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Chapter 1

1.1 Introduction
1.2 What is Merger?
1.3 What is Acquisition?
1.4 Purpose of Merger and Acquisition
1.5 Types of Merger
1.6 Advantages of Merger

1.1 INTRODUCTION
We have been learning about the companies coming together to from
another company and companies taking over the existing companies to expand
their business. With recession taking toll of many Indian businesses and the
feeling of insecurity surging over our businessmen, it is not surprising when we
hear about the immense numbers of corporate restructurings taking place,
especially in the last couple of years. Several companies have been taken over
and several have undergone internal restructuring, whereas certain companies in
the same field of business have found it beneficial to merge together into one
company. In this context, it would be essential for us to understand what
corporate restructuring and mergers and acquisitions are all about.
All our daily newspapers are filled with cases of mergers, acquisitions,
spin-offs, tender offers, & other forms of corporate restructuring. 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 stamp duty and last but not the least also on
the employees of the Transferor or Transferee Company.

1.2 WHAT IS 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.

1.3 WHAT IS ACQUISITION


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.
Takeover: 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.

De-merger or corporate splits or division: De-merger or split or divisions of a


company are the synonymous terms signifying a movement in the company.
1.4 PURPOSE OF MERGERS & ACQUISITIONS
The purpose for an offered 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:
To safeguard the source of supplies of raw materials or intermediary
product;
To obtain economies of purchase in the form of discount, savings in
transportation costs, overhead costs in buying department, etc.;
To share the benefits of suppliers economies by standardizing the
materials.
(2) Revamping production facilities:
To achieve economies of scale by amalgamating production facilities
through more intensive utilization of plant and resources;
To standardize product specifications, improvement of quality of product,
expanding
Market and aiming at consumers satisfaction through strengthening after
sale Services;

To obtain improved production technology and know-how from the


offered company
To reduce cost, improve quality and produce competitive products to
retain and Improve market share.
(3) Market expansion and strategy:
To eliminate competition and protect existing market;
To obtain a new market outlets in possession of the offeree;
To obtain new product for diversification or substitution of existing
products and to enhance the product range;
Strengthening retain outlets and sale the goods to rationalize distribution;
To reduce advertising cost and improve public image of the offeree
company;
Strategic control of patents and copyrights.
(4) Financial strength:
To improve liquidity and have direct access to cash resource;
To dispose of surplus and outdated assets for cash out of combined
enterprise;
To enhance gearing capacity, borrow on better strength and the greater
assets backing;
To avail tax benefits;
To improve EPS (Earning Per Share).
(5) General gains:
To improve its own image and attract superior managerial talents to
manage its affairs;
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To offer better satisfaction to consumers or users of the product.

(6) Own developmental plans:


The purpose of acquisition is backed by the offeror companys own
developmental plans. A company thinks in terms of acquiring the other
company only when it has arrived at its own development plan to expand its
operation having examined its own internal strength where it might not have
any problem of taxation, accounting, valuation, etc. But might feel resource
constraints with limitations of funds and lack of skill managerial personnels. It
has to aim at suitable combination where it could have opportunities to
supplement its funds by issuance of securities, secure additional financial
facilities, eliminate competition and strengthen its market position.
(7) Strategic purpose:
The Acquirer Company view the merger to achieve strategic objectives
through alternative type of combinations which may be horizontal, vertical,
product expansion, market extensional or other specified unrelated objectives
depending upon the corporate strategies. Thus, various types of combinations
distinct with each other in nature are adopted to pursue this objective like
vertical or horizontal combination.
(8) Corporate friendliness:
Although it is rare but it is true that business houses exhibit degrees of
cooperative spirit despite competitiveness in providing rescues to each other
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from hostile takeovers and cultivate situations of collaborations sharing


goodwill of each other to achieve performance heights through business
combinations. The combining corporate aim at circular combinations by
pursuing this objective.

