This project submitted for the partial

fulfillment of final year M.COM

Submitted By :-

sunil kumar khuntia

College roll num - PGCOM20-36
Exam roll num - PGUNCOM20028
PG COMMERCE
SESSION 2020-22

Under Guidance of
MS: MUN MUN MAHAPATRA
(Lecturer.of PG Depatment commerce)

P.G DEPARTMENT OF COMMERCE U.N (AUTO) COLLEGE

OF SCIENCE & TECHNOLOGY
ADASPUR,CUTTACK
 CERTIFICATE

This is to certified that Mr. Sunil Kumar Khuntia bearing Exam Roll No

PGUNCOM20028 has prepared the project titled “STUDY OF MERGERS AND

ACQUISITIONS IN INDIAN BANKING SECTOR” under my guidance. To the best of

knowledge & belief, no part of this project has been submitted to any other institutions or

university for award of any degree.

Signature of guide
 DECLARATION

I Sunil Kumar Khuntia bearing Exam Roll No. PGUNCOM20028 student of PG 2nd year ,

4th semester commerce 2020-22,of U.N auto. College of science and technology, Adaspur.

Undertake to say that the project titled “STUDY OF MERGERS AND ACQUISITIONS

IN INDIAN BANKING SECTOR” has been prepared by me and it is my original work

nothing has been reproduced except quotes.

Signature Of Student

Sunil Kumar Khuntia

College Roll No-PGCOM20 -36
Exam Roll No-PGUNCOM20028
Department of commerce
U.N Auto.College of Science and
Technology ,Adaspur , Cuttack
 ACKNOWLEDGEMENT
The satisfaction that accompanies the successful completion of any task would be incomplete
without mentioning people who made it possible, whose encouragement & consistent
guidance crowned my efforts with success .At the outset, I would like to express my heartfelt
indebtedness and deep sense of gratitude to my guide Ms. Mun mun Mahapatra, lecturer in
PG department of commerce for sharing her knowledge and giving me guidance and generous
co-operation. I am thankful to Ms. Mun mun Mahapatra, lecturer in PG department of
commerce for her continuous support and encouragement. I am also thankful to Prof. Arun
Kumar Swain H.O.D, of Commerce for giving me opportunity to prepare the project.

I am also thankful to my family and friends for their constant support and who helped me a
lot and encourage me most by their comment on this topic.

Signature Of Student

Date: - Sunil Kumar Khuntia

Place: - College Roll No-PGCOM20 -36
Exam Roll No-PGUNCOM20028
Department of commerce
U.N Auto. College of Science and
Technology Adaspur , Cuttack
 CONTENT
SL.NO. Name Of The Topic Page No.
CHAPTER -1 INTRODUCTION
1.1 - Introduction of the Study of mergers 1
and acquisition in Indian banking
sector

1.2 - Objective of the study 2

1.3 - Scope of the study 3
1.4 - Research methodology 4 -5
1.5 - Limitation of the study 6
CHAPTER-2 2.1 REVIEW OF LITERATURE 7-9

CHAPTER-3 COMPANY PROFILE 10

3.1 - Merger of global trust bank and 11 - 19
Oriental bank of commerce
CHAPTER-4 THEORYTICAL BACKGROUND 20
4.1 - Meaning of merger 21
4.2 - Types of merger 22 - 23
4.3 - Meaning of acquisition 23 - 24
4.4 - Types of acquisition 24 - 25
4.5 - Purpose of merger and acquisition 26 - 27
4.6 - Benefits of merger and acquisitions 28 - 29
4.7 Reasons for Bank Mergers and 30
Acquisitions in Indian banking sector
CHAPTER - 5 5.1 DATA ANALYSIS AND 31 - 40
ENTERPRETATION
CHAPTER-6 6.1 FINDINGS 41-42
6.2 - SUGGESTION 43
6.3 - CONCLUSION 44
6.4 - BIBLIOGRAPHY 45
6.5 - ANEXTURE 46-47
 CHAPTER-1

INTRODUCTION
 INTRODUCTION

This project is about the “Study of mergers and acquisition in Indian banking sector”. A
merger occurs when two companies combine to form a single company. A merger is very
similar to an acquisition or takeover, except that in the case of a merger existing stockholders
of both companies involved retain a shared interest in the new corporation. By contrast, in an
acquisition one company purchases a bulk of a second company's stock, creating an uneven
balance of ownership in the new combined company.

In India, the concept of mergers and acquisitions was initiated by the government bodies.
Some well-known financial organizations also took the necessary initiatives to restructure the
corporate sector of India by adopting the mergers and acquisitions policies.

The Indian economic reform since 1991 has opened up a whole lot of challenges both in the
domestic and international spheres. The increased competition in the global market has
prompted the Indian companies to go for mergers and acquisitions as an important strategic
choice.

