Mergers and Acquisitions in Indian Banks after Liberalisation: An Analysis

Abstract

Mergers and Acquisitions (M &A) aim towards business restructuring thereby increasing competitiveness and shareholder value via increased efficiency. The banking industry has experienced an unprecedented level of consolidation on a belief that incomparable gains can accrue through expense reduction, increased market power, reduced earnings volatility, and scale and scope economies. Whether or not bank mergers actually achieve this expected performance gains is the critical question. This article looks at some M&As that have happened post-2000 in India to understand the intent (of the targets and the acquirers), resulting synergies (both operational and financial), modalities of the deal, congruence of the process with the vision and goals of the involved banks, and the long term implications of the merger.

In this paper, we have attempted to study mergers and acquisitions (M & A) (in Indian banking industry post liberalization and critically examine the reasons for these mergers and analyze whether these mergers can be considered as successful or not. To measure the bank performance after pre merger and post merger, we have selected a sample of 5 bank mergers from 1994 -2004. There have been about 25 significant bank mergers post liberalization, if we ignore mergers of cooperative banks and regional rural banks. Using this sample, we have tried to measure and analyze pre merger and post merger financial performance of these banks. We have also tried to understand the major factors involved for being successful on mergers and acquisitions operations in banking industry in India.