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Concept of mergers ACQUISITION

Meaning The term mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. In simple words we can say a merger is said to occur when: Two or more companies may merge with an existing company They may merge to form a new company Two or more companies combine in to one company

Meaning An Acquisition usually refers to a purchase of a smaller firm by a larger one. Acquisition, also known as a takeover or a buyout, is the buying of one company by another. Acquisitions or takeovers occur between the bidding and the target company. There may be either hostile or friendly takeovers. Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company.

Methods of Acquisition

An acquisition may be affected by: (a) An agreement with the persons holding majority interest in the company management like members of the board or major shareholders commanding majority of voting power; (b) Purchase of shares in open market; (c) Making takeover offer to the general body of shareholders; (d) Purchase of new shares by private treaty; (e) Acquisition of share capital through the following forms of considerations viz. means of cash, issuance of loan capital, or insurance of share capital.

TYPES OF ACQUISITION

There are different types of Acquisitions/takeover:1. Friendly takeovers 2. Hostile takeovers 3. Reverse takeovers Friendly takeovers Before a bidder makes an offer for another company, it usually first informs that company's board of directors. If the board feels that accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. In a private company, because the shareholders and the board are usually the same people or closely connected with one another, private acquisitions are usually friendly. If the shareholders agree to sell the company, then the board is usually of the same mind or sufficiently under the orders of the shareholders to cooperate with the bidder.

Hostile takeovers
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A hostile takeover allows a suitor to bypass a target company's management unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer without informing the target company's board beforehand. A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. Tender offers in the USA are regulated with the Williams Act. An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simple majority, to replace the management with a new one which will approve the takeover .Another method involves quietly purchasing enough stock on the open market, known as a creeping tender offer, to effect a change in management. In all of these ways, management resists the acquisition but it is carried out anyway. Reverse takeovers A reverse takeover is a type of takeover where a private company acquires a public company. This is usually done at the instigation of the larger, private company, the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. However, under AIM rules, a reverse take-over is an acquisition or acquisitions in a twelve month period which for an AIM company would change in its business, board or voting control; or in the case of an investing company, depart substantially from the investing strategy stated in its admission document or, where no admission document was produced on admission, depart substantially from the investing strategy stated in its pre-admission announcement or, depart substantially from the investing strategy

Types of Mergers

There are many types of mergers and acquisitions that redefine the business world with new strategic alliances and improved corporