babi final ppt (1)

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Semester 3

SYBMS B (2010- 2011)

Submitted to: Professor Mr. Sachin Pimple

Banking and Insurance



IN BANKING SECTOR

MERGERS AND ACQUISITIONS



GROUP MEMBERS

y 7510 ² Megha Patil

y 7516 ² Parikshit Prabhudesaiy 7521 ² Bhranti Rawal

y 7528 ²Yasha Shrishrimal

y 7536 ² Priyanka Vasnik

y 7548 ² Praful Jain



BUSINESS RESTRUCTURING

MERGERS, ACQUISITIONS, AMALGAMATIONS, INTEGRATION



MERGER

y The combining of two or more companies, generally byoffering the stockholders of one company securities in the

acquiring company in exchange for the surrender of theirstock

y Example: Company A+ Company B= Company C.



ACQUISITION

y A transaction where one firms buys another firm with theintent of more effectively using a core competence by making

the acquired firm a subsidiary within its portfolio of business

y Example: Company A+ Company B= Company A.



AMALGAMATION

y Two companies joint together and form a third new companythis is called Amalgamation.

y Both companies looses its entity



INTEGRATION

y Integration means combining activities related to the presentactivity of a firm



MOTIVE BEHIND CONSOLIDATION

y Growth

y

Synergyy Managerial Efficiency

Market Entry

y Strategic Motive

y

Tax Shields and FinancialSafeguards

y Regulatory Intervention



ADVANTAGES OF M&A

y Enhances profitability

y Economies of scaley Enhances debt capacity

y Lowers the financial costs



DISADVANTAGES OF M&A

y Clash of corporate culturesy Effect of globalization



CASE STUDY

ICICI BANK·S ACQUISITION OF BANK OF RAJASTHAN



ICICI

y Established in 1994 by ICICI Limited.

y 2nd largest bank in India.y A major source of foreign currency loans to IndianIndustries.

y It provides banking products & financial services to

Corporate & Retail customers.



ICICI

Total Assets (MARCH 2010) 3,634 Billions

Over all Branches 2583

ATMs 6700



BANK OF RAJASTHAN

y Established in 1943 ²Udaipur by Late Seth Shri Govind

Ram Seksaria.

y It has a strong hold in Rajasthan.

y It engages in Commercial banking, Merchant Banking,Consumer Banking etc



BANK OF RAJASTHAN

Total Assets (MARCH 2010) 172.24 Billion

Over all Branches 463

ATMs 111



NEED FOR ACQUISITION

y Corporate governance

y Presence in north-western statesy Strong capital base to capitalize on growth opportunities

y Regulatory measures

y Readymade infrastructure



PROCESS OF ACQUISITION

With reference to ICICI and BOR



Joint Assessment

Haribhakti & co.



Approval of Board of Directors



Information to the Stock Exchange



Application in the High Court



Shareholders and Creditors meetings



Filing of the Court Order



Sanction by the High Court



Transfer of Assets or Liabilities



Payment by Cash and Securities



210 days from the filing of court order

MaximumWaiting Period



DEAL VALUATIONICICI BANK BANK OF RAJASTHAN

LATEST MCAP (inRs.crores)

99,125 1471

BRANCHES 2,009 458*

ATM 5,219 111*

EMPLOYEES 34,596 4075

GROSSNPA (%) 5.06 2.8#

CAPITAL ADEQUACY (%) 19.41 11.3#

LOAN BOOK (in Rs.crores) 1,81,200 8,100#

LOW COST DEPOSITS 41.7 27.4*

BUSINESS (Rs.crores) 1,154* 532*

* As of march 2009 , # as of December 2009 , remaining figures march 2011



y Horizontal acquisition

y BOR market cap 1.5% that of ICICI

ySwap ratio (25:118)

y 3rd acquisition by ICICI

y Rs 188.42/- per share

(premium of 89%)

y Valuation of BOR $ 668 million



OBSTACLES IN MERGER

y United forum of BOR opposed the acquisition, citing

cultural incompatibility.y They suggested a merger with public sector bank.

y The employees union of BOR branch in Udaipur filed

petition claiming BOR acquisition is illegal



IMPACT OF THE ACQUISITION

ImpactEmployees

Acquired bank

Acquiring bank

Customers

Shareholders



ICICI

y Helps in increasing customers

y Increase in staff (skilled & unskilled)

yIncrease in assets

y Increased coverage



CUSTOMERS

yNo loss of money

y Interest being safeguarded



SHARE HOLDERS

y Didn·t incur lossesy More dividend for the

share holders of theacquired bank



EMPLOYEES

ySeniority rules

y Trade union problem



CONCLUSION



WEBLIOGRAPHY

y http://tejas-iimb.org/articles/01.php

y www.taxguru.in

y http://www.economywatch.com/mergers-acquisitions/international/banking-sector.html

y http://finance.mapsofworld.com/merger-acquisition/impact.html

y www.icici.com

y www.slideshare.com

y http://www.thehindubusinessline.com/todays-paper/article992114.ece



THANK YOU

babi final ppt (1)

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