1.5 TYPES OF MERGERS


Merger or acquisition depends upon the purpose of the offeror company it
wants to achieve. Based on the offerors objectives profile, combinations could
be vertical, horizontal, circular and conglomeratic as precisely described below
with reference to the purpose in view of the offeror company.
(A) Vertical combination: A company would like to takeover another company
or seek its merger with that company to expand espousing backward integration
to assimilate the resources of supply and forward integration towards market
outlets. The acquiring company through merger of another unit attempts on
reduction of inventories of raw material and finished goods, implements its
production plans as per the objectives and economizes on working capital
investments. In other words, in vertical combinations, the merging undertaking
would be either a supplier or a buyer using its product as intermediary material
for final production. The following main benefits accrue from the vertical
combination to the acquirer company i.e. -- It gains a strong position because of
imperfect market of the intermediary products, scarcity of resources and
purchased products; -- Has control over products specifications.
(B) Horizontal combination:
It is a merger of two competing firms which are at the same stage of
industrial process. The acquiring firm belongs to the same industry as the target
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company. The mail purpose of such mergers is to obtain economies of scale in


production by eliminating duplication of facilities and the operations and
broadening the product line, reduction in investment in working capital,
elimination in competition concentration in product, reduction in advertising
costs, increase in market segments and exercise better control on market.
(C) Circular combination:
Companies producing distinct products seek amalgamation to share
common distribution and research facilities to obtain economies by elimination
of cost on duplication and promoting market enlargement. The acquiring
company obtains benefits in the form of economies of resource sharing and
diversification.
(D) Conglomerate combination:
It is amalgamation of two companies engaged in unrelated industries like
DCM and Modi Industries. The basic purpose of such amalgamations remains
utilization of financial resources and enlarges debt capacity through reorganizing their financial structure so as to service the shareholders by increased
leveraging and EPS, lowering average cost of capital and thereby raising present
worth of the outstanding shares. Merger enhances the overall stability of the
acquirer company and creates balance in the companys total portfolio of
diverse products and production processes.

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1.6 ADVANTAGES OF MERGERS

Mergers and takeovers are permanent form of combinations which vest


in management complete control and provide centralized administration
which are not available in combinations of holding company and its partly
owned subsidiary. Shareholders in the selling company gain from the merger
and takeovers as the premium offered to induce acceptance of the merger or
takeover offers much more price than the book value of shares. Shareholders
in the buying company gain in the long run with the growth of the company
not only due to synergy but also due to boots trapping earnings.
Mergers and acquisitions are caused with the support of shareholders,
managers ad promoters of the combing companies. The factors, which
motivate the shareholders and managers to lend support to these
combinations and the resultant consequences they have to bear, are briefly
noted below based on the research work by various scholars globally.
(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
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Realization of monopoly profits;


Economies of scales;
Diversification of product line;
Acquisition of human assets and other resources not available
otherwise;
(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


Impact of mergers on general public could be viewed as aspect of benefits
and costs to:
(a) Consumer of the product or services;
(b) Workers of the companies under combination;
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(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
favour 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.

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(c) General public


Mergers result into centralized concentration of power. Economic power is to
be understood as the ability to control prices and industries output as
monopolists. Such monopolists affect social and political environment to tilt
everything in their favour to maintain their power ad expand their business
empire. These advances result into economic exploitation. But in a free
economy a monopolist does not stay for a longer period as other companies
enter into the field to reap the benefits of higher prices set in by the monopolist.
This enforces competition in the market as consumers are free to substitute the
alternative products. Therefore, it is difficult to generalize that mergers affect
the welfare of general public adversely or favorably. Every merger of two or
more companies has to be viewed from different angles in the business practices
which protects the interest of the shareholders in the merging company and also
serves the national purpose to add to the welfare of the employees, consumers
and does not create hindrance in administration of the Government polices.

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Chapter 2

2.1 Change In Scenario Of Banking Sector


2.2 The Banking Scenario has been changing at fast pace.
2.3 Procedure Of Mergers & Acquisitions
2.4 RBI Guidelines On Mergers & Acquisitions Of Banks
2.5 Information & Documents To Be Furnished by the acquirer of banks

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2.1 Change in scenario of Banking Sector