India has emerged as one of the top countries with respect to merger and acquisition deals. In
2007, the first two months alone accounted for merger and acquisition deals worth $40 billion
in India.

1
 OBEJECTIVE OF THE STUDY:-

 To know the legal framework for Mergers and Acquisitions in India.

 To examine the trends and progress of Mergers and Acquisitions in India.

 To study the impact of Mergers and Acquisitions on Physical Performance of

Merged Banks.

 To analyze the impact of Mergers and Acquisitions on Financial Performance of

Merged Banks.

2
 SCOPE OF THE STUDY :-

 To find out the impact of merger on company’s stock.

 To examine the effects of merger on equity shareholder’s.

 To examine the main factor affecting performance of company; before merger and after

merger.

 To study the relation between market (CNX BANK NIFTY) and company.

 To study other variables affecting company’s operations and net returns to stock.

3
 RESEARCH METHODOLOGY :-
Research Methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done systematically. We study the
various steps that are generally taken by the researcher in studying the research problem along
with the logic behind it. The research methodology includes overall research design, the
sampling procedure, the data collection method and analysis procedure.

Steps of Methodology :-

I. SAMPLE DESIGN
The target population of the study consists of various respondents of various places. This
survey was done by collecting the data from the respondents.

II. SAMPLE SIZE

After due consultation with the company supervisor as well as with the college guide, also
keeping in mind the requirements of the company for the research, the sample size that was
found to be appropriate for the study was 100.

III. SAMPLING TECHNIQUE

The sampling technique that adapted to conduct the survey was ‘Convenient Random
Sampling’ and the area of the research was concentrated in the city of Erode only. The survey
was conducted by visiting different places like banks, different bank related offices,
respondent’s home etc.

IV. DATA SOURCE The task of data collection begins after a research problem has been
defined. In this study data was collected through both primary and secondary data source.

4
V. PRIMARY DATA
A primary data is a data, which is collected for gathering information first time and to analyze
the problem. In this study the primary data was collected among the consumers using
questionnaire.

VI. SECONDARY DATA

Secondary data consist of information that already exists somewhere, having been collected
for some other purpose. In this study secondary data was collected from different banking
websites, magazines and brochures.

VII. STATISTICAL TOOLS

Simple percentage analysis and ranking method used for the study.

VIII. SIMPLE PERCENTAGE ANALYSIS

Percentage refers to a special king of ratio in making comparison between two or more data
and to describe relationships. Percentage can also be used to compare the relation terms
between two or more sources of data.

5
 LIMITATIONS OF THE STUDY:-

 Number of merger cases analyzed by various studies is much less and have taken only
mergers and acquisitions.

 It is noticed that none of the studies dealt comprehensively on trend of M&A‟s for the
post 1991 period.

 From the survey of Indian M&A‟s literature, it is mainly found that apart from growth
and expansion, efficiency gains and market power are the two important motives for
M&As. Apart from measuring post-merger profitability of the merged entity, there have
been no reported works on these issues in the Indian context.

 Merger and acquisition are hard to occur, so the information about them is very less.

 Various financial terms related to merger and acquisition are the difficult to understand.

6
 CHAPTER -2

REVIEW AND LITERATURE

7
REVIEW AND LITERATURE:-

Various research paper have been studied about the effect of merger and acquisition of bank
in India and compared pre and post-Merger position of selected banks and quested advantage
and disadvantages of merger and acquisition of banks. Here are some following related
reviews.

Devarajapp S.(2012) Analysed financial performance of HDFC Bank Limited and Centurion
Bank of Punjab with the help of financial parameters and compared premerger and post-
merger performance of banks on the basis of last 3 year data and the result of this analysis
was that mean value of gross profit had increased and the mean value of equity had increased
but there is no change in net profit, return on capital, and operating profit. And concluded that
merger effect is helpful for surviving of week Bank by merging into larger banks.

Dr K.A. Goyal & Vijay Joshi (2012) Studied case of ICICI Bank Limited to be aware with
the growth of ICICI Bank Limited. This Bank amalgamated with Nine Finance entities like
SCICL, ITC Classic Finance Ltd., Anagram Finance, Bank of Madura, Bank of Sangali,
ICICI Personal Finance Service Ltd & ICICI Capital Service Ltd., Standard of Chartered
Grindlays Bank’s two branches, and Bank of Rajasthan Ltd. According to them merger and
acquisition considered in three phases premerger phase, acquisition phase and post-merger
phase. And concluded that that there were many issues and challenges for ICICI Bank
Limited but it accepted that challenges and became India’s largest Private sector bank.

