SYNOPSIS

“A STUDY ON
MERGERS AND ACQUISTION”

PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF

THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

BY

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 CONTENTS OF THE SYNOPSIS

1. Introduction of the Topic

2. Need for the Study

3. Scope of the Study

4. Objectives of the Study

5. Nature of the Company selected for Research

6. Review of Literature

7. Research Methodology

CHAPTER PLAN

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 INTRODUCTION OF THE TOPIC

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, or
A mix of the above modes.
TYPES OF MERGERS
Merger or acquisition depends upon the purpose of the offeror company it wants to achieve.
Based on the offerors‟ objectives profile, combinations could be vertical, horizontal, circular and
conglomeratic as precisely described below with reference to the purpose in view of the offeror
company.
(A) Vertical combination:
A company would like to takeover 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 a 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 i.e.
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.
(B) Horizontal combination:
It is a merger of two competing firms which are at the same stage of industrial process. The
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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.
(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.
ACQUISITION
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.
Methods of Acquisition:
An acquisition may be affected by:-
 Agreement with the persons holding majority interest in the company management like
members of the board or major shareholders commanding majority of voting power;
 Purchase of shares in open market;
 To make takeover offer to the general body of shareholders;
 Purchase of new shares by private treaty;
 Acquisition of share capital through the following forms of considerations viz. Means of
cash, issuance of loan capital, or insurance of share capital.

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 NEED FOR STUDY

As merger is a combination of two or more co‘s into an existing co or a new co. Acquired co.
transfer its assets, liabilities and shares to the acquiring company for cash or exchange of
shares.Need for Merger and Acquisition arises because in general, a merger can facilitate the
ability of two or more competitors to exercise market power interdependently, through an
explicit agreement or arrangement, or through other forms of behaviour that permits firms
implicitly to coordinate their conduct. It will be found to be likely to prevent or lessen
competition substantially when the parties to the merger would like to be in a position to exercise
a materially greater degree of market power in a substantial part of a market for two years or
more, than if the merger did not proceed in whole or in part. In short, a company can achieve its
growth objective by:
 Expanding its existing

markets Entering in new markets

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 SCOPE OF THE STUDY
I studied M&A was a term normally referring to consolidation of companies. However,

from legal point of view, acquisition means taking over of another company (target company)

thereby making it as a new owner of the target company. Merger, on the other hand, is

consolidation of two (or more) entities into a single entity and neither of the previous companies

remains independent.

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 OBJECTIVES OF THE STUDY
 To study the purpose of mergers and acquisitions in the Banking sector.
 TO Study on the Merger of OBC, ANDHRABANK, SYNDICATE BANK,
ALAHABAD BANK.
 To study the benefits of mergers and acquisitions.
 To understand Bank merger/amalgamation under various Acts
 To study the changes in the Indian Banking Scenario.
 To study the Procedure of Bank Mergers and Acquisitions
 To study the risk involved in merger and acquisition.
 To understand the challenges and opportunities in the Indian Banking Sector.
 To study the major Banks involved in Mergers and Acquisitions.

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 NATURE OF THE COMPANY SELECTED FOR RESEARCH

The Indian economic environment provides an advantage to banks and also uniquely accretes

value to M&A based transactions proving benefits to bidders unlike in other Bank M&A regimes
in the USA. This work provides deeper insight into the linkages between Bank M&A and M&A
literature with Indian Banking M&A and reviews the evidence. In a study of 23 M&A
transactions in Indian Banks during the period 2006 -2019, we find strong evidence for both
bidder and target gains that are used to specify points of comparison in Global US and European
markets. These gains reflect on economic conditions

