mergers & acquisition in banking sector
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Transcript of mergers & acquisition in banking sector
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Merger:-
A Merger may be defined as the combinationof twoor more independent business corporations
into a
single enterprise, usually involving theabsorptionof one or more firms by a dominant firm.
Mergers may be broadly classified asHorizontal,
Vertical or Conglomerate
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Acquisition:-
It is defined as an act of one enterprise of
acquiring,directly or indirectly of shares, votingrights, assets
or control over the management, of another
enterprise .
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Difference BetweenMergers & Acquisitions
Merges AcquisitionsThe case when two companiesdecide to move forward as a singlenew company instead of operatingbusiness separately.
The case when one company takes overanother and establishes itself as thenew owner of the business.
The stocks of both the companiesare surrendered, while new stocksare issued afresh.
The buyer company swallows thebusiness of the target company, whichceases to exist.
For example, Glaxo Welcome andSmithKline Beehcam ceased to existand merged to become a new company,
known as Glaxo SmithKline.
Dr. Reddy's Labs acquired Beta harmthrough an agreement amounting $597million.
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Regulatory acts for merger:- The Companies Act, 1956 The Takeovers Code, 1997
The Monopolies and Restrictive Trade Practices Act,1969
The Foreign Exchange Management Act, 1999 The Foreign Investment Promotion Board (FIPB)
The Reserve Bank ofIndia
The Income Tax Act, 1961
Mergers, amalgamations, de-mergers,acquisitions of business units or divisions, areall governed by The Companies Act for allregistered companies
Acquisition of shares in listed Indian companiesis governed by The Takeover Code, 1997.
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Motives behind M&A Economy of scale
Economy of scope
Increased revenue or market share
Cross-selling
Synergy
Taxation Vertical integration
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Types of merger
1. HORIZONTAL: Between enterprisesin the same product market and atthe same level of the production or
distribution cycle.2. VERTICAL: Between enterprisesthat operate at different levels ofthe production and distributioncycle.
3. CONGLOMERATE: Betweenenterprises operating in differentmarkets.
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Advantages of merger
Accessing new markets Maintaining growth momentum Acquiring visibility and international
brands Buying cutting edge technologyrather than importing it
Taking on global competition Improving operating margins andefficiencies
Developing new product mixes
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The Industrial Development Bank ofIndiaLimited commonly known by IDBI is oneofIndia's leading public sector banks and 4thlargest Bank in overall ratings.
TheIndustrial
Development Bank of
India (
IDBI)was established on July 1, 1964 under an Act of
Parliament.
10th largest development bank in the world interms of reach with 1228 ATMs, 720 branches
and 486 centers. Some of the institutions built by IDBI are NSE,
NSDL, SHCIL, the Credit Analysis & Research Ltd,the Exim Bank, SIDBI , the EntrepreneurshipD
evelopmentInstitute of
India.
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IDBI Bank
Type Public sector bank
Industry Banking
Financial services
Founded July 1964
Headquarters Mumbai,India
Key people Mr. R. M. Malla, CMD
Products Finance and insurance
Website www.idbibank.com
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IDBI Bank Ltd - Company Profile
SnapshotCompany Profile: IDBI Bank Ltd
Ticker: 500116
Exchanges: BOM
2010 Sales: 178,170,000,000
Major Industry: Financial
Sub Industry: Commercial Banks
Country: INDIA
Employees: 10201
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Total mergers ofIDBI
United Western Bank
Satara Swadeshi CommercialBank
Union Bank of Kolhapur
IDBI Ltd
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United Western Bank
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Saraswat Co-operative
Bank Ltd.(A Schedule Bank)
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Position of merged banks as on 31.03.2009
Name of Bank Date of Merger
TotalBusinessAdded
(Rs. Incr.) as on31.03.09
NumberofBranch
Licensesreceived
Gross NPAs on thedate of
merger(Rs. Incr.)
Gross NPAs on31.03.09
(Rs. Incr.)
Profitearnedfrom the
date of themerger(Rs. In cr.)
Maratha MandirCo. op. Bank Ltd.
20.03.06 1,104.28 12 66.54 29.79 29.48
Mandyi Co.-op.Bank Ltd.
30.03.07 1,157.24 19 40.38 17.68 38.14
Annasaheb KaraleJanata Sah. BankLtd.Murgharajendra
. Bank Ltd.
30.06.07 333.04 22 73.82 45.79 -2.04
Nasik Peoples Co-op. Bank Ltd.
21.12.07 251.35 14 56.24 41.92 6.75
South Indian Co-op. bank Ltd.
01.09.08 159.00 14 13.43 13.23 -3.11
KolhapurMaratha Co-op.
06.03.09 86.62 15 26.00 26.00 -2.42
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1. Maratha Mandir Co-op. Bank.
2. Mandyi Co-op. Bank Ltd.
3. Annashaheb Karale Janata Sahakari Bank.
4. Murgharajendra Sahakari Bank Ltd.
5. Nashik Peoples Co-op. Bank Ltd.
6. South Indian Co-op. Bank Ltd.
7. Kolhapur Maratha Co-op. Bank Ltd.
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KOLHAPUR MARATHA CO-OP. BANK
MERGED WITH SARASWAT BANK Those were merged on August 15, 2007.
It is the fifth acquisition for Saraswat Bank.
The Saraswat banks chiarman is Mr. Eknath Thakur.
Across the country there are 15 branches of KolhapurMaratha Co-op. Bank.
With the merger, the total branches of Saraswat Bankgoes to 172 and now including the Maratha bank.
Total Business added in Saraswat bank of Rs. 86.63caror.
NPA still constant from the date of merger i.e. Rs.26caror.
Saraswat co-op. bank goes on loos when it is merged
with Kolhapur Maratha Bank i.e. 2.42 crore.
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Reason of merger Kolhapur Maratha with a total business of Rs 110
crore and number of depositors of 1.31 lakhspread over 15 branches, had run into moredifferent types of difficulties.
Shareholders of the acquired bank will notreceive any shares after merger since the bank isa loss-making one. The merger is not with theintention of expansion but to protect smalldepositors.
It is also considering merging two cooperativebanks with itself. The bank has set a businesstarget of Rs 19,000 crore for the current financialyear and expects to touch Rs 25,000 crore by2010-11.
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Difficulties of Kolhapur
Mhanagar bank
The Kolhapur-based bank has reported an
accumulated loss of Rs 24 crore till dateand its gross non-performing assets stood
at 40 per cent. It has a deposit base of Rs
65 crore and advances base of Rs 45
crore.