society under the State Acts with that under the Central Act. the State Governments have incorporated in their respective Acts a provision for obtaining prior sanction in writing. if all concerned including administrators of the concerned Acts are agreeable to order merger/ amalgamation. RBI may consider proposals on merits leaving the question of compliance with relevant statutes to the . of RBI for an order. 1949 (AACS) does not empower Reserve Bank to formulate a scheme with regard to merger and amalgamation of banks. inter alia. it has been decided to frame guidelines to encourage merger/amalgamation in the sector.  Although the Banking Regulation Act.RBI GUIDELINES ON MERGERS & ACQUISITIONS OF BANKSs  With a view to facilitating consolidation and emergence of strong entities and providing an avenue for non disruptive exit of weak/unviable entities in the banking sector.

In other words.administrators of the Acts. . Reserve Bank will confine its examination only to financial aspects and to the interests of depositors as well as the stability of the financial system while considering such proposals.

the bank boasts of as many as 1412 branches and over 3275 ATMs across India. HDFC and Times became the first two private banks in the New Generation Private Sector Banks to have gone through a merger About Centurion Bank of Punjab Centurion bank of Punjab is a new generation private bank offering a wide spectrum of retail. HDFC Bank witnessed its merger with Times Bank Limited (a private sector bank promoted by Bennett. Coleman & Co. SME and corporate banking products and services. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited'. With this.The bank aims to serve all the banking and financial needs of its customers through multiple delivery channels. Centurion Bank of Punjab has a nationwide reach through its network of 241 branches and 389 ATMs. Amalgamations In 2002. each of which is supported by state of the art technology architecture. it started its operations as a Scheduled Commercial Bank. as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The following year. / Times Group). with its registered office in Mumbai.MERGERS OF HDFC BANK AND CENTURIAN BANK OF PUNJAB HDFC BANK The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. Today. . India. It has been among the earliest banks to offer a technology enabled customer interface that provides easy access and superior customer service.

including leadership positions in two wheeler loans and commercial vehicles loans and a strong capital base. The merger will strengthen HDFC Bank's distribution network in the northern and the southern regions. Centurion Bank of Punjab has close to 170 branches in the north and around 140 branches in the south.4 billion. Centurion Bank of Punjab shareholders will get one share of HDFC Bank for every 29 shares held by them. HDFC Bank will jump to the 7th position among commercial banks from 10th after the merger. both of which had strong retail franchises in their respective markets. HDFC Bank and Centurion Bank of Punjab have agreed to the biggest merger in Indian banking history. the merged entity would become second largest private sector bank. Centurion Bank had a well managed and growing retail assets business. It is likely the beginning of a wave of M&A deals in the financial services industry. Centurion Bank of Punjab has a concentrated presence in the in the Indian states of Punjab and Kerala. The shares of the bank are listed on the major stock exchanges in India and also on the Luxembourg Stock exchange Merger position HDFC Bank Board on 25th February 2008 approved the acquisition of Centurion Bank of Punjab for Rs 9. as India prepares to ease restrictions on bank ownership in 2009. However.510 crore in one of the largest merger in the financial sector in India. This will be HDFC Bank’s second acquisition after Times Bank. The combined entity will have a network of 1148 branches. valued at about $2. HDFC will also acquire a .Centurion Bank of Punjab was formed by the merger of Centurion Bank and Bank of Punjab.

HDFC shareholding falls to will fall from 23. . Rana Talwar. he mentioned that at 40% growth rate there will be no lay-offs. while Bank Muscat's holding will decline to less than 4 per cent from over 14 per cent in Centurion Bank of Punjab. which will be subject to regulatory approvals. There is not much of overlapping of HDFC Bank and Centurion Bank of Punjab customers. The entire process of the merger had taken about four months for completion. The integration of the second rung officials should be smooth as there is hardly any overlap. The move would allow HDFC to maintain the same level of shareholding in the bank. In an interview.strong SME (small and medium enterprises) portfolio from Centurion Bank of Punjab. Integration will be smooth as there is no overlap. “I believe that the merger with HDFC Bank will create a world-class bank in quality and scale and will set the stage to compete with banks both locally as well as on a global level. The merged entity will be known as HDFC Bank. chairman of Centurion Bank of Punjab.” According to HDFC Bank Managing Director and Chief Executive Officer Aditya Puri. Rana Talwar's Sabre Capital would hold less than 1 per cent stake in the merged entity from 3. HDFC Bank will consider making a preferential offer to its parent Housing Development Finance Corp Ltd (HDFC).28 per cent to around 19 per cent in the merged entity. The boards of the two banks had meet on February 28 to consider the draft scheme of amalgamation. says.48 in Centurion Bank of Punjab.

4) HDFC Bank Board on 25th February 2008 approved the acquisition of Centurion Bank of Punjab for Rs 9.HDFC AND CENTURION BANK OF PUNJAB 1) HDFC bank is merged with Centurion Bank of punjab 2) New entity is named as “HDFC bank itself”.510 crore . 3) The merger will strengthen HDFC Bank's distribution network in the northern and the southern regions.HIGHLIGHTS OF THE MERGER.