8
Dr. Sangita Ghosh(2016) researched on merger between Global Trust Bank and Oriental
Bank of Commerce. She analysed liquidity factor, efficiency factor, profitability factor and
performance factor of Oriental bank of commerce. And found that after merging bank
profitability and efficiency of acquirer bank has improved but there was no change in
liquidity position of oriental bank of commerce.

Prof. Ritesh Patel(2014) examined finance and stock return of selected banks to know the
effect after merger and concluded that merger and acquisition has positively impacted on
Indian banks and told that some public sector banks is more advantageous rather than private
sector bank.

Agarwal Meghan, Singh Sheikh [2015] carried research on the effect of Mergers on the
financial performance of Kingfisher Airlines. The main aim of the research is to examine the
pre-& post-Mergers financial performance of KFA (Kingfisher Airlines). The main
parameters of analysis of the pre and post-merger are profitability, liquidity, earning per share
and leverage. Authors concluded that no improvement has been observed in return on equity
and earning per share after mergers.

9
 CHAPTER -3

COMPANY PROFILE

10
MERGER OF GLOBAL TRUST BANK AND ORIENTAL BANK OFCOMMERCE

Introduction to Global Trust bank Ltd.

The Global Trust Bank Ltd was incorporated on 29th October & the Certificate of
Commencement of Business was obtained on 10th November, 1993. It was promoted by
Ramesh Gilli, Dr. Jayanta Madhab & Sridhar Subasri and their friends & relatives. In the
early nineties, the process of liberalization and deregulation was setting the tone for the
creation of new private sector banks in India. The Reserve Bank of India opened the doors of
the banking industry to new players and the era of the “New Generation Banks”. The GTB is
providing various services such as overdrafts, term loans, letters of credit, cash credit, bank
guarantees, and bill inland discounting. Global Trust Bank Ltd had also launched in
partnership with Visa, the Proton International Debit Card. Global Trust Bank has fallen to its
lowest depth with the government issuing a 3-month moratorium. During this period the
Reserve Bank of India (RBI) considered the various options, including amalgamation of GTB
with another bank to provide the necessary capital infusion. Customers are permitted to
withdraw only up to Rs 10,000 from the ATM. This comes as a hard blow to the millions of
odd customers of the GTB who now face the possibility of losing their money. The bank also
plans to expand its ATM network to 100 centers. It is looking to install a high-end
Transmission Processing Switch that would facilitate debit card functionality. The switch will
also augment future growth in the number of ATMs.

11
Introduction to Oriental Bank of Commerce Ltd.
Oriental Bank of Commerce made a beginning under its Founding Father, Late Rai Bahadur
Lala Sohan Lal and the first Chairman of the Bank. Within four years of coming into
existence, the Bank had to face partition. Branches in the newly formed Pakistan had to be
closed down and the Registered Office had to be shifted from Lahore to Amritsar. The Bank
has witnessed many ups and downs since its establishment. The period of 1970-76 is said to
be the most challenging phase in the history of the Bank. At one time profit plummeted to 175
that prompted the owner of the bank, the Thapar House, to sell or close the bank. Then the
employees and leaders of the Bank came forward to rescue the Bank. The owners moved and
had to change their decision of selling the bank and in turn they decided to improve the
position of the bank with the active cooperation and support of all the employees. The bank
was nationalized on 15 April 1980. At that the time total working of the bank was 483 cores
having 19th position among the 20 nationalized banks.

Vision statement of Oriental Bank of Commerce Ltd.

"To be a customer friendly premier bank committed to enhancing

stakeholders value"

Mission statement of Oriental Bank of Commerce Ltd.

 Provide quality, innovative services with state-of-the-art technology in line with customer
expectations.
 Enhance employees’ professional skills and strengthen cohesiveness.
 Create wealth for customers and other stakeholders.

12
COUNTDOWN TO COLLAPSE OF GLOBAL TRUST BANK

This was a crisis in the making for the last three years.

KETAN PAREKH SECURITIES SCAM OF 2001

The genesis of the Global trust bank collapses lies in now ousted promoter Ramesh Gelli's
involvement in the Ketan Parekh securities scam of 2001, when he gave huge unsecured loans
to the stock broker and group companies of Zee Telefilms.

March 31, 2002

Global trust bank audited balance sheet for march 31,2002, showed net worth of
Rs.400,4 cr. & a profit of Rs. 40 cr. However, RBI's inspection revealed that net worth is
negative.

LARGE VARIANCE IN GTB'S FINANCIAL POSITION AS REPORTED

BYAUDITORS.

In view of very large variance in the assessment of GTB's financial position as

reported by auditors and by RBI's inspectors, unindependent chartered accountant was
appointed to reconcile the position.

