A STUDY ON EMPLOYEES PERCEPTION ABOUT THE MERGER AND

ACQUISITIONS IN BANKING SECTOR

INTRODUCTION

Indian financial part can be partitioned into two significant times the pre – advancement

period and post-progression time since 1991.This area has seen an enormous measure of

progress in the post-progression time. On the ongoing occasions, this division has been

experiencing a lot of changes as far as guidelines and impacts of globalization.These

progressions have influenced this area both fundamentally and deliberately. With the

changing conditions are a wide range of techniques have been received by this part to

stay effective and to flood ahead in the worldwide field. One such methodology is

through the procedure of solidification by means of merger and procurement (Bhan,

2011). With the changing occasions, the Indian financial framework is moving from a

framework with an enormous number of little banks to a framework where in there are a

modest number of huge banks. This changing business sector drives the mergers which

have been a piece of the history procedure of progress in the created economies;

however, in the developing economies this idea is picking up pace in the ongoing

occasions. For each change is to quicken some initiator is important and for the Indian

financial framework, monetary arrangement advancement, privatization, deregulation and

other market changes have gone about as the impetuses. As per Mr. D.K. Mukerjee,

overseeing chief, IDBI Bank "The new age private part banks are experiencing a basic

period of money related transformation. The Indian government and Reserve bank of

India has been agreeable to these mergers occurring in the Indian Financial segment.
Each merger wave has its own reasons and these reasons are firmly identified with the

limited condition.

Consolidation in an Indian Banking Sector

The solidification of business substances, through mergers and acquisitions, is an overall

marvel. The various mergers and acquisitions everywhere throughout the world,

remembering for India, in the genuine just as in the budgetary administration area, give

off an impression of being driven by the target of utilizing the cooperative energies

emerging from the procedure of merger and procurement. The private part banks are

dependent upon the arrangements of the Banking Regulation Act, 1949, the open segment

banks are administered by their individual establishing resolutions and by those

arrangements of the Banking Regulation Act which have been made explicitly material to

them. The urban co-employable banks, then again, are represented by the arrangements

of the Cooperative Societies Act of the particular State or by the Multi-State Cooperative

Societies Act, as additionally by the arrangements of the Banking Regulation Act which

are explicitly relevant to them. The Development Financial Institutions (DFIs), which

were established by a resolution, draw in the arrangements of those rules while the DFIs

organized as constrained organizations, were dependent upon the arrangements of the

Companies Act, 1956, yet both the sorts of the DFIs are managed and administered by

the RBI under the arrangements of the R B I Act, 1934. The Regional Rural Banks

(RRBs) were made under the RRBs Act, 1976 and are managed by the RBI yet directed

by the NABARD, while the non-banking money related organizations are dependent
upon the arrangements of the Companies Act, 1956 and are controlled and administered

by the RBI under the arrangements of the RBI Act(Singh & Gupta, 2015).

CONCEPTUAL FRAMEWORK

(Hax & Majluf, 1996) characterize mergers and acquisitions as a method for building up

the hierarchical reason as far as its drawn-out targets, activity projects, and asset

distribution. A significant snag looked by associations trying to combine or get others has

been that of recognizing the business zone in which a firm ought to take an interest so as

to boost its drawn-out productivity (Hill & Jones 2001). The creators incorporate these

speculations into one applied structure that depicts interesting wellsprings of issues that

can develop in various phases of M&A reconciliation, their mental and conduct impacts

on workers, and solutions to address the issues. The structure can be utilized as a guide

for M&A reconciliation pioneers to deliberately design intercessions to smooth the

human combination process(Seo & Hill, 2005). The mergers and acquisitions elevated

the shareholders' assessment of the merged/acquiring banks(Joash & Njangiru, 2015).