1. The first mega merger in the Indian banking sector that of the HDFC Bank
with Times Bank, has created an entity which is the largest private sector
bank in the country.
2. The merger of the city bank with Travelers Group and the merger of Bank of
America with Nation Bank have triggered the mergers and acquisition
market in the banking sector world wide.
3. Europe and Japan are also on their way to restructure their financial sector
thought merger and acquisitions. Merger will help banks with added money
power, extended geographical reach with diversified branch Network,
improved product mix, and economies of scale of operations. Merger will
also help banks to reduced them borrowing cost and to spread total risk
associated with the individual banks over the combined entity. Revenues of
the combine entity are likely to shoot up due to more effective allocation of
bank funds. ICICI Bank has initiated merger talks with Centurian Bank but
due to difference arising over swap ration the merger didnt materialized.
Now UTI Bank is egeing Centurian Bank. The proposed merger of UTI
Bank and Centurian Bank will make them third largest private banks in
terms of size and market Capitalization State Bank of India has also planned
to merge seven of its associates or part of its long-term policies to regroup
and consolidate its position. Some of the Indian Financial Sector players are
already on their way for mergers to strengthen their existing base.

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4. In India mergers especially of the PSBS may be subject to technology and


trade union related problem. Management of efficiency, cost reduction,
tough competition from the market players and strengthing of the capital
base of the banks are some of the problem which can be faced by the merge
entities. Mergers for private sector banks will be much smoother and easier
as again that of PSBS.
2.2 THE BANKING SCENARIO HAS BEEN CHANGING AT FAST
PACE.
Bank traditionally just borrower and lenders, has started providing
complete corporate and retail financial services to its customers
1. Technology drive has benefited the customers in terms of faster improve
convenient banking services and Varity of financial products to suit their
requirement. Atms, Phone Banking, Net banking, Any time and Any where
banking are the services which bank have started offering following the
changing trend in sectors. In plastic money segment customer have also got a
new option of debits cards against the earlier popular credit card. Earlier
customers had to conduct their banking transaction within the restricted time
frame of banking hours. Now banking hours are extended.
2. Atms ,Phone banking and Net banking had enable the customer to transact as
per their convince customer can now without money at any time and from
any branch across country as certain their account transaction, order
statements of their account and give instruction using the tally banking or on
online banking services.
3. Bank traditionally involve working capital financing have started offering
consumer loans and housing loans. Some of the banks have started offering
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travel loans, as well as many banks have started capitalizing on recent capital
market boom by providing IPO finance to the investors.

2.3 Procedure of Mergers & Acquisitions

1. Public announcement: To make a public announcement an acquirer shall


follow the following procedure:
2. Appointment of merchant banker: The acquirer shall appoint a merchant
banker registered as category I with SEBI to advise him on the
acquisition and to make a public announcement of offer on his behalf.

3. Use of media for announcement: Public announcement shall be made at


least in one national English daily one Hindi daily and one regional
language daily newspaper of that place where the shares of that company
are listed and traded.

4. Timings of announcement: Public announcement should be made within


four days of finalization of negotiations or entering into any agreement or
memorandum of understanding to acquire the shares or the voting rights.
5. Contents of announcement: Public announcement of offer is mandatory
as required under the SEBI Regulations.

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Procedure of Bank Merger

The procedure for merger either voluntary or otherwise is outlined in the


respective state statutes/ the Banking regulation Act. The Registrars,
being the authorities vested with the responsibility of administering the
Acts, will be ensuring that the due process prescribed in the Statutes has
been complied with before they seek the approval of the RBI. They
would also be ensuring compliance with the statutory procedures for
notifying the amalgamation after obtaining the sanction of the RBI.

Before deciding on the merger, the authorized 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.

Once the scheme is finalized, it is tabled in the meeting of Board of


directors of respective banks. The board discusses the scheme thread bare
and accords its approval if the proposal is found to be financially viable
and beneficial in long run.

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After the Board approval of the merger proposal, an extra 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. The 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.

Once the valuation is accepted by the respective banks , they send the
proposal along with all relevant documents such as Board approval,
shareholders approval, valuation report etc to Reserve Bank of India and
other regulatory bodies such Security & exchange board of India SEBI
for their approval.