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 REVIEW OF LITERATURE

THE INDIAN BANKING SECTOR

MERGER OF PSBs IN INDIA There is a long history for PSBs with regard to their
Ms&As. Chronologically Ms&As in Indian PSBs can be divided into five phases. Each of these
phases are briefly presented below.
Phase – I: Merger of Punjab National Bank and New Bank of India (1993-94)
In the year 1993-94, first ever merger between two nationalized banks i.e. merger of New Bank
of India with the Punjab National Bank was made to protect the interest of the stakeholders of
New Bank of India as it was a loss making bank. This was an example for strong bank protecting
a weaker bank.
Phase – II: Merger of State Bank of India and State Bank of Saurastra (2008)
Merger of State Bank of India and State Bank of Saurastra in 2008 have reduced the number of
SBI associate banks from seven to six. Merger was considered in order to increase the State Bank
of India’s competency with international presence. Earliest merger between SBI and
its associates was with State Bank of Saurastra as it was fully owned by the State bank of India.
And State Bank of Saurastra was smaller than any other associate banks of SBI. Phase – III:
Merger of Five SBI associate banks and Bharatiya Mahila Bank merged with SBI (2017)
Country’s largest lender, SBI has entered the group of the top 50 banks (in terms of Assets) in the
world as a result of its merger with five associate banks and Bharatiya Mahila Bank. The total
customer base of the bank has reached 37 crores with the 24000 branch network and nearly
59000 ATMs across the country.
Phase – IV: Merger of Bank of Baroda, Dena Bank and Vijaya Bank (2019)
On 1st April 2019 Bank of Baroda was merged with Dena Bank and Vijaya Bank. As a result
Bank of Baroda became India's second-largest PSBs.
1. Suchismita Mishra, Arun, Gordon and Manfred Peterson (2005) examined the contribution
of the acquired banks in only the non-conglomerate types of mergers (i.e., banks with
banks), and finds overwhelmingly statistically significant evidence that non conglomerate
types of mergers definitely reduce the total as well as the unsystematic risk while having no
statistically significant effect on systematic risk.
2. Ms. Astha Dewan (2007) focused on the post-merger financial performance of the acquirer
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companies in India and performance of firms going through mergers in Indian industry. The
merger cases for the year 2003 have been taken for the analysis. The financial data has been
collected for six years from 2000-06. Pre-merger and post-merger financial ratios have been
examined using paired sample t test. The results of the analysis reveal that there is significant
difference between the financial performance of the companies before and after the merger.
Further, it has been found that the type of industry does seem to make a difference to the
post-merger operating performance of acquiring firms.
3. Pramod Mantravadi & Vidyadhar Reddy (2008) studied the impact of mergers on the
operating performance of acquiring corporates in different industries, by examining some
pre- merger and post-merger financial ratios, with the sample of firms chosen as all mergers
involving public limited and traded companies in India between 1991 and 2003. The results
from the analysis of pre- and post- merger operating performance ratios for the acquiring
firms in the sample showed that there was a differential impact of mergers, for different
industry sectors in India. Type of industry does seem to make a difference to the post-merger
operating performance of acquiring firms.
4. Kannan R. (2008) in this study “The impact of mergers and acquisition on personal sector
banks on international economy” has studied that Mergers and Acquisition are a really
necessary market entry strategy moreover as growth strategy. This gift era is thought as
competition, goes for merger, and enjoys generally monopoly. relief and technological
advances area unit more and more pushing the banking sector towards larger globalization to
enhance the operational flexibility of banks, that is crucial within the competitive atmosphere
that banks operate in. the government conjointly proposes to recapitalize weak banks. The
recapitalization of weak banks has not yielded the expected ends up in the past and therefore
ought to be joined to a viable and time sure restructuring arrange. The method of merger and
acquisition is taken in several banks in Asian nation like- Times bank united with HDFC
Bank, Bank of Madura with ICICI bank, etc. The investigator has created a trial to live the
changes within the profit and money position of the higher than banks and has calculated
many ratios and tested them within the lightweight of ‘T-Test’, to understand the acceptance
and rejection of the developed hypothesis. The investigator has found that overall the merger
and acquisition doesn't result the money position of banks except once weaker and non-
viable banks area unit united with a financially sound and profit creating bank in such case
the profit of the later bank are going to be affected.