The progression of mergers and acquisitions has augmented the competence and

productivity increase of the banking group(Abd-Kadir, Selamat, & Idros, 2010). The

majority of mergers are gracious and are recommended by the directors and shareholders

of both companies (Hax & Majluf, 1996).

several directors and senior managers will today suggest to their board that merging or

acquiring an additional company will help the organization right to use to new or

infiltrate additional into existing markets, obtain new products, knowledge, resources, or

management of talent(Jemison & Sitkin, 1986). The important factors that influence
corporate strategy are the environment in which a company is operating. It is, in search of

suitable responses to that environment, that an organization realizes that it neither has the

strengths needed, nor the time required to develop such strengths as the opportunity

might get lost, that it seeks and identifies another firm with which to merge or to acquire,

that has appropriate capabilities and competencies (Hubert & Edward, 2006)

According to Pike and Neale (2002), merger methodologies are related to the pooling of

the interests of two organizations into another undertaking requiring the understanding of

the two arrangements of investors. Firms will accordingly look for that key position that

will give them the most extreme effect on the outside condition, inside assets and

abilities, and the desires and impact of partners (Johnson and Scholes, 2002). Firms use

mergers and acquisitions methodologies in key situating. A takeover or a securing, then

again, is characterized as an obtaining by one organization of the offer capital of another

in return for money, customary offers, advance stock, or some blend of the two: this

legitimately brings about the personality of the procured being consumed into that of the

acquirer. Hill and Jones (2001) hypothesize that capture is when the acquiring company

gains control of an extra without the co-operation of its existing management. The merger

motives can be classified into seven groups. Those theories arguing with private

information, managerial empire‐building, or process influences are better supported by

evidence than those tracing mergers back to efficiency gains or monopoly power. The

explanations of mergers in terms of raider activity or macroeconomic disturbances carry

the least plausibility(Trautwein, 1990). Many scholars squabble that mergers and

acquisitions of company are a widespread and important answer to globalization and the

altering market environment (Boateng & Bjortuft, 2003). in spite of the increasing
attractiveness of mergers and acquisitions, it has been description that more than two-

thirds of great merger deals not succeed to create worth for shareholders in the

intermediate term (Reshcke & Aldag, 2000). Reshcke and Aldag (2000) establish that the

profitability of target companies, on average, declines after an acquisition. nevertheless,

the effect of M&A on modernization performance has been discuss controversially. even

as mergers have been regarded as an helpful instrument for reaping remuneration of both

scale and scope, this is frequently taken for granted devoid of any further specifications

Concept of Perception

(Hay, Warren, & Drager, 2006) The wide range of factors influences accuracy in the

perception task. These include participant-specific characteristics, word-specific

characteristics, context-specific characteristics, and perceived speaker characteristics. We

argue that taken together; the results provide strong support for exemplar-based models

of speech perception, in which exemplars are socially indexed

Perception can be defined as the progression by which organisms interpret and organize

sensations to produce a meaningful experience of the world. Sensation usually refers to

the immediate, relatively unprocessed result of stimulation of sensory receptors in the

eyes, ears, nose, tongue, or skin. Perception, on the other hand, better describes one's

ultimate experience of the world and typically involves further processing of sensory

input. Through the perceptual process, gain in sequence about the properties and elements

of the environment that are significant to our survival. Perception not only create our

experience of the world something like us; it allows us to act within our environment

(Sternberg 1996)
Perception can be divided into two groups; bottom-up theories or data-driven and top-

down theories. Top-down theorists start their explanation of perception from the top,

focussing on expectancies, prior knowledge, and other higher-level cognitive processes

and then work their way down to considering the sensory data. While bottom-up theorist

"s start from the bottom and consider the perceived physical stimulus, the observable

form or pattern, and work their way up to higher-level cognitive processes such as the

organizing principles (Sternberg 1996)

REVIEW OF LITERATURE

(Basavaraj, 2019) The merger of banking institutions in general and PSBs, in particular,

is being discussed by academicians, bankers, and practitioners. When the banking sector

is at crossroads due to bulging NPAs, increased frauds, and failing banks, at the time

when the country's GDP is at lower levels, the government decided megamerger of

nationalized banks. The present paper provides a chronological account of mergers in

nationalized banks. It presents post-merger quantitative data at each phase of the merger.

The manuscript highlights the merits and limitations of bank mergers. It observes that a

merger is not a guarantee for overcoming all the problems faced by banking institutions.

Simply the size of a bank will not help the banks unless these institutions revived lending

and focused on the recovery of bad loans.