RBI'S SCHEME OF AMALGAMATION OF GLOBAL TRUST BANK

WITH ORIENTAL BANK OF COMMERCE
A) Global Trust Bank Ltd., (GTB) was placed under of Moratorium on July 24, 2004. The
option available with Reserve Bank was to compulsory merger under section 45 of the
Banking Regulation Act, 1949.
B) The government of India has sanctioned the scheme for amalgamation of the global trust
bank ltd. With the oriental bank of commerce. The amalgamation came into force on August
14, 2004.

13
C) Before the wide interest of the different parties had considered i.e.

 OBC interest was examined by the RBI keeping in view its financial parameters.
 Its retail network and its synergies.
 Strategic advantages.
 Considered the interests of the millions of depositors of GTB.
 Evaluated the banks strengths and weaknesses, the RBI prepared draft scheme of
amalgamation of GTB with OBC.

PROVISIONS FOLLOWED DURING THE PERIOD OF MERGER :-

a) The moratorium will be effective from the close of business on Saturday, July 24,2004 up
to and inclusive of October 23, 2004 or an earlier date.

b) During the period, the Reserve Bank of India will consider the various options, including
amalgamation of the Global Trust Bank Ltd.

c) Finalize the plans in public interest and with a view to ensuring that the public deposit are
protected.

d) During the period of moratorium, the bank will be permitted to make only those payments
that have been specified in the Order of Moratorium and the depositors of the Global Bank.

e) Depositors were permitted to withdraw up to Rs.10000 (Rs. ten thousand only) from their
savings bank account or current account or any other deposit account through any other of the
branches of the bank.

14
f) For the present, withdrawals through ATMs of the bank/ATMs shared with other banks
will not be permitted so as to give effect to the monetary ceiling prescribed in the moratorium,
but the customers can make withdrawals up to the limit specified at any of the bank's
branches.

g) Any requirement of cash at the branches of the bank for making permitted payments will
be ensured in full by the Reserve Bank of India since cash balances are maintained with it by
the Global Trust Bank Ltd.

CLARIFICATIONS ISSUED BY RESERVE BANK OF INDIA:-

RBI reiterates that the objective of the moratorium is to protect the interests and safety of
funds of all depositors. Necessary actions are being initiated to ensure the return of normalcy.

 All the branches of Global Trust Bank Ltd. will continue to remain open as per their
normal working hours to help their customers and enable them to make the permitted
withdrawals.
 RBI stands by its assurance to meet any requirement of cash at the branches of the bank
for making permitted payments under the Order of moratorium.

 It is also clarified that the D-mat accounts and Safe Deposit Lockers of customers will be
allowed to be operated as usual,

 The Reserve Bank of India has set up help lines to assist the members of public at
Mumbai and Hyderabad.

GLOBAL TRUST BANK IS NOW ORIENTAL BANK OF COMMERCE:-

The Government of India has sanctioned the scheme for amalgamation of the Global Trust
Bank Ltd. With the Oriental Bank of Commerce. The amalgamation will come in to force on

15
August 14, 2004. All the branches of Global Trust Bank Ltd with function as branches of
Oriental Bank of Commerce with effect from this date.

CUSTOMERS / DEPOSITERS OF GLOBAL TRUST BANK

Customers, including depositors of the Global Trust bank Ltd. Will be able to operate their
accounts as customers of Oriental Bank of Commerce with effect from August 14, 2004,
Oriental Bank of Commerce is making necessary arrangements to ensure that service, as usual,
is provided to the customers of the Global Trust bank Ltd.

PRO-DATA PAYMENT. IF ANY SURPLUS REMAINS

If any surplus remains after meeting all the liabilities out of the realization of the assets of the
Global Trust bank Ltd., the shareholders may receive pro-data payment.

INCOME TAX EXEMPTIONS

As part of the merger proposal, the OBC would get income tax exemptions in transferring the
assets of GTB in its book during the merger process, while all the bad debts of the merged
entity would be adjusted against the cash balances and reserves of the Hyderabad-based bank.

16
Year of Establishment

Global Trust bank ltd. Oriental Bank of Date of merger

Commerce ltd.

29th October 1993 01 January 1901 24-07-2004

Number of Branches of Global Trust bank Ltd. and Oriental

Bank of Commerce Ltd. before and after merger

YEAR Global YEAR Oriental YEAR Oriental Bank

Trust bank Bank of of
Ltd commerce Commerce Ltd.
Ltd.

Pre Pre-Merger After merger

Merger
2002 82 2002 1005 2019 2166
2003 103 2003 1028 2020 2148
2004 NA 2004 1051 2021 2273

Source:- Annual report of 2001-02, 2002-03, 2003-04, 2019-20, 2020-21&

2021-22.

NA - Not Available

17
THE MERGED BALANCESHEET OF THE YEAR -2020-21

Post write-offs, OBC’s books will be stronger.