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5. Egl Duksait and Rima Tamosiunien (2009) described the most common motives for
company’s decision to participate in mergers and acquisitions transactions. The reason is
growth, synergy, access to intangible assets, diversification, horizontal and vertical
integration and so on arises from the primary company’s motive to grow. Most of the
motivations for mergers and acquisitions feature serve as means of reshaping competitive
advantage within their respective industries. However, it may be that some of the motives
identified affect some industries more than others, and in that sense they can be expected to
be associated with a greater intensity of mergers and acquisitions in certain sectors rather
than others.
6. Jagdish R. Raiyani (2010) in her study investigated the extent to which mergers lead
to efficiency. The financial performance of the bank has been examined by analyzing data
relevant to the select indicators for five years before the merger and five years after the
merger. It is found that the private sector merged banks are dominating over the public sector
merged banks in profitability and liquidity but in case of capital adequacy, the results are
contrary. Further, it was observed that the private sector merged banks performed well as
compared to the public sector merged banks.
7. Dr. V. K. Shobhana and Dr. N. Deepa (2011) made a probe into the fulfilment of motives
as vowed in the merger deals of the nine select merged banks. The study uses Summary
Statistics, Wilcoxon Matched Paired Signed Rank Test and‘T’ test for analysis and
interpretation of data pertaining to the five pre and post-merger periods each. The result
indicates that there has been only partial fulfilment of the motives as envisaged in the merger
deals.
8. Rehana Kouser and Irum Saba (2011) explored the effects of merger on profitability of the
bank by using six different financial ratios. They have selected 10 commercial banks that
faced M&A during the period from 1999 to 2010. The lists of banks were selected from the
Karachi Stock Exchange (KSE). Quantitative data analysis techniques are used for inference.
Analysis was done by using paired t-test. The results recommend that operating financial
performance of all commercial bank’s M&A included in the sample from banking industry
had declined later.
9. Dr. P. Natarajan and k. Kalaichelvan (2011) used the share price data and financial
statements of eight select public and private sector banks, during the period between 1995 and

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2004, this study examined M&A as a business strategy and to identify the relative importance
of mergers on business performance and increased Shareholders wealth. The study showed
that in a banking environment marked by frequent mergers, such transactions directly or
indirectly effects the shareholders sentiments and increase market share (i.e.) mergers
enhances performance and wealth for both the
Businesses and shareholders.
10. Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of corporations and
over that it had positive impact as their gain, in most of the cases deteriorated liquidity. When
the amount of few years of Merger and Acquisitions .it came to the purpose that firms could
are able to leverage the synergies arising out of the merger and Acquisition that haven't been
able to manage their liquidity. That Study analysis the comparison of pre and post analysis of
the corporations. It additionally indicated the positive effects supported some monetary
parameter like Earnings before Interest and Tax (EBIT), come on investor funds, ratio,
Interest Coverage, Current magnitude relation and value potency etc.
11. Mital Menapara (2012) evaluated the impact of mergers and acquisitions on financial
Performance of Indian Corporate Sectors and examined the impact of merger and acquisitions
on Return on Investment, Profitability and Liquidity position of selected companies. The
authors concluded that emerging from the point of view financial evaluation is that the
merging Companies were taken over by companies with reputed and good management. And
therefore, it was possible for the merged firms to turnaround successfully in due course.
12. P Akhil Bhan (2015) has made an attempt to study the insight into the
motives and benefits of the mergers in Indian banking sector .This is done
by examining the eight merger deals of the banks in India during the period of
reforms from 1999 to 2006 . Through the empirical methods by applying t-test
and EVA value calculations the potential of the mergers has been evaluate to
study the efficiencies or benefits achieved.

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 RESEARCH METHODOLOGY
The study has been carried out as a desk research with a theoretical approach.
This guide to used qualitative research methodology is designed to help you think about all
the steps you need to take to ensure that you produce a good quality piece of work.
METHODOLOGY CONSIST OF TWO TYPES
 Primary data

 Secondary data

 This project is about the list of the companies which are M&A in 2010 in India ,and
what is the companies positions, deal values. it is also includes with information about
how the M&A take place 2001-2010.

 this also include with the information about what is the growth of the M&A from past
years. how the percentage increased from few years. and what are the reasons for
M&A .this is also include with the case study on selected company acquisition.

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