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MERGERS &
ACQUISITIONS
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INDEX
Definition of Merger
Types of Merger
Definition of Acquisition
Difference between Merger & Acquisition
Impact
Advantages
Disadvantages
Merger & Acquisition in Banking Sector
Motives
Future in Banking Sector
Conclusion


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M E R G E R S








MERGER

Definition: In the pure sense of the term, a
merger happens when two firms, often of
about the same size, agree to go forward
as a single new company rather than
remain separately owned and operated.
This kind of action is more precisely
referred to as a "merger of equals." Both
companies' stocks are surrendered and
new company stock is issued in its place.

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EXAMPLE
GLAXO WELLCOME+SMITH KLINE BEECHAM
=GLAXOSMITH KLINE

GLAXO WELLCOME: Originally it was a baby food
manufacturer company.
It process local milk into baby food.
SMITH KLINE BEECHAM: It is a pharmaceutical company.
Founded in 2000 due to merger of GLAXO WELLCOME &
SMITH KLINE BEECHAM
It is also known as GSK.
It is a public limited company.


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TYPES OF MERGERS
From the perspective of business structures:

Horizontal merger - Two companies that are in direct
competition and share the same product lines and markets.
For example, combining of two book publishers or two
luggage manufacturing companies to gain dominant
market share
Vertical merger - It is a combination of two or more firms
involved in different stages of production or distribution
of the same product. For example, joining of a TV
manufacturing(assembling) company and a TV marketing
company or joining of a spinning company and a weaving
company.


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Market-extension merger - Two companies that sell the
same products in different markets.
Product-extension merger - Two companies selling
different but related products in the same market.
Conglomeration - Two companies that have no common
business areas For example, merging of different
businesses like manufacturing of cement products,
fertilizer products, electronic products, insurance
investment and advertising agencies. L&T and Voltas Ltd
are examples of such mergers.
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FROM THE PERSPECTIVE OF FINANCE:

Purchase Mergers: This kind of merger occurs when
one company purchases another.
Consolidation Mergers: With this merger, a brand new
company is formed and both companies are bought and
combined under the new entity.
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ACQUISITIONS
Definition: When one company takes over another and
clearly established itself as the new owner, the purchase
is called an acquisition. From a legal point of view, the
target company ceases to exist, the buyer "swallows" the
business and the buyer's stock continues to be traded.


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TOP 10 ACQUISITIONS MADE BY
INDIAN COMPANIES WORLDWIDE
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DIFFERENCE BETWEEN MERGERS
& ACQUISITIONS
In the case of a merger, two firms
together form a new company.
After the merger, the separately
owned companies become jointly
owned and obtain a new single
identity.
Mergers take place between two
companies of more or less same
size. In these cases, the process is
called Merger of Equals.
When two firms merge, stocks of
both are surrendered and new
stocks in the name of new
company are issued.

However, with acquisition, one
firm takes over another and
establishes its power as the single
owner.
The relatively less powerful,
smaller firm loses its existence,
and the firm taking over, runs the
whole business with its own
identity.
Unlike the merger, stocks of the
acquired firm are not surrendered,
but bought by the public prior to
the acquisition, and continue to be
traded in the stock market.



MERGERS ACQUI SI TI ONS
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IMPACT OF MERGERS &
ACQUISITIONS
Impact Of Mergers And Acquisitions on workers or
employees
Impact of mergers and acquisitions on top level
management
Impact Of Mergers And Acquisitions on shareholders
a) Shareholders of the acquired firm:
b) Shareholders of the acquiring firm:

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ADVANTAGES OF MERGERS AND
ACQUISITIONS
Shareholders get better information about the business
unit because it issues separate financial statements
Separating a subsidiary from its parent can reduce
internal competition for corporate funds.
For employees of the new separate entity, there is a
publicly traded stock to motivate and reward them.
Corporate restructuring techniques, which involve the
separation of a business unit or subsidiary from the
parent, can help a company raise additional equity funds.

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DISADVANTAGES OF MERGERS
AND ACQUISITIONS
De-merged firms are likely to be substantially smaller
than their parents, possibly making it harder to tap credit
markets and costlier finance that may be affordable only
for larger companies.
There are the extra costs that the parts of the business
face if separated. When a firm divides itself into smaller
units, it may be losing the synergy that it had as a larger
entity.

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ACQUISITIONS AND
MERGERS IN BANKING
SECTOR
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Mergers and acquisitions in banking
sector have become familiar in the
majority of all the countries in the world.
A large number of international and
domestic banks all over the world are
engaged in merger and acquisition
activities.
The principal objectives behind the
mergers and acquisitions in the banking
sector is to reap the benefits of economies
of scale.
Mergers and acquisitions in banking
sector are forms of horizontal merger.

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With the help of mergers and acquisitions, the banks can
achieve significant growth in their operations and
minimize their expenses to a considerable extent.
Important advantage behind this kind of merger is that in
this process, competition is reduced because merger
eliminates competitors from the banking industry.
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EXAMPLES OF ACQUISITIONS IN
BANKING SECTOR
Standard Chartered Acquires ANZ Grindlays Bank
(November '00)
HDFC Bank Acquires Centurion Bank of Punjab (May
'08)
Bank of Baroda Acquires South Gujarat Local Area Bank
Ltd (June '04)
ICICI Bank Ltd. Acquires Bank of Madura (March '01)
Oriental Bank of Commerce Acquires Global Trust Bank
Ltd (August '04)

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MOTIVES BEHIND MERGERS &
ACQUISITIONS

Growth
Synergy
Managerial efficiency
Tax shields and financial safeguards
Regulatory intervention

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FUTURE OF M&A IN
INDIAN BANKING

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CONCLUSION
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