OBC GTB TOTAL OBC GTB TOTAL

COST OF MERGING GLOBAL TRUST BANK OF THE YEAR- 2020-21

18
BENEFITS OF ORIENTAL BANK OF COMMERCE
Since the GTB is a south-based bank, it would give OBC the much-needed edge in the
south part of the country.

Both the banks have a common core banking solution Finale, which will help in the
consolidation.

a. GTB's 275 ATM's multiplied its strength of 72 by a factor of almost five folds & make it
the3 largest ATM operator in PSU banks.

b. 103 branches are added to existing 1013 branches.

c. Larger customer base.

d. After accounting for the tax gains the merger of GTB, the total losses come to Rs. 704.6cr.

Future Vision from 2020 to 2024 of Oriental Bank of Commerce.

The Bank has targeted to increase its customers has by 3 million and has already added 0.61
million accounts during the first half year. During 2021-22, the Bank plans to open more than
100 branches all over India and increase its Branch network to 1800 Branches with a total
Business Mix of over Rs.2 Lac Corers by March 2023.

19
 CHAPTER - 4

THEORITICAL SBACKGROUND

20
MEANING OF 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

Merger is a financial tool that is used for enhancing long-term profitability by expanding
their operations. Mergers occur when the merging companies have their mutual consent as
different from acquisitions, which can take the form of a hostile takeover. 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. If we trace back to history, it is
observed that very few mergers have actually added to the share value of the acquiring
company and corporate mergers may promote monopolistic practices by reducing costs, etc .

21
 TYPES OF MERGER:-
Merger or acquisition depends upon the purpose of the offeror company it wants to achieve.
Based on the offeror’s objectives profile, combinations could be horizontal,vertical, circular
and conglomeratic as precisely described below with reference to the purpose in view of the
offeror company.

(A) 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 company. The main 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.

B) Vertical combination :-
A company would like to take over 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 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:-
1. It gains a strong position because of imperfect market of the intermediary products, scarcity
of resources and purchased products;
2. Has control over products specifications.
3. It gains a strong position because of imperfect market of the intermediary products, scarcity
of resources and purchased products;
4. Has control over products specifications.

22
(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 re-organizing 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 company’s total portfolio of
diverse products and production processes.

MEANING OF ACQUISITION:-

An Acquisition usually refers to a purchase of a smaller firm by a larger one. Acquisition,

also known as a takeover or a buyout, is the buying of one company by another.

Acquisitions or takeovers occur between the bidding and the target company. There may be
either hostile or friendly takeovers. Acquisition in general sense is acquiring the ownership in
the property. In the context of business combinations, an acquisition is the purchase by one
company of a controlling interest in the share capital of another existing company.

23
Methods of Acquisition
An acquisition may be affected by: -
(a) An 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) making 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.

TYPES OF ACQUISITION:-
There are different types of Acquisitions/takeover:-

1. Friendly takeovers
2. Hostile takeovers
3. Reverse takeovers

1. Friendly takeovers
Before a bidder makes an offer for another company, it usually first informs that company's
board of directors. If the board feels that accepting the offer serves shareholders better than
rejecting it, it recommends the offer be accepted by the shareholders.
In a private company, because the shareholders and the board are usually the same
people or closely connected with one another, private acquisitions are usually friendly. If the
shareholders agree to sell the company, then the board is usually of the same mind or
sufficiently under the orders of the shareholders to cooperate with the bidder.

24
2. Hostile takeovers
A hostile takeover allows a suitor to bypass a target company's management unwilling to
agree to a merger or takeover. A takeover is considered "hostile" if the target company's
board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer
without informing the target company's board beforehand.

A hostile takeover can be conducted in several ways. A tender offer can be made where the
acquiring company makes a public offer at a fixed price above the current market price.
Tender offers in the USA are regulated with the Williams Act.

An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough
shareholders, usually a simple majority, to replace the management with a new one which
will approve the takeover.

Another method involves quietly purchasing enough stock on the open market, known as a
creeping tender offer, to effect a change in management. In all of these ways, management
resists the acquisition but it is carried out anyway.

3. Reverse takeovers

A reverse takeover is a type of takeover where a private company acquires a public company.
This is usually done at the instigation of the larger, private company, the purpose being for
the private company to effectively float itself while avoiding some of the expense and time
involved in a conventional IPO. However, under AIM rules, a reverse take-over is an
acquisition or acquisitions in a twelve month period which for an AIM company would :-
 exceed 100% in any of the class tests; or
 result in a fundamental change in its business, board or voting control; or

in the case of an investing company, depart substantially from the investing strategy stated in
its admission document or, where no admission document was produced on admission, depart
substantially from the investing strategy stated in its pre-admission announcement or, depart
substantially from the investing strategy.