After obtaining approvals from all the concerned institutions, authorized


officials of both the banks sit together and discuss and finalize share
allocation proportion by the acquiring bank to the shareholders of the
merging bank SWAP ratio

After completion of the above procedures , a merger and acquisition


agreement is signed by the bank

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2.4 RBI Guidelines on Mergers & Acquisitions of Banks

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, it has been decided to frame guidelines to
encourage merger/amalgamation in the sector.
Although the Banking Regulation Act, 1949 (AACS) does not empower
Reserve Bank to formulate a scheme with regard to merger and
amalgamation of banks, the State Governments have incorporated in their
respective Acts a provision for obtaining prior sanction in writing, of RBI
for an order, inter alia, for sanctioning a scheme of amalgamation or
reconstruction.
The request for merger can emanate from banks registered under the
same State Act or from banks registered under the Multi State Cooperative Societies Act (Central Act) for takeover of a bank/s registered
under State Act.
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, it is felt that, if all concerned including
administrators of the concerned Acts are agreeable to order merger/
amalgamation, RBI may consider proposals on merits leaving the
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question of compliance with relevant statutes to the administrators of the


Acts. In other words, 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.

2.5 Information & Documents to be furnished by the acquirer of banks


1. Draft scheme of amalgamation as approved by the Board of Directors
of the acquirer bank.
2. Copies of the reports of the valuers appointed for the determination of
realizable value of assets of the acquired bank.
3. Information which is considered relevant for the consideration of the
scheme of merger including in particular: Annual reports of each of the Banks for each of the three completed
financial years immediately preceding the proposed date for merger.
Financial results, if any, published by each of the Banks for any period
subsequent to the financial statements prepared for the financial year
immediately preceding the proposed date of merger.
Pro-forma combined balance sheet of the acquiring bank as it will appear
consequent on the merger.
Information certified by the values as is considered relevant to understand
the net realizable value of assets of the acquired bank including in
particular:A. The method of valuation used by the values
B. The information and documents on which the values have relied and the
extent of the verification, if any, made by the values to test the accuracy of
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such information
C. If the values have relied upon projected information, the names and
designations of the persons who have provided such information and the
extent of verification, if any, made by the values in relation to such
information
D. Details of the projected information on which the values have relied
E. Detailed computation of the realizable value of assets of the acquired
bank.
Chapter 3 COMPANY PROFILE
3.1 Kotak Mahindra Bank
3.2 ING Vysya Bank

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Company Profile: KOTAK BANK & ING VYSYA BANK

Type

Public company

Traded as

BSE: 500247

Industry

Banking, Financial service

Founded

1985 (as Kotak Mahindra Finance Ltd)

Headquarters

Mumbai, India

Products

Uday Kotak (Founder & Executive Vice Chairman)


Deposit accounts, Loans,Investment services, Business banking solutions,

NSE: KOTAKBANK

Treasury and Fixed income products etc.

Number of

29,000 (before merger with ING Vysya) (2015)

employees
Website

www.kotak.com

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Kotak Mahindra Bank is an Indian private sector banking headquartered


inMumbai, Maharashtra, India. In February 2003, Reserve Bank of India (RBI)
gave the licence to Kotak Mahindra Finance Ltd., the group's flagship company,
to carry on banking business.
It offers a wide range of banking products and financial services for corporate
and retail customers through a variety of delivery channels and specialized
subsidiaries in the areas of personal finance, investment banking, life insurance,
and wealth management.
As of 30 September 2014, Kotak Mahindra Bank has a network of 641 branches
and over 1,159 ATMs spread across 363 locations in the country. Kotak
Mahindra bank has received rave reviews from many customers and has been
presented many awards by various bodies in India. The bank, before its merger
with ING Vysya, had around 29,000 employees. In 2014, it was the fourth
largest private bank in India by market capitalization.
History
Kotak Mahindra group, established in 1985 by Uday Kotak, is one of Indias
leading financial services conglomerates. In February 2003, Kotak Mahindra
Finance Ltd. (KMFL), the Groups flagship company, received a banking
licence from the Reserve Bank of India (RBI). With this, KMFL became the
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first non-banking finance company in India to be converted into a bank Kotak


Mahindra Bank Limited (KMBL).
In a study by Brand Finance Banking 500, published in February 2014 by the
Banker magazine (from The Financial Times Stable), KMBL was ranked 245th
among the worlds top 500 banks with brand valuation of around half a billion
dollars ($481 million) and brand rating of AA+.[6] [7] KMBL is also ranked
among the top 5 Best Ranked Companies for Corporate Governance in IR
Global Ranking.
Timeline
Year Milestone
198
5
198
7
199
0
199
1
199
2
199

Kotak Mahindra Finance Limited commences bill discounting business

Kotak Mahindra Finance Limited enters leasing and hire purchase business

Starts the auto finance division for financing passenger cars

Launches investment banking business

Enters the funds syndication business

Commenced joint venture with Goldman Sachs Group Inc.

