A DISSERTATION STUDY ON ³ANALYSIS OF MERGERS AND ACQUISITIONS OF BANKING SECTOR´

Research Report submitted to Entrepreneurship Development Institute of India in partial fulfillment of the requirement for the award of

Post Graduate Diploma in Business Management Submitted by RANJEET KUMAR Register No.: 09JEPG1108 Under the guidance of Prof. A.S.velpanur Profaser. Of SBM Jain College Bangalore

Entrepreneurship Development Institute of India, Ahmadabad 2010

VELPANUR Prof. of SBM Jain College. This work has not formed the basis for the award of any Degree and has not been submitted previously to any other College/University.DECLARATION I hereby declare that the research entitled ³ANALYSIS OF MERGERS AND ACQUISITIONS OF BANKING SECTOR´ submitted to Entrepreneurship Development Institute of India in partial fulfillment of the requirements for the award of PGDBM. is a record of independent research work carried out by me under the supervision and guidance of Prof A. 2010 RANJEET KUMAR . Bangalore July 24.S. Bangalore.

Prof. Bangalore July 24th.S.Ranjeet kumar under my supervision and guidance.VELPANUR Research Mentor . A. 2010 Prof.S. is a record of independent research work carried out by Mr.A. This work has not formed the basis for the award of any Degree and has not been submitted previously to any other College/University.VELPANUR SBM Jain College Bangalore CERTIFICATE I certify that this research entitled ³ANALYSIS OF MERGERS AND ACQUISITIONS OF BANKING SECTOR´ submitted to Entrepreneurship Development Institute of India in partial fulfillment of the requirements for the award of PGDBM.

Also. velpanur in Department of Management Studies. Department of Management studies. DHIMANT SBM JAIN COLLEGE Head of the Department.EASW ARAN LAYER DEAN OF SBM JAIN COLLEGE BANGLORE who encouraged and permitted me to do this dissertation.S. I would like to record my sincere thanks and gratitude to DR. A. I also take this opportunity to thank my parents and friends who were source of inspiration in completing this dissertation successfully and also I would like to thank the Almighty who endowed his blessing in carrying out my dissertation. Bangalore. I express my sincere gratitude through this simple acknowledgment to all the persons who have helped me directly or indirectly. . I also express my heartiest gratitude to my beloved guide prof. I wish to place on record my sincere and heartiest gratitude to Dr.sbm jains Management College for his inspiring guidance. who provided me an opportunity to undertake this dissertation.ACKNOWLEGEMENT This study of mine has taken the co-operation and assistance of some respectable people.

Valuation of firms for the purpose of acquisition / sale has emerged as a lucrative niche for the investment bankers. However. to conclude we can rightly say that merger are no doubt carried out with an intention of corporate growth. negotiations etc. the notification of the Takeover Code by SEBI has opened up a big market for corporate control. This has resulted in a massive restructuring by the corporate to enable them to face emerging challenges. but they have succeeded in achieving only part of their goals. The title of the project is ³ANALYSIS OF MERGERS AND ACQUISITIONS OF BANKING SECTOR´. All these developments have resulted in an exponential growth of business for investment bankers. a pre-merger and post-merger balance sheet. But in the long run it can be achieved. tax savings and improved debt-raising capacity. STATEMENT OF THE PROBLEM . The objective of the study is to understand the various objectives that companies have while deciding to merge and probing whether the companies under study managed to achieve the objectives they had in mind.EXECUTIVE SUMMARY: The deregulation and globalization of the economy has exposed the corporate to severe competition from domestic and foreign firms. identification of buyer for divestitures. and to understand the legal and procedural frame work involved in a amalgamation. For the purpose of the study the entire process of merger was studied with the help of secondary data about the companies. The other services rendered by investment bankers include acquisition search. Contacting stock exchange collected primary data regarding financial statements swap ratios. After the analysis. managing the tender offers for Takeovers. Further. it was inferred that the companies benefited from the merger in terms of greater stability in their business cycle. The cash related problems were solved on account of the merger and the additional liquidity was successfully deployed to meet the capital requirements.