25
 PURPOSE OF MERGERS AND ACQUISITIONS

The purpose for an offeror company for acquiring another company shall be reflected in the
corporate objectives. It has to decide the specific objectives to be achieved through
acquisition. The basic purpose of merger or business combination is to achieve faster growth
of the corporate business. Faster growth may be had through product improvement and
competitive position. Other possible purposes for acquisition are short listed below: -

(1) Procurement of supplies:

1. To safeguard the source of supplies of raw materials or intermediary product;
2. To obtain economies of purchase in the form of discount, savings in transportation costs,
overhead costs in buying department, etc.;
3. To share the benefits of suppliers‟ economies by standardizing the materials.

(2) Revamping production facilities:

1. To achieve economies of scale by amalgamating production facilities through more

intensive utilization of plant and resources;
2. To standardize product specifications, improvement of quality of product, expanding.
3. Market and aiming at consumers satisfaction through strengthening after sale Services;
4. To obtain improved production technology and know-how from the offered company.
5. To reduce cost, improve quality and produce competitive products to retain and improve
market share.

(3) Market expansion and strategy:

1. To eliminate competition and protect existing market;
2. To obtain a new market outlets in possession of the offeree;
3. To obtain new product for diversification or substitution of existing products and to
enhance the product range;

26
4. Strengthening retain outlets and sale the goods to rationalize distribution;
5. To reduce advertising cost and improve public image of the offeree company;
6. Strategic control of patents and copyrights.

(4) Financial strength:

1. To improve liquidity and have direct access to cash resource;

2. To dispose of surplus and outdated assets for cash out of combined enterprise;

3. To enhance gearing capacity, borrow on better strength and the greater assets backing;

(5) Own developmental plans:

The purpose of acquisition is backed by the offeror company’s 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
constraint with limitations of funds and lack of skill managerial personnel. 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.

(6) 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.

27
 BENEFITS OF MERGERS AND ACQUISITIONS

1. 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. The firm may achieve the same objective in a short period of time by
merging with an existing firm. In addition such a strategy is often less costly than the
alternative of developing the necessary production capability and capacity. 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; manufacture the sale of addition or new
products. Moreover when a firm expands or extends its product line by acquiring another firm,
it also removes a potential competitor.

2. SYNERGISM:- The nature of synergism is very simple. Synergism exists whenever the
value of the combination is greater than the sum of the values of its parts. In other words,
synergism is “2+2=5”. But identifying synergy on evaluating it may be difficult, in fact
sometimes its implementations may be very subtle. As broadly defined to include any
incremental value resulting from business combination, synergism is the basic economic
justification of merger. The incremental value may derive from increase in either operational
or financial efficiency.

Operating Synergism: - Operating synergism may result from economies of scale, some
degree of monopoly power or increased managerial efficiency. The value may be achieved by
increasing the sales volume in relation to assets employed increasing profit margins or
decreasing operating risks. Although operating synergy usually is the result of either
vertical/horizontal integration some synergistic also may result from conglomerate growth. In
addition, sometimes a firm may acquire another to obtain patents, copyrights, technical
proficiency, marketing skills, specific fixes assets, customer relationship or managerial

28
Personnel. Operating synergism occurs when these assets, which are intangible, may be
combined with the existing assets and organization of the acquiring firm to produce an
incremental value. Although that value may be difficult to appraise it may be the primary
motive behind the acquisition.

Financial synergism-Among these are incremental values resulting from complementary

internal funds flows more efficient use of financial leverage, increase external financial
capability and income tax advantages.

a) Complementary internal funds flows

Seasonal or cyclical fluctuations in funds flows sometimes may be reduced or eliminated by

merger. If so, financial synergism results in reduction of working capital requirements of the
combination compared to those of the firms standing alone.

b) More efficient use of Financial Leverage

Financial synergy may result from more efficient use of financial leverage. The acquisition
firm may have little debt and wish to use the high debt of the acquired firm to lever earning of
the combination or the acquiring firm may borrow to finance and acquisition for cash of a low
debt firm thus providing additional leverage to the combination. The financial leverage
advantage must be weighed against the increased financial risk.

29
Reasons for Bank Mergers and Acquisitions in Indian banking sector

1) Merger of weak banks:

Practice of merger of weak banks with strong banks was going on in order to provide
stability to weak banks but Narsimhan committee opposed this practice. Mergers can
diversify risk management.

2) Increase market competition:

Innovation of new financial products and consolidation of regional financial system are
the reasons for merger. Markets developed and became more competitive and because of
this market share of all individual firm reduced so mergers and acquisition started.

3) Economies of scale:
Capability of generating economies of scale when firms are merged.

4) Skill & Talent:

Transfer of skill takes place between two organization takes place which helps them to
improve and become more competitive.