(Patra, 2019) With the initiation of financial sector reforms, competition among the

banks had increased. The competition is intense, and irrespective of the challenge from

the multinational players, domestic banks, both public and private, are also seen to be

earnest in their pursuit of gaining a competitive edge by opting for mergers and
acquisitions. As a result, Mergers and Acquisitions (M&A) are the order of the day. As

an characteristic of strategic management, M&A can permit enterprises to cultivate,

shrink, and revolutionize the environment of their business or competitive situation. From

a legal point of observation, a merger is a legal consolidation of two entities into one

entity. In contrast, an acquisition occurs when one entity takes ownership of another

entity's stock, equity interests, or assets. However, from a commercial and economic

point of view, both types of transactions generally result in the consolidation of assets

and liabilities under one entity. The dissimilarity among a "merger" and an "acquisition"

is less clear.

(Tandon, Saxena, & Tandon, 2019) conclude that though as per the EPS, there is dilution

and no competitive advantage obtained due to the merger, the other motives such as

enhanced productivity, multi-dimensional banking, increased operational efficiency.

Customer delights will be advantageous to the evolved entity. Overall, the integration of

investments and treasuries will bring cost-saving and synergy in this era of megamergers.

(.P .S & .Veerakumaran, 2019) The results indicate that significant differences exist

between employees of Public Sector and Private Sector Banks regarding various aspects

of job satisfaction, pay and fringe benefits, supervision, training, and development.

However, they are significant in the case of the aspects, relation with co-workers,

employee empowerment, supervision, performance appraisal, and nature of the job.

(Agrawal, 2018) suggests that the surviving employees of the merged banks positively

perceive merger activity. Though the employees were initially nervous about the

information of merger, job security, financial security, work-life balance. The employees
were pleased with their job security, financial security, and work-life balance after the

merger.

(Ladha, 2017) It proposes that the government could use the threat of merger to induce

reluctant public sector banks to meet the critical domestic agenda and performance

metrics. Those that meet the societal goals may continue to have the benefit of the status

quo. Those that do not are required to merge to form an entity that can internationally

compete in raising equity and deposits and providing loans and services.

(Mehta, Chandani, Sooraj, & Baunthiyal, 2017) will give the bits of knowledge and the

rules to existing blended organizations, the organizations experiencing M&A, or wanting

to do as such as a piece of their vital objective. It will offer help to HR experts for better

coordination of delicate and hard parts of workers. The paper will be valuable for

academicians and to the intrigued perusers managing in the HR elements of an

association.

(Deshmukh, 2015) describes that the merger and acquisition is an inevitable part of

banks. As it is a law of nature, that small entity is supposedly merged into a larger entity.

There are a number of factor which cause stress among employees like uncertainty,

insecurity, fears concerning job loss, job changes, compensation, changes in power,

status, prestige, workload, working hours, the technological problem at work, inadequate

salary, time for family job worries at home group differences and communication.

Careful proactive planning by the acquiring organization to reduce the emotional fallout

can ease the transition and reduce the risk of failure for an otherwise advantageous

merger.
(Singh & Gupta, 2015) concluded that before and after the merger the financial

performance of the banks has increased, which margin to the gain of selected public and

private sector banks in the Indian Banking Sector.

(Chavan & Upadhyaya, 2014) established their study that the M&As have become a

major strategic tool for achieving the same objective and it is imperative to avoid the

possibilities of small banks from becoming the target of huge foreign banks which are

expected to come to India

(Joshi, 2013) found that mergers and acquisition is the activity which created stress

among bank employees of erstwhile Bank of Rajasthan Ltd. When the BoR was about to

be merged in the ICICI bank, all the employees were against this merger. As we found

that the post-merger satisfaction level is shallow, and the stress is very high. The study

also reveals that the two most prominent factors are Cultural Fit and HR Policy

Framework during a merger. Thus, the study can say that the changes which occur during

mergers and acquisitions, if not managed at the right time, then the level of stress can

increase.

(Joshi & Goyal, 2012) point out that the merger and acquisition is an inevitable part of

banks. As it is a law of nature, that small entity is supposedly merged into a larger entity.

There are a number of factor which cause stress among employees like uncertainty,

insecurity, fears concerning job loss, job changes, compensation, changes in power,

status, prestige, workload, working hours, the technological problem at work, inadequate

salary, time for family job worries at home group differences and communication.
(Naveed, Hanif, & Ali, 2011) suggested that this framework can give a new site into

explaining the impact of M&A on employee's job satisfaction and security. This

framework investigated the impact of M&A on the employee's job motivation and job

satisfaction, having both pre & post-M&A job experience and those having only post

M&A experience.

PROBLEM OF THE STUDY

The financial framework assumes a fundamental job in the cutting edge monetary world.

Banks gather the investment funds of the people and loan them and producers. Bank

advances encourage business. Makers get from banks the cash required for the

acquisition of crude materials and to meet different necessities, for example, working

capital. It is sheltered to keep cash in banks. Premium is additionally earned

subsequently. In this way, the longing to spare is stimu¬lated, and the volume of

investment funds increments. The reserve funds can be used to create new capital

resources. Consequently, the banks assume a basic job in the production of new capital

(or capital arrangement) in a nation and hence help the development procedure. Banks

organize the offer of offers and debentures. Hence, business houses and producers can get

fixed capital with the guide of banks. There are banks known as modern banks, which

help the development of new com¬panies and new mechanical ventures and give long

haul credits to manu¬facturers. The financial framework can make cash. At the point

when a business extends, more cash is required for trade exchanges. The lawful delicate

cash of a nation can't generally be extended rapidly. Bank cash can be expanded rapidly

and utilized when there is a requirement for more cash. In a creating economy (like that
of India), banks have a basic impact as a provider of cash. The financial framework

encourages inward and worldwide exchange. An enormous piece of the exchange is done

using a credit card. Banks give references and assurances, for their clients, in light of

which merchants can gracefully products using a loan. This is especially significant in

worldwide exchange when the gatherings live in various nations and are frequently

obscure to each other. Despite the fact that the financial area assumes a huge job in the

advancement of our economy, the working and running expense are expanding. To deal

with these costs, the administration chose to actualize the merger and procurement of

banks in our nation. The main motives behind merger & acquisition in

the banking sectors are to the reduction of costs, to gain efficiency, to achieve economies

of scales, enlarging customer base and market coverage, to bring in new products and

specialization thereof. A merger is the grouping of two or more companies into a single

company where one survives, and others lose their corporate existence. Since 1991 the

banking sector has been in the process of transformation and consolidation. Mergers and

acquisitions are repeatedly happening in a common scenario. The technological progress,

emerging opportunities, excess retention capacity and deregulation of environmental,

increasing economic scale, stock level, buying a new share and increasing subsidiary

banks' economic level, customer's service approval etc.are the primary reason for the

merger. In order to adapt to the fast-changing environment, the banking sector is in the

process of consolidation, corporate restructuring, and strengthening to continue

competent and sustainable.

Mergers and acquisitions can prove to be a considerable risk to the human resources of

both organizations. Employees of the merging or acquiring organization, however, have

the edge over those working for the acquired banks as they may be rewarded with an

increase in remuneration and better job position. It gives them a sense of having an

upper-hand, yet, the fears of mergers cannot be neglected. It must be noted that there is a

remarkable difference between acquisitions, and the unification of two banks can play out

very differently in different scenarios. Here is a delicacy, employees of massive corporate

deal with such predicaments better than their counterparts working in relatively smaller

companies. Also, often employees deal with a partial or unrelated merger/acquisition in a

much less hostile fashion. The effects on employees can be downplayed by providing

them adequate information and training to be well-equipped and engaged in dealing with

the new change. As a result the present study is an attempt to relate with the impact of

Mergers and Acquisition on employees, which can be assessed by analyzing and

assessing it in both pre and post status of banks employee and business per employee.

Both of them are index related to the employees. The need to distinguish the impact on

employees stimulated as the employees are the significant respondents affected by the

Mergers and Acquisition, and the reflections can be clearly seen on the HR issues as

Employee Morale, Motivation, and Commitment, Competency and Job satisfaction as

well.

