Presented by:- Reg no:-

Tara prasad 057

Nasim A khan 061
Mitali 062
Kamaljeet Sahoo 060
INTRODUCTION TO MERGER AND ACQUISITION

MERGERS

A merger occurs when two or more companies combines

and the resulting firm maintains the identity of one of the
firms. One or more companies may merger with an existing
company or they may merge to form a new company.
Usually the assets and liabilities of the smaller firms are
merged into those of larger firms.
Merger may take two forms-

1.Merger through absorption

Absorption is a combination of two or more companies into an

existing company. All companies except one loose their
identify in a merger through absorption.

2.Merger through consolidation.

A consolidation is a combination if two or more combines into
a new company. In this form of merger all companies are
legally dissolved and a new entity is created .In consolidation
the acquired company transfers its assets, liabilities and share
of the acquiring company for cash or exchange of assets.
ACQUISITION

A fundamental characteristic of merger is that the

acquiring company takes over the ownership of other
companies and combines their operations with its own
operations. An acquisition may be defined as an act of
acquiring effective control by one company over the
assets or management of another company without any
combination of companies.
 MERGER AND INDIAN BANKING SECTOR
1) Mergers and acquisitions encourage banks to gain global reach and
better synergy andallow large banks to acquire the stressed assets of
weaker banks.
2) Merger in India between weak/unviable banks should grow faster so
that the weak banks could be rehabilitated providing continuity of
employment with the working force, utilization of the assets blocked
up in the weak/unviable banks and adding constructively to the
prosperity of the nation through increased flow of funds.

3) The process of merger and acquisition is not a new happening in case

of Indian Banking,Grind lay Bank merged standard charated Bank,
Times Bank with HDFC Bank, bank of Madura with ICICI Bank,
Nedungadi Bank Ltd. With Punjab National Bank and most recdently
Global Trust Bank merged with Oriental Bank of Commerce.
4) Merger and amalgamation in Indian banking so far has been to
provide the safeguard and hedging to weak bank against their failure
and too at the initiative of RBI, rather than to pay the way to initiate
the banks to come forward on their own record for merger and
amalgamation purely with a commercial view and economic
consideration.

5) The Banking and finance system will improve competitiveness

through aprocess of consolidation either through mergers and
acquisitions or through strategic alliances.

6) There is need to restructure the banking sector in India through

merger and amalgamation in order top makes them more capitalized,
automated and technology oriented so as to provide environment
more competitive and customer friendly.
 Mergers Of Banking Sector

2000 Times bank HDFC Bank

2001 Bank of Madura ICICI

2002 Benaras state bank Bank of Baroda

2003 Nedungadi Bank Punjab national Bank

2004 South Gujrat Local Area Bank Bank of Baroda

2004 Global Trust Bank Oriental Bank of

Commerce
2005 Bank of Punjab Centurion bank

2007 Centurion Bank of Punjab HDFC Bank Ltd

Ltd(merged)
 TYPES OF MERGERS

Mergers are of many types. Mergers may be differentiated on the basis

of activities,which are added in the process of the existing product or
service lines. Mergers can be a distinguished into the following four
types:-

1. Horizontal Merger
2. vertical Merger
3. Conglomerate Merger
4. Concentric Merger
Horizontal merger
Horizontal merger is a combination of two or more corporate firms
dealing in same lines of business activity. Horizontal merger is a co
centric merger, which involves combination of two or more business
units related to technology, production process,marketing research and
development and management.

Vertical Merger
Vertical merger is the joining of two or more firms in different stages of
production or distribution that are usually separate. The vertical Mergers
chief gains are identified as the lower buying cost of material.
Minimization of distribution costs, assured supplies and market
increasing or creating barriers to entry for potential competition or
placing them at a cost disadvantage.
Conglomerate Merger
Conglomerate merger is the combination of two or more unrelated
business units in respect of technology, production process or market and
management. In other words, firms engaged in the different or unrelated
activities are combined together. Diversification of risk constitutes the
rational for such merger moves.

Concentric Merger
Concentric merger are based on specific management functions where as
the conglomerate mergers are based on general management functions. If
the activities of the segments brought together are so related that there is
carry over on specific management functions. Such as marketing
research, Marketing, financing, manufacturing and personnel.
 BENEFITS OF MERGERS
GROWTH 0R 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.

SYNERGISM: - The nature of synergism is very simple. Synergism

exists when ever the value of the combination is greater than the sum of
the values of its parts. 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 assts employed increasing profit margins or
decreasing operating risks.
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) The Income Tax Advantages

In some cases, income tax consideration may provide the financial

synergy motivating a merger, e.g. assume that a firm A has earnings
before taxes of about rupees ten crores per year and firm B now break
even, has a loss carry forward of rupees twenty crores accumulated
from profitable operations of previous years. The merger of A and B
will allow the surviving corporation to utility the loss carries forward,
thereby eliminating income taxes in future periods.