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Presentation on the topic

Group Members
Aabha Amatya
Barsha

Shrestha
Durga Dulal
Milan Adhikari
Pooja Neupane
Punisha Tandukar

43 financial institutions have merged so far and 13 more are in the process of merging So far. when Nepal Rastra Bank (NRB) introduced the Merger Bylaws. the Nepali banking sector has witnessed 21 sets of mergers — three were undertaken before the Merger Bylaws were introduced.History of Merger And Acquisition Since April 2011. .

the compulsion to increase the paid up capital as of the end of fiscal year 2012-13 was the driving force behind the increase in mergers Four commercial banks. seven development banks and two finance companies.Last fiscal year saw the maximum number of mergers taking place with nine sets of mergers between 22 financial institutions including commercial banks. development banks and finance companies to form two commercial banks. 18 development banks and 21 finance companies have undergone mergers .

while an Acquisition is the purchase of one company by another in which no new company is formed. .Concept of Merger and Acquisition A Merger means a combination of two companies to form a new company. the boards of directors for two companies approve the combination and seek shareholders’ approval. Merger  In a merger.

the acquired company chooses to exist and becomes part of the acquiring company.  Both companies' stocks are surrendered and new company stock is issued in its place. . After the merger.

. In an acquisition. the acquiring company obtains the majority stake in the acquired firms. the target company chooses to exist.•Acquisition When one company takes over another and clearly established itself as the new owner. which does not change its name or legal structure From a legal point of view. the purchase is called an acquisition. the buyer "swallows" the business and the buyer's stock continues to be traded.

Nepalese Perspective Liberalization policy led to mushrooming of banking & financial institutions in Nepal Nepal had only two commercial bank till 1984 A.D The forces that led NRB to direct Banking Institutions to go in the process of mergers and acquisitions:  Liquidity Crunch  Capital requirement  Open Financial Market .

State of financial institutions before and after merger Before merger Data as on July 2012 Financial Institutions Number Number Of Branches Commercial Banks 32 1423 Development Banks 88 687 Finance Companies 69 246 After merger Data as on July 2016 Financial Institutions Number Commercial Banks 28 (3 are Under Process Of Merging) Development Banks 70 (17 are Under Process Of Merging) Finance Companies 42 .

Will M&A solve problems of FI in Nepal???? If not What can be done?????? .

. franchising. Government should just not rely on mergers and acquisitions for addressing the problem of banking sector Rather.We can not blindly agree that the nepalese banking sector problem will be best addressed by the M&A strategy.  Should provide additional benefits to encourage joint venture. licensing. etc. it should   Introduce deficit budget financing  Encourage the investments in the productive sectors.

Classification by the Form of Integration: Statutory Merger: A statutory merger is one in which all the assets and liabilities of the smaller company is acquired by the bigger (acquiring) company Company A + Company B = Company A .

Company A + Company B = (Company A + Company B) .Subsidiary Merger: A subsidiary merger is one in which the target company becomes a subsidiary of the bigger acquiring company.

Company A + Company B = Company C .Consolidation:  A consolidation merger is one in which both the companies lose their identity as separate entities and become a part of a bigger new company.

on the Basis of Relatedness of the Business Activities: Horizontal Merger:  A merger that happens between companies belonging to the same industry. The companies have businesses in the same space and are generally competitors to each other The motivation behind such merger is economies of scale and control of bigger market share. .

•Backward Integration: A vertical integration where a company acquires the suppliers of its raw materials. .Vertical Merger:  A vertical merger is a merger between companies that produce different goods or offer different services for one common finished product. •Forward Integration: A vertical integration where a company acquires the distribution channels of its products.

A pure conglomerate merger is between companies with totally nothing in common.Conglomerate Merger: A merger between companies that operate in completely different and unrelated industries. . A mixed conglomerate merger is between companies looking for market or product extensions.

.Market Extension Mergers:  A merger between companies that have same products to offer but the markets are different. The reason behind such mergers is access to bigger markets and an increase in client base.

.Product Extension Mergers: A merger between companies that have different but related products but the markets are same.  Such mergers allow the companies to bundle their product offerings and approach more consumers.

Replacing leadership Reasons of Merger Diversifying Survival Competitive advantage .Cutting costs Increasing capabilities.

 Kist Bank Limited with Prabhu Bikash Bank Limited. .  NIC Bank with Bank of Asia.Examples of Banks Merger  Himalayan Saving and Finance Company(HISEF) with Laxmi Bank .  Machhapuchhre Bank with Janata Bank.  Mega Bank Nepal Ltd with Pashchimanchal Development Bank Ltd.

33 billion. 2073. with its central office at Rupandehi.Mega Bank Nepal Limited (MEGA) Mega Bank has been in operation in Nepal since 2009. .  It was registered as private sector promoted public limited company operation with issued capital of NRs 2. Pashchimanchal Development Bank Ltd. has formally merged with Mega Bank Nepal Ltd from13 Baishak.

 The reasons behind the merger was a step towards progress and growth. Mega Bank Nepal Ltd now has capital fund of Rs 3. 1.24 billion.350 Mega remittance centres and one extension counter.  Now it also has 53 branchless banking outlets. deposit of Rs 31 billion and credit portfolio of Rs 25.5 billion. to increase the amount of paid up capital as per the policy made by NRB. . 45 Mega money machines.

 The swap ratio was finalised at Rs 104. .25 per share for Mega Bank Nepal Ltd and Rs 67 per share for Pashchimanchal Development Bank Ltd.

Success and Failure of Merger .

Fully integrate the two businesses Ensure cultural compatibility Clearly define the specific value Improve the competitive behavior . II.Success of Merger I. IV. III.

III. II.Failure of Merger I. IV. V. Flawed Intention No common vision Ignorance Poor program management Weak leadership .