INTRODUCTION
Banking industry plays a very important role in the economic growth of a country. Mergers and Acquisitions have become a positive way for growth in the size of banks which in turn play a significant role in entering the competitive global financial market. The Indian banking sector can be divided into two eras, the pre liberalization era and the post liberalization era. In pre liberalization era government of India nationalized 14 Banks on 19 July 1969 and later on 6 more commercial Banks were nationalized on 15 April 1980. In the year 1993 government merged The New Bank of India and The Punjab National Bank and this was the only merger between nationalized Banks, after that the numbers of nationalized Banks reduced from 20 to
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The findings of the paper suggest that bank M&A in Egypt has not shown significant improvement in performance and ROE.
Bhan Akhil (2009) in his paper gives an insight into the motives and benefits of the mergers in Indian banking industry. The study examined eight merger deals of the Indian banks during the period 1999 to 2006.
Azhagaiah & Kumar (2011), in their study tested hypothesis concerning whether there is significant improvement in the corporate performance of Indian manufacturing corporate firms following the merger event using paired t-test. The study findings indicate that Indian corporate firms involved in M&A have achieved an increase in the liquidity position, operating performance, profitability, and reduce financial and operating risk.
Azhagaiah and Sathish Kumar (2011), in their study related to short-run profitability of acquirer firms in India, selected 10 acquiring firms from chemical industry evaluated them based ratios such as Gross profit ratio, Operating profit ratio and Net profit
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Ayorinde (2012) examined the effects of merger and acquisition on the performance of selected commercial banks in Nigeria. Gross earnings, profit after tax and deposit profile was chosen as financial efficiency parameters for the purpose of study. The findings indicated an enhanced financial performance leading to improved financial efficiency.
Devarajappa S (2012) in their research explored various motives of merger in the Indian banking sector. It further compared pre and post merger financial performance of merged banks by using various financial parameters. The result suggested that post merger, the financial performance of the banks have improved, particularly, the return on equity, debt-equity ratio and Gross Profit ratio have shown significant improvement after the merger.
Saluja Rajni, Sharma Sheetal, Dr. Lal Roshan (2012) evaluated the impact of merger on the financial performance of HDFC Bank by using CAMEL Model. The study concluded that financial performance of HDFC Bank improved in post merger period in almost all parameters of CAMEL Model that is capital adequacy, asset quality, management capability, earning quality and
A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate
The economic recession of 2009 pushed some financial institutions to bankruptcy. The banking industry was also a victim of this economic hardship. Some solid institutions like Bank of America, Trust Bank, and Wells Fargo take over other banks for different reasons: market power, diversification, cost savings, and external growth. These banks acquire all the assets and the liabilities of another bank. These banks obtained the property rights and new market power. This research paper is to look at the economic advantages of the merger and to make some predictions.
Mergers and acquisition plays an important role in survival/vitalization of a corporation in today’s market. It continues to be a breakthrough strategy for improving innovation of a company’s product or services, market share, share price etc.
While some studies show there may be little or no improvements in the post acquisiton operating performance of merged banks, M&As do create value. This is observed by the positive or negative reactions of stock prices during M&A announcements (Isa & Yap, 2004) (Campa, 2004) (Drymbetas & Kyriazopoulos, 2014). Most studies find that cumulative abnormal returns occur in the days following or prior to the announcement date (Andrade et al., 2001).
aspects to analyze are the financial statements after the merger as well as accounting methodology.
Islam, S., Sengupta, P., Ghosh, S., & Basu, S. (2012). The behavioral aspects of mergers and acquisitions: A case study from India. Global Journal of Business Research, 6(3), 103-112.
In this paper, I begin by describing and assessing the different criteria financial analysts within Fortune 500 companies use to evaluate merger success and acquisition rationale. I also discuss what these strategies can imply about the sources of gains and losses on each company’s stock price, and the factors that drive merger success in the long run. I then discuss the firsthand evidence of this merger and acquisition by examining transaction details from both parties and transitioning into an analysis of CB&I’s strategy for post-merger integration. Finally, I discuss the implications of
The paper differs from others as it will provide insight and evaluation into which event during the merger process had the largest effect and identify whether this was the same for both firms, especially since the merger was undertaken in a tough regulatory environment which contains many “hurdles” (). The results of this paper could be attributed to other firms in the industry or, potentially, to other industries with similar regulatory structures.
Even mergers and acquisitions with high combination potential were more successful with robust organizational integration efforts (Larsson & Finkelstein, 1999). Malhotra and Sharma (2013) mentions that financial gain is often the crux of the matter when merger and/or acquisitions are considered. Corporations hardly consider the impact on the employees and related human resources changes, issues or outcomes. People and indeed their compensation is mostly placed in a marginal position with most of the due diligence done around financial and strategic planning.
The nature of change being witnessed in the contemporary business environment has made mergers and acquisitions a common feature. In the context of mergers, some two or more companies engage in negotiations and start to operate as a single entity. On the other hand, in acquisitions, one large firm acquires a smaller company. While on paper, these two components, both mergers, and acquisitions, may appear straightforward; the gist of the issue is that there is significant complexity associated with both measures.
A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less essential company loses its identity and becomes part of the more imperative corporation, which retains its identity. A merger extinguishes the merged corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the merged corporation (Gomes, 2011). A merger is not the same as a consolidation, in which two corporations lose their separate identities and unite to form a completely new
For example, the return on average assets in 2003 for the two merger targets, Bank One and Fleet Boston, were 1.27% and 1.34%, respectively, while the top 50 bank holding companies averaged 1.28%. This indicates that the recent mega mergers are not motivated by economic weakness but rather by other economic forces. Major changes in the banking system One significant phenomenon in the nation’s banking system is consolidation. The pace of mergers had been expedited in the 1990s.
Mergers and acquisitions represent the ultimate in change for a business. No other event is more difficult, difficult, or chaotic as a merger and acquisition. According to oxford, the term "merger" means "the combination of two commercial companies into one." the term "acquisition" refers to the acquisition of assets by a company from another company. In an acquisition, the both companies may continue to exist. The acquiring company will remain in business and the acquired business will be integrated into the acquiring company and therefore, the acquired company ceases to exist after the merger. Technology transfer to developing perspectives of multiple challenges any business. The prospects include access to new markets that were previously closed because of the cost, regulatory or indirect obstacles, the ability to beat resources such as capital, knowledge and work. Challenges come from foreign competitors entering domestic markets businesses, as well as domestic competitors reduce costs through global sourcing in offshore production moving or saving money expansion in scale in new markets. Globalization challenges the businesses to become more streamlined and efficient, while simultaneously extending the geographical scope of their activities [kraemer et al., 2002]. The transition to faster growth and elimination of the position of the third largest economy, the indian
Table 5: Profile of financial ratios of The Bank of Rajasthan and ICICI Bank for three financial years prior to merger (in percentages)
11 Sheikh, N. A. and Karim, S., “Determinants of profitability of Islamic commercial banks: Evidence from Pakistan”, Pakistan Journal of Islamic Research, Vol. 17