5) Technology, New services and Products:

Introduction of e- banking and some financial instruments / Derivatives. Removal of
entry barrier opened the gate for new banks with high technology and old banks can’t
compete with them so they decide to merge.

6) Positive Synergies:
When two firms merge their sole motive is to create a positive effect which is higher than
the combined effect of two individual firms working alone. Two aspects of it are cost
synergy and revenue synergy.

30
 CHAPTER - 5

DATA ANALYSIS AND INTERPRETATION

31
 DATA ANALYSIS AND INTERPRETATION

Bank service be affected after merger

The response data pertaining to services of the bank after Merger & Acquisition has been
presented. Majority of the corporate customers from the public and private sector banks, i.e.55
% per cent showed they are happy towards the services of bank after Merger & Acquisition.

Very Good Good nor Bad Very Bad Total

good bad
In Number 0 20 05 04 04 33

In 0 60.5 14.1 15.2 10.2 100

percent

70

60

50
4
40
3
30 2
Series 1
20

10

0
GOOD GOOD nor BAD BAD VERY BAD

From the above table and graph it can be witnessed that the 60.5 per cent of the corporate
customer feels that the services are good after the Merger & Acquisition. 14.1per cent of the
respondent feels that the services are average, 15.5 per cent are bad and 12.5 per cent are very
bad. The analysis brings out that majority of the respondent are happy with the services rendered
by the acquired bank.

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Bank merger by individual customers
PARTICULARS RESPONDENTS PER CENT
Public sector bank with public sector 0 00.00
bank
Public sector bank with private bank 12 37.50
Private bank with private bank 8 25.00
Bank merger should not take place at all 12 37.50
TOTAL 32 100

40

35

30

25
Series 1
20
3
15
2
10

0
Public sector bank Public sector bank Private bank with Bank merger should
with public sector with private bank private bank not take place at all
bank

Table and Graph reflects that the majority of the respondents from the public and private sector
banks in India feel that banks M&A should happen only in Public sector with Private sector
bank 37.5 per cent and at the same time 37.5 194 per cent of the respondents feel that the M&A
should not take place in the Indian Banking sector. Only 25 per cent respondents reveal that
M&A should happen between Private with Private sector banks in India.

33
Bank merger by corporate customers

PARTICULARS RESPONDENTS PER CENT

Public sector bank with public sector 06 17.65
bank
Public sector bank with private bank 11 32.35
Private bank with private bank 11 32.35
Bank merger should not take place at all 06 17.65
TOTAL 34 100

35

30

25

20
Series 1
15
3

10 2

0
Public sector bank Public sector bank Private bank with Bank merger should
with public sector with public sector private bank not take place at all
bank bank

Table and graph given above discloses that a majority of the bank employees, i.e., 32.35 per cent
from the public and private sector banks in India are of the opinion that bank mergers should
happen between public with private sector and private with private sector. Only 17.65 per cent
of the bank employees feel public sector banks with public sector banks and some per cent of
employee feels that there should not be any merger between the banks.

34
For Oriental Bank of Commerce there was an apparent synergy post-merger as the
weakness of Global Trust Bank had been bad assets and the strength of OBC lay in recovery.
In addition, GTB being a south-based bank would give OBC the much-needed edge in the
region apart from tax relief because of the merger. GTB had no choice as the merger was
force don it, dated 14th August 2004, by an RBI ruling, following its bankruptcy. OBC
gained from the 104 branches and 276 ATMs of GTB, a workforce of 1400 employees and
one million customers. Both banks also had a common IT platform.

Again, When we regressed Oriental Bank Of Commerce as we did in previously with the
Bank Nifty, PE ratio, MPS/EPS and Size to find out the actual effect of merger, we obtained
the above mention results from which we can draw a conclusion that as the merger came into
effect „Beta‟ coefficient of MPS/EPS increased but all other coefficients decreased.

Also looking at the above table we can say that Constant, PE ratio, MPS/EPS and Size are
insignificant but Coefficient of Bank Nifty is significant.

Even though some variables are insignificant but this does not affect the viability of the
model as overall model is significant.

35
From the above figure we can easily say that R2 of the company reduced after the merger,
this implies the factors we took in our model now explain less variation in the stock. It is to be
noted that reduced R2 will not make our model meaningless.

NOTE:- All the above mentioned assumptions of CRLM are validate with this model and
thus it is good model for conducting research.
After completing the regression process we repeated the same process for calculating
Predicted Mean as we did earlier and compared it with actual return taking both 100 days and
1yr. Taking the same hypothesis and null hypothesis we computed t-value at one tail.

36
Above Graph was obtained when found the values of Predicted and actual returns taking
sample of 100 days. From the above graph it can be easily concluded that both predicted
return and actual return are moving together but actual return outclassed the predicted return.