5
26

Investment Banking division incorporated into a separate company - Kotak


Mahindra Capital Company
The auto finance business is hived off into a separate company - Kotak Mahindra
199

Prime Limited (formerly known as Kotak Mahindra Primus Limited).

Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra Limited,
for financing Ford vehicles.

199

Launches mutual fund through Kotak Mahindra Asset Management Company

(KMAMC).

200

Kotak Securities launches online broking business (now

www.kotaksecurities.com).

200

Launches insurance business, partners Old Mutual from South Africa to

form Kotak Mahindra Old Mutual Life Insurance Ltd.


Kotak Mahindra Finance Ltd. (KMFL), the group's flagship company, receives

200

banking license from the Reserve Bank of India (RBI). With this, KMFL becomes

the first non-banking finance company to be converted into a commercial bank Kotak Mahindra Bank Ltd.

200
4
200
5
200
5

Enters alternate assets business with the launch of a private equity fund.
Kotak Mahindra Group realigns joint venture in Ford Credit; takes 100%
ownership of Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus
Limited) and sells its stake in Ford credit Mahindra to Ford.
Launches a real estate fund

200

Buys out Goldman Sachs' equity stake in Kotak Mahindra Capital Company and

Kotak Securities Ltd

200
8
200

Launched a Pension Fund under India's National Pension System (NPS)


Kotak Mahindra Bank Ltd. opens a representative office in Dubai

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27

Kotak Mahindra Bank Ltd. becomes anchor investor in Ahmedabad Commodities


Exchange (ACE)
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ING Vysya Bank has merged with Kotak Mahindra Bank with effect from 1 April

2015.

Merger with ING Vysya Bank


In 2014, Kotak Bank acquired ING Vysya Bank for a deal valued
at 15000 crore (US$2.2 billion). With the merger, the total human resource
count will jump to almost 40,000 heads and the count of branch reached at
1261. Post the merger, ING Group which controlled ING Vysya Bank will own
7% share in Kotak Mahindra Bank.
Awards and recognitions
Won Gold Award for Best Innovation Worlds first socially powered bank
account and Gold Award for Best App developed Worlds first banking
application using Twitter awards at the Indian Digital Media Awards 2014 for
Kotak Jifi Recognised as Highest Fundraising Company in Corporate Challenge
category in Standard Chartered Mumbai Marathon 2014
Kotak Mahindra Bank was ranked 292nd among India's most trusted brands
according to the Brand Trust Report 2012, a study conducted by Trust Research

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Advisory. In the Brand Trust Report 2013, Kotak Mahindra Bank was ranked
861st among India's most trusted brands and subsequently, according to the
Brand Trust Report 2014, Kotak Mahindra Bank was ranked 114th among
India's most trusted brands.
Won National Securities Depository Ltd. (NSDL) award in the Best Performer
in account Growth Rate category 2013, for Demat Accounts

Type

Public
BSE: 531807

Industry

Banking, Financial Services& insurance

Founded

2002
(est. 1930 as Vysya Bank)

Headquarters

Bangalore, India

Key people

Shailendra Bhandari(CEO & MD)


Uday Sareen
(deputy CEO)

Revenue

5588 crore(US$820 million)

Net income

613 crore(US$90 million)

Total assets

54836 crore(US$8.1 billion)

