MERGER OF BHARAT OVERSEAS BANK TO INDIAN OVERSEAS BANK

What is merger & Acquisition

MERGER : When two companies become one entity with a new name, and agree upon shared control in the management of the new company, a merger is said to have taken place. An example of this is the recent merger of Sandoz and Ciba-Geigy to form Novartis. The recent proposition for the merger of Coopers and Lybrand is an example of a merger wherein two of the world's largest financial consultants are coming together to make their business even more enterprising. ACQUISITION : When two companies become one, but with the name and control of the acquirer, and the control goes automatically into the hands of the acquirer. A classic example in this context is the acquisition of TOMCO by HLL. Mergers and acquisitions are undertaken by companies to achieve certain strategic and financial objectives. They involve the bringing together or two organizations with often disparate corporate personalities, cultures and value systems. Success of mergers may, therefore, depend on how well the organizations are integrated. There are a variety of stakeholders in the merging companies who have an interest in the success of the mergers. Shareholders and managers are two of the most important stakeholders, but others include employees, consumers, local communities and the economy at large. OBJECTIVES OF MERGERS AND ACQUISITIONS The immediate objective of an acquisition is self-evidently growth and expansion of the acquirer's assets, sales and market share. A more fundamental objective may be the enhancement of shareholders' wealth through acquisitions aimed at accessing or creating sustainable competitive advantage for the acquirer. In modern finance theory, shareholder wealth maximization is posited as a rational criterion for investment and financing decisions made by managers. Share holder wealth maximization may, however, be supplanted by the self-interest pursuit of managers making those decisions. According to the managerial utility theory, acquisitions may be driven by mangerial ego or desire for power, empire building or perquisites that go with the size of the firm.