However the M&A activity has it¶s advantageous and disadvantageous. but also the prices of daily necessities as competitors become of fewer and more powerful.  To understand the various objectives that companies have while deciding to merge and probing whether the companies under study managed to achieve the  Objectives they had in mind. This might in due course lead to a problem of Oligopoly over banking products available for the users´ Background of the study A new merger and acquisition wave across India¶s corporate land scale tends to show that companies want to avoid stiff and unequal competition . It is likely to affect dividend rates. with consequences for all.³Of late. companies are finding this the easiest and perhaps the quickest way to expand. job prospects.new business combinations are re-shaping India¶s largest industries. .  To understand the legal and procedural framework involved in an amalgamation  To find out whether merger results are beneficial to banks. business strategy. This study intends to analyze the pros and cons of corporate mergers as strategy growth. Objectives of this project are two folds. there appears to be an increasing tendency among new private sector banks to combine their businesses apparently for synergic advantage. More over the elements missing in today¶s market are the takeover artistes with invest able funds to finance their acquisition. brand power and synergies. RATIONALE OF THE STUDY Since market shares accompany mergers and acquisitions.

Literate review The Indian business environment has altered radically since 1991 with the changes in the economic policies and introduction of new institutional mechanisms. Those most affected are the promoters who are today threatened by the possibility of hostile takeovers. Ruth J. Idalene Kesner (2010) Mergers can be described from a legal perspective and an economic perspective. while benefiting from decontrol and deregulation¶s has now began to feel the effect of these changes. The Indian corporate world. regulatory issues. financial institutions. Indian companies and the latter multinationals. Pharmaceuticals and ad agencies would be the frontrunners as well as primary targets of the M & A activity. On the other hand dominate the former. have started demanding better corporate governance thus while the Indian scenario continues to witness promoter-controlled companies. which have a significant stake in many companies. and strategic planning. Maddiga .Janis K. Slotegraaf. Zaima (2010) We explore the role of resource interactions in explaining firm performance in the context of acquisitions. Rebecca J. At the same time. Mergers and acquisition can bring about change in the mode of governance of a company. Although we confirm that acquisitions do not lead to . David R. family businesses and single units are consolidating their positions to avoid possible hostile takeovers. King. This distinction is relevant to discussions concerning deal structuring. The purpose of this article is to help clarify some of the terms commonly involved in discussing M&As and other types of corporate restructuring. corporate governance is shifting from the hands of the promoter entrepreneur to the professional executive to the financiers.

" demonstrates that mergers and acquisitions do not result in instability among management at target companies solely in the short-term. as is often assumed. "Companies involved in these deals need to understand the long-term effect on their executive ranks and they need to find ways to keep key executives on board. Implications for management theory and practice are identified. we do find that complementary resource profiles in target and acquiring firms are associated with abnormal returns.000 executives. Krug said recent mergers and acquisitions have created even greater instability within executive teams as globalization and technology trends continue to increase the intensity of competition and generate industry turbulence. but result in abnormally high turnover that lasts much longer. "The Big Exit: Executive Churn in the Wake of M&As.(2002) The study. Target companies lose 21 percent of their executives each year for at least 10 years following an acquisition " more than double the turnover experienced in non-merged firms. Walt Shill. associate professor of strategic management in the VCU School of Business and lead author of the study. TANVEER. "These findings are especially important in light of the correlation between the loss of top executives and a company's poor performance.higher performance on average. is co-author of the study. meanwhile. we find that acquiring firm marketing resources and target firm technology resources positively reinforce (complement) each other." Krug studied the turnover patterns at more than 1. a managing director at Accenture." said Jeffrey Krug. liberalization of foreign investment norms and globally consolidation activity are some of the reasons that have seen the Mergers and Acquisitions companies thrive even in a bad business .RASHMI (2003) Privatization. Specifically. acquiring and target firm technology resources negatively reinforce (substitute) one another.000 firms and examined the employment of more than 23.

There are several reasons for the failure of the mergers: . The need for consolidation by local companies to become globally competitive is another reason for this trend. The lure of gaining exceptional advantage may make the prospect of a merger seem very attractive to companies but there are many glitches to beware of.environment. The merger even it is done for seemingly value adding purpose may threaten the company¶s objectives of maximizing value of the firm to the shareholders.

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