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Number of
employees

Over 10,000
No. of Branches: 527
No. of ATMS: 405
No. of Extension counters: 10

Website

ING Vysya Bank

ING Vysya Bank was a privately owned Indian multinational bank based
in Bangalore, with retail, wholesale, and private banking platforms formed from
the 2002 purchase of an equity stake in Vysya Bank by the Dutch ING Group.
This merger marks the first between an Indian bank and a foreign bank. Prior to
this transaction, Vysya Bank had a seven-year-old strategic alliance with
erstwhile Belgian bank Banque Bruxelles Lambert, which was also acquired by
ING Group in 1998.
As of March 2013, ING Vysya is the seventh largest private sector bank in India
with assets totaling 54836 crore (US$8.1 billion) and operating a pan-India
network of over 1,000 outlets, including 527 branches, which service over two
million customers. ING Group, the highest-ranking institutional shareholder,
currently holds a 44% equity stake in ING Vysya Bank, followed by Aberdeen
Asset Management, private equity firm Chrys Capital, Morgan Stanley,
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and Citigroup, respectively. ING Vysya has been ranked the "Safest Banker" by
the New Indian Expressand among "Top 5 Most Trusted Private Sector Banks"
by the Economic Times.
On 20 November 2014, in an all stock amalgamation, ING Vysya Bank decided
to merge with Kotak Mahindra Bank, creating the fourth largest private sector
bank in India. On 1 April 2015, the Reserve Bank of India approved the merger.

Chapter 4
4.1 Mergers and Acquisitions
4.2 Formal merger with the ING Group
4.3 Post merger News

4.4 RBI approves ING Vysya-Kotak Mahindra merger

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4.1 Mergers and acquisitions (M&A) are transactions in which the ownership
of companies, other business organizations or their operating units are
transferred or combined. As an aspect of strategic management, M&A can allow
enterprises to grow, shrink, change the nature of their business or improve their
competitive position.
From a legal point of view, a merger is a legal consolidation of two entities into
one entity, whereas an acquisition occurs when one entity takes ownership of
another entity's stock, equity interests or assets. From a commercial and
economic point of view, both types of transactions generally result in
the consolidation of assets and liabilities under one entity, and the distinction
between a "merger" and an "acquisition" is less clear. A transaction legally
structured as a merger may have the effect of placing one party's business under
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the indirect ownership of the other party's shareholders, while a transaction


legally structured as an acquisition may give each party's shareholders partial
ownership and control of the combined enterprise. A deal may
be euphemistically called a "merger of equals" if both CEOs agree that joining
together is in the best interest of both of their companies, while when the deal is
unfriendly (that is, when the management of the target company opposes the
deal) it may be regarded as an "acquisition".

4.2 Formal merger with the ING Group


In 2002, Vysya Bank's Board of Directors and the RBI approved Vysya Bank's
formal merger with the ING Group. Under Indian law, this move allowed ING
to increase its total equity holdings in Vysya Bank from 20% to 44%. Peter
Alexander Smyth and Jacques PM Kemp were appointed to the board of the
newly formed ING Vysya Bank. ING Vysya Bank then appointed Bart
Hellemans as CEO and managing director (MD) and G Mallikarjuna Rao as
chairman of the board.

Merger Introduction

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ING Vysya Bank has merged with Kotak Mahindra Bank with effect from April
1, 2015 and the combined entity will bear the name Kotak Mahindra Bank. I see
this as a historic moment for the Indian financial services sector, because never
before has a merger of this magnitude ever taken place.
ING Vysya Bank has been a respected name in Indian banking, with a sterling
legacy spanning eight decades.
In less than thirty years, Kotak Mahindra Group has built a comprehensive
financial services conglomerate that truly serves all its customers needs under
the same roof.
The ING Vysya-Kotak Mahindra merger will give the merged entity a
significant national footprint, affording it the capacity and means to serve you
even better. Our deep Indian roots, long and proven experience, and global
standards of service will enable us to deliver a truly seamless banking and
financial services experience.
Over 230 million Indians can now benefit from Kotaks offerings, including
6%* p.a. interest on the balances of above rupees one lakh in their savings
accounts, helping them earn more and from banking services delivered through
1,200+ branches and 1,900 ATMs across nearly 643 locations.
As we integrate our two organisations, my colleagues will be working hard to
minimise the hiccups entailed in such transitions. However, I do seek your
forbearance and support in advance.
We are at the cusp of a remarkable opportunity. I am confident that this merger
will firmly place us in a different orbit and on a new trajectory of growth and
excellence.

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A large financial institution with an even larger national footprint


Expanded products and services suite
Up to 6%* p.a. interest on savings account balances
1,200+ branches, 1,900 ATMs across nearly 700 locations
*Up to 6% p.a. interest applicable on Resident accounts only.

