2. Meaning of Merger
It is combining of different
business organizations having
similar entities which results in
creation of new business
organization which grows more
rapidly and success in global
market by expanding customer
base.
3. Meaning of merger can be understood by following
aspects:
Consolidation Absorption
TYPES OF MERGER:
1. Horizontal merger
2. Vertical merger
3. Conglomerate merger
4. Concentric merger
4. EXAMPLES
BAE Systems results merger of BRITISH AEROSPACE AND
MES (Marconi Electronic Systems).
Indian Fisheries results merger of Air India and Kingfisher
Airlines
Sikkim Bank Ltd. And Union Bank of India.
New Bank of India and Punjab National Bank.
Global Trust Bank Ltd and Oriental Bank of
Commerce.
5. Meaning of Acquisition
By keeping the view that, Corporate remain with
their separate legal entity and being
independent, one corporate controls
management and assets of other corporate to
attain effective control.
6. Examples
The biggest deal was done by Reliance
Communication which merged its telecoms tower
business with GTL infrastructure Ltd for USD 11
billion.
Bharti Airtel acquired Kuwait based Zain Telecom's
African business for USD 10.7 billion.
Reliance Industries acquired Infotel broadband for
USD 1 Billion.
The biggest deal in Pharmaceutical sector was the
acquisition of the generic drug unit of Piramal Health
care by USA based drug maker Abbot Laboratories
(ABT) for USD 3720 million.
7. Meaning of Takeover
Takeover means control.
Under Monopolies And
Restrictive Trade Practices
Act 1969, Takeover is
defined as Acquisition by
having at least 25% of voting
right of one business , in
hands of other business.
8. EXAMPLES
Tata’s takeover of Tetley Tea.
Essel Packaging owned by Subhash Chandra of Zee
acquired Switzerland's Propack AG.
Cadbury by Kraft foods in 2010.
9. OBJECTIVES :
To hold a sizeable market share.
To improve profitability.
Accelerate growth and reduces risks.
Utilization of financial strengths.
Cost of diversifying products and services delivered to
customers within an industry.
Divest poor performing elements.
Gain of valuable and potentially valuable assets.
Usage of expertise of acquired company.
Serve the customer better.
To compete with international banks.
For mushroom growth of banks.
Economy of Scale.
10. MAIN ISSUES AT TIME OF MERGER
Shareholders Interest.
Accounting.
Issues related to technology.
Taxation.
Integration of products and services.
Human resources.
11. Legal Issues:
Banking Regulation Act 1949 Section 44 A : 2/3 rd
majority of shareholders for passing resolution.
Compulsory amalgamation and voluntary
amalgamation.
Co-operative bank can be merged with Co-operative
banks only.
12. ADVANTAGES OF MERGER
Efficiencies in Operations.
Revenue Encashment.
Benefits to worldwide Banking.
Deregulation.
Preparing for future.
Spreading fixed cost.
enhance market image.
Easy supervision.
13. Disadvantages of Merger
Brand Projection.
Big size and scale.
Customer Services.
Lack of Human Approach.
Valuation problems.
Dysynergy effect.
Failure to integrate well.
Long Incubation Period.
14. SUGGESTIONS
Merger banks of same technology.
Technology should be upgraded.
Productivity should be enhanced.
Improve knowledge and attitude of Employees.
For Indian Banking System, merger is a effective way of
making banking system strong and sound.