Above Graph was obtained when found the values of Predicted and actual returns taking
sample of 1yr. From the above graph it can be easily concluded that both predicted return and
actual return are moving together but Actual return outclassed the Predicted return and this is
verified as when we found the compare means of both the returns. We hypothesized that both
means are same, but our hypothesis got rejected as the p-value of the test is very low so we
can easily conclude that “merger had a positive impact on Oriental Bank of Commerce”.

37
BANK MERGER LIST FROM 1990 to 1999

38
BANK MERGER LIST FROM 2000 to 2009

39
BANK MERGER LIST FROM 2010 to 2017

40
 CHAPTER - 6

FINDINGS, SUGGESTIONS & CONCLUSION

41
 FINDINGS
 A combination of factors increased global competition, regulatory changes, fast
changing technology, need for faster growth and industry excess capacity - have
fuelled mergers and acquisitions (M&A) in recent times.

 The M & A phenomenon has been noticeable not only in developed markets like the
US, Europe and Japan but also in emerging markets like India.

 Major acquisitions have strategic implications because they leave little scope for trial
and error and are difficult to reverse.

 Moreover, the risks involved are much more than financial in scope. A failed merger
can disrupt work processes, diminish customer confidence, damage the company's
reputation, cause employees to leave and result in poor employee motivation levels.
So the old saying. Discretion is the better part of valour,is well and truly applicable
here.

 A comprehensive assessment of the various risks involved is a must before striking an

M&A deal Circumstances under which the acquisition may fail including the worst
case scenarios should be carefully considered.

 Even if the probability of a failure is very low but the consequences of the failure are
significant, one should think carefully before rushing to complete the deal.

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 SUGGESTIONS

 Promote financial literacy through customer education.

 Become a trusted advisor to small business customers.

 Develop a truly omnichannel customer experience.

 Provide customers with self-service opportunities.

 Set your employees up for success.

 Solicit customer feedback whenever possible.

 Be flexible and open to change.

43
 CONCLUSION

In recent years, the banking industry has been undergoing massive mergers and acquisitions
in order to achieve bank consolidation. Mergers and amalgamations assist the institutions in
scaling up fast and gaining a bigger number of new consumers so as to improve their balance
sheet and cash flow statements. An acquisition or a merger not only offers a bank more
capital to work with in terms of giving out loans and making investments, but it also helps in
the expansion of the bank's geographic reach that enables it to provide services to a larger
customer base. However, a sharp rise in the number of such mergers and acquisitions has
resulted in an unprecedented increase in bank concentration at the market level, which may
have an impact on banking competitiveness.

44
 BIBLIOGRAPHY

 http://www.mergersandacquisitions.in
 http://www.mergersindia.com/mergeronline/
http://www.moneycontrol.com
 www.Orientalbankof commerce.com
 www.punjabnationalbank.com
www.globaltrustbank.com
 www.rbi.org.in
 www.Wikipedia.org.com

OTHER:- BOOKS-

 Merger and acquisition - j.fred weston and samwel C. Weaver.

 Financial services - M.Y Khan.

45
 ANEXTURE
The Study of Mergers and Acquisition in Indian Banking Sector
Dear respondent,

The questions given below relate to the Minor Research project on the above subject. Kindly
cooperate by answering the questions given below. We assure you that your answers will be
kept confidential.

NAME: -
ADRESS:-
PHONE NUMBER:-

Questionnaire

1. How many years do you have the relation with mergers bank?
1. A) 2yr B) 3yr C) 4yr D) 5yr

2. Which of the following merger do you think is good for the Indian Banking sector.?

A) Public sector bank with public sector bank(s) B) Public sector bank with private sector bank
C) Private sector bank with private sector bank(s) D) Banks merger should not take place at all

3. How the bank service is affected after merger. ?

A) Very good B) Good C) Good nor bad D) Bad

4. Which combination do you think is good for bank merger by individual customers. ?

A) Public sector bank with public sector bank(s) B) Public sector bank with private sector bank(s)
C) Private sector bank with private sector bank(s) D) Banks merger should not take place at all.

5) Which combination do you think is good for M&A in Indian Banks by corporate customers? ?

A) Public sector bank with public sector bank(s) B) Public sector bank with private sector bank(s)
C) Private sector bank with private sector bank(s) D) Banks merger should not take place at all.

46
6) Do you satisfy with this merger system?
A) YES B) NO

7) You satisfy with your bank services. ?

A) YES B) NO C) AVERAGE

8) Suggest any good merged bank. ?

9)If a bank merged in another bank, then who will be suffering after the merger situations ?

A) Bank Customers B) Bank employees C) RBI D) Govt.

10) Who will be responsible behind the merger?

A) Huge NPA B) Negative Net Worth C) Inappropriate Audit D) All of these

47