4.3 Post merger News


In 2003, Western Union, a leading global money transfer firm, tied up with ING
Vysya for inbound money transfer services across India. ING Vysya then
launched three new endowment products and an innovative retail savings
account called Orange with facilities such as personal accident and free annual
accident coverage. Japanese auto manufacturer Toyotathen signed an agreement
with ING Vysya for auto financing services. ING Vysya then inked a deal with
fertilizer producers, Madras Fertiliser Ltd (MFL), to co-market/distribute life
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insurance products to farmers by employing the fertilizer company's brokerdealer network in the rural sector.
In 2005, ING Vysya Bank named Ned Swarup to the CEO and MD role. ING
Vysya launched a cheque account product for mid-sized businesses. It also
rolled-out its own proprietary online money transfer service.
In 2006, Vaughn Richtor stepped into the CEO and MD role for a fixed threeyear term. Under Mr Richtor's leadership, ING Vysya went private and delisted
from the Bangalore Stock Exchange. ING Vysya also forayed into private
banking and portfolio management services.
In 2009, Shailendra Bhandari was appointed as CEO and MD. He was formerly
the Head of Private Equity at Tata Capital, the Tata Group's private equity arm.
Having completed his three-year term in India, Vaughn Richtor was promoted
to CEO of ING Banking Asia. Mr Thiagarajan was selected for his vast
international experience across strategic planning, economics and finance,
technology and systems.
As of January 2013, ING Group announced plans to divest itself of its Indian
insurance and investment management businesses through the sale of its 26%
interest in ING Vysya Life Insurance Company Ltd. to its joint venture
partner Exide Industries Ltd.

4.4 RBI approves ING Vysya-Kotak Mahindra merger


Acquisition made Kotak Mahindra fourth largest private sector lender in
the country, with a total business of Rs 2.25 lakh crore
The Reserve Bank of India (RBI) approved the merger of Kotak Mahindra Bank
and ING Vysya Bank. From now on, all ING branches will function as Kotak
branches, said the central bank.

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The acquisition will make Kotak Mahindra Bank the fourth largest private
sector lender in the country, will have about 1,200 branches and a total business
of Rs 2.25 lakh crore, as on December 2014, and a combined market
capitalisation of close to Rs 1.25 lakh crore.
Jaimin Bhatt, president & group chief financial officer, Kotak Mahindra, said
there would be a total of 30,000 employees in the bank after the merger, while
at the group level, there would be 40,000 employees.
In November 2014, Kotak Mahindra had announced it was acquiring
Bengaluru-headquartered ING Vysya in an all-stock deal.
With respect to the branches, Bhatt said change at signage in ING Vysya
branches had already begun and the process would be completed within a
month. For ATMs, too, the same has started.
On employee rationalisation, Bhatt said, they were in a growth phase and would
need people for branch expansion. We will keep growing and would first
utilise our combined employee strength before hiring from external sources, he
added.
On restructuring the existing branch network, he said the company would look
into it. In Mumbai, Delhi, Bengaluru and Chennai, the bank would expand its
branch network. It would also look at shifting branches to new locations, if
necessary, he said.
In February, the proposed Rs 15,000-crore merger deal between Kotak
Mahindra Bank and ING Vysya Bank got the Competition Commission of
Indias approval.

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According to the fair trade regulator, the merger, which would create the
countrys fourth largest private sector lender, was not likely to have an
appreciable adverse effect on competition in India.
The deal implies a price of Rs 790 for each ING Vysya share, based on the
average closing price of Kotak shares during the month to November 19,
valuing the deal at about Rs 15,000 crore. That was a 16 per cent premium to a
like measure of ING Vysya market price, Kotak Bank had stated.

Chapter 5
5.1 FREQUENTLY ASKED QUESTIONS ABOUT THE MERGER
5.2 Conclusion
5.3 Bibliography

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5.1 FREQUENTLY ASKED QUESTIONS ABOUT THE MERGER

Q1. Why have ING Vysya Bank and Kotak Mahindra Bank merged?