OBJECTIVES OF THE STUDY

1. To study the employee's perception of the merger and acquisition of banks

2. To comprehend the role of HR in Mergers and Acquisitions

3. To study the job security among the employees of pre and post-merger of banks

in the study area

 4. To assess the financial security among the employees of pre and post-merger of

banks

5. To examine the work-life balance among the employees of pre and post-merger

of banks in the study region

6. To categorize the challenges concerned in any Mergers and Acquisitions from

the human resource perspective

7. To assess the employee's satisfaction level of pre and post-merger of banks

STATEMENT OF HYPOTHESIS

1. The employees do not have the perception of the merger and acquisition of banks

2. There is no significant difference between pre and post-merger of banks

concerning the job security among the employees of banks in the study area

3. There is no significant difference between pre and post-merger of banks

concerning the financial security among the employees

4. There is no significant difference between pre and post-merger of banks related to

work-life balance among the employees

5. There are no challenges involved in Mergers and Acquisitions from the human

resource perspective

6. The employees are not satisfied with the merger and acquisition of banks in the

study region.
RESEARCH METHODOLOGY

The present research focuses on assessing the employee's perception of the

merger and acquisition in the banking sector. To study also focuses on understanding the

role of HR in Mergers and Acquisitions. Additionally, the study concentrates on

assessing job security, financial security, and work-life balance among the employees

after the merger and acquisition process. Furthermore, the research focuses on identifying

the problems and challenges faced by the employees after M& A. Finally, the study

concentrates on assessing the satisfaction level among the employees.

SOURCES OF DATA

To fulfill the present research objectives, both primary and secondary data used.

The primary data gathered from the employees of recent merger and acquisition of banks

in India. The secondary based data collected from journals, magazines, books, the

internet, and newspapers regarding organic food products in India and overseas.

PILOT STUDY

The extensive literature survey helps to identify the variables of the study. The

identified variables are consolidated and prepare a rough draft of questionnaires and

circulated among the employees of recent merger and acquisition of banks. To verify the

reliability of the questionnaires, a pilot study was carried out with a questionnaire to

analyze the employee's perception of the merger and acquisitions of banks. The

questionnaire was administered to 50 employees. The data collected on this process has
been tested using Cronbach's Alpha for its reliability. The results of the reliability test are

shown in the following table:

Perception of the Merger and Acquisitions of banks 0.867

job security among the employees of pre and post-merger of 0.891

banks

financial security among the employees of pre and post-merger 0.811

of banks

work-life balance among the employees of pre and post-merger 0.798

of banks

challenges concerned in any Mergers and Acquisitions from the 0.863

human resource perspective

The pilot study results indicate the entire factors. Alpha values are >0.7. It

indicates that the entire factors alpha values are more significant than the threshold level.

The pilot study results revel the questions raised in questionnaires are easily

understandable by the employees. Therefore the same questionnaires finalized and

circulated among the employees without any modification.

SAMPLING TECHNIQUE
 The purposive sampling method used to elicit the necessary information from the

employees of banks.

SAMPLE SIZE

Table 1.1

An Over View Of Sample Response to the Questionnaires

S.No Partial Fully

Response
Area Planned Completions Filled-
Rate
Rejected in
1 Punjab National Bank
200 19 181 90.50
(OBC/United Bank of India)
2 Indian Bank
200 21 179 89.50
(Allahabad Bank)
3 Canara Bank
200 24 176 88.00
(Syndicate Bank)
4 Union Bank of India
(Andhra Bank and
200 23 177 88.50
Corporation Bank)
5 State Bank of India
200 26 174 87.00
(SBI Associate banks)

METHOD OF ANALYSIS

The data collected for the study are analyzed by using the SPSS package. The

analysis can broadly be categorized under two parts, namely Descriptive Analysis and

Inferential Analysis. In the descriptive analysis, the percentage method is adopted to

analyze the demographic profile of the bank employees and other data relevant to the

objectives of the study. In statistical analysis, the relationships between the variables are

established in the form of the hypothesis. These hypotheses are tested by using One

sample t-test, Independent t-test, Analysis of Variance, Duncan multiple range tests,

Correlation and Multiple Regression Analysis, Friedman test, EFA & CFA, Chi-square

Test, and Structural Equation Modeling.

SCHEME OF CHAPTERIZATION

The research is segregated into five chapters.

Chapter I deal with the introduction about merger and acquisitions, Conceptual

framework, Role of banks, Reasons for Merger and Acquisitions, Statement of the

Problem, Objectives of the study, Statement of the Hypothesis Research Methodology,

and Limitation of the study and Chapterization Scheme.

Chapter II highlights the various research studies conducted in merger and

acquisitions

Chapter III deals with an overview of the banking sector and Merger and
Acquisitions

Chapter IV focuses on Data Analysis and Interpretation.

Chapter V summarizes the significant findings, suggestions, conclusions, and

opens new vistas for further research.
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