VALUE CREATION THROUGH CORPORATE RESTRUCTURING

Impact of Pre & Post merger effects on financial restructuring

In Indian banking sector

Sunil Kumar M.N.

Lecturer, MBA Department
sunilkumarmn.rit@gmail.com
Rajeev institute of Technology, Hassan

Bhavani B S
Asst. Professor, MBA Department
bhavanibs@gmail.com
Rajeev institute of Technology, Hassan

Abstract:+

Since Pre-independence the Indian banking sector has witnessed mergers of three
presidency banks, mergers and acquisitions in banking sector provides opportunities to banks
viz. economies of scale, achieve growth in their operations, decrease the expenses to the
considerable extent, business synergies, increase the productivity level and also satisfy the
customers. In the process of merger & acquisitions Reserve Bank of India play a vital role in
banking system to protect the depositors’ interest, expeditious resolution and avoidance of
regulatory forbearance.

Corporate restructuring is the process of redesigning one or more variables of a company.

The process of restructuring a company affected by different factors like positioning of the
company, competitive survives, liquidity of a company and working capital estimations.
Corporate restructuring may take place in the form of merger & acquisitions, takeovers, sell offs,
spin offs, joint ventures, divestitures, equity carve out, leveraged buyout and changes in
ownership. In merger & acquisitions of banks, financial restructuring involves restructuring their
debt-equity mix which brings changes in capital structure as well as changes in the assets and
liabilities to maximize the value of the stakeholders, shareholders and creditors. Financial
restructuring is significant reorganization of firm’s assets and liabilities and it is always
associated with the corporate restructuring.

This paper compute the capital structure of the banks in pre-merger and post-merger cases and
finds value of the bank in terms of their debt and equity using capital structure theories, which in
turn impacts the capital structure decisions like EBIT-EPS analysis, ROI-ROE analysis, leverage
analysis, comparative analysis and ratio analysis. The purpose of this paper is to know the impact
of changes in assets and liabilities of the banks on value of the bank.

Key words: corporate restructuring, financial restructuring, Indian banking sector,

Merger & acquisitions, capital structure & capital structure decision techniques.