ING Vysya Bank and Kotak Mahindra Bank had complementary branch
networks, products and client segments. ING Vysya Bank has a stronger
presence in South India while Kotak has an extended franchise in the West and
39

North India. The merger created a large financial institution with a vast national
footprint. Together, the new entity will have over 1,200 branches and 1,900
ATMs across the country and will be Indias 4th largest private sector bank.

Q2. What should I know about Kotak Mahindra Bank?

Kotak Mahindra Bank is a one stop shop for all your financial needs be it
deposits, loans or investments. It has customized offerings for both individual
and corporate customers. It offers transaction banking, operates lending
verticals, manages IPOs and provides working capital loans. Kotak has one of
the largest and most respected Wealth Management teams in India, providing
the widest range of solutions to high net worth individuals, entrepreneurs,
business families and employed professionals.

Q3. Will ING Vysya Bank change its name to Kotak Mahindra Bank?

Yes. With effect from April 1st, 2015 ING Vysya Banks name has been changed
to Kotak Mahindra Bank. To help manage the transition from ING Vysya Bank
to Kotak Mahindra Bank, our branches and ATM signage will be changed to
ING Vysya Bank is now Kotak Mahindra Bank till complete integration of
systems and processes takes place.
Q4. How does this merger impact me as a customer now?
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Customers can now earn up to 6% p.a. interest on your savings account balance.
You also have access to a wider network of ATMs (1,900+ across the country).
These changes are w.e.f. April 1st, 2015. There is no change in the terms and
conditions, service offerings and charges of your existing accounts / products.

Q5. What happens to ING Vysya Bank employees?


Employees of ING Vysya Bank will become employees of Kotak Mahindra
Bank.

Q6. Has the ATM locations change?


There is no change in existing ATM locations. You can view the complete ATM
list here.

Q7. Will the ATM transactions be free of charge across all your ATMs?

Customers can now have access to the combined network of erstwhile ING
Vysya Bank and Kotak Mahindra Bank ATMs. The number of free transactions
will be as per your bank account features and yes, up to that limit, all
transactions on the combined network will be free. Next time you need to use an
ATM, look for the signage of Kotak Mahindra Bank or ING Vysya Bank is
now Kotak Mahindra Bank on ATMs.
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5.2 CONCLUSION
Analysts at top brokerage firms were of the view that the merger
between Kotak Mahindra Bank and ING Vysya Bank will be a happy
marriage and strategically fill many gaps for Kotak Mahindra Bank.
"The amalgamation would gave Kotak access to ING Vysya's 573
branches. An important point to note is that Kotak doesn't have branch
presence in 65 per cent of ING Vysya's current branch locations.
"The deal, if concluded as a full share swap deal, will help reduce the
promoter stake at Kotak Bank from 40.07 per cent to 33 per cent. Note,
the RBI has mandated that Kotak Bank reduce its promoter holding to
30% by December 2016 and 20% by March 2018," Morgan Stanley said
in a report.
"The acquisition will increase Kotak's number of branches from 600 in
FY14 to 1,200 branches and give access to ING's SME platform. ING
Vysya's key strength is in SME," Nomura said in a report.

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CASA ratios for Kotak and ING Vysya at 32-33% are very similar, but
since SME banking is CASA-heavy, liability franchise in the long run
would benefit.
ING Vysya Bank and Kotak Mahindra Bank had complementary branch
networks, products and client segments. ING Vysya Bank has a stronger
presence in South India while Kotak has an extended franchise in the
West and North India.
The merger created a large financial institution with a vast national
footprint. Together, the new entity will have over 1,200 branches and
1,900 ATMs across the country and will be Indias 4th largest private
sector bank.

Kotak Mahindra Bank is a one stop shop for all your financial needs be it
deposits, loans or investments. It has customized offerings for both
individual and corporate customers.
It offers transaction banking, operates lending verticals, manages IPOs
and provides working capital loans. Kotak has one of the largest and most
respected Wealth Management teams in India, providing the widest range
of solutions to high net worth individuals, entrepreneurs, business
families and employed professionals

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5.3 BIBLIOGRAPHY
http://ir.kotak.com/node/707
http://profit.ndtv.com/topic/kotak-ing-merger
http://www.ing.com/Newsroom/All-news/Press-releases/PR/ING-VysyaBank-completes-merger-with-Kotak-Mahindra-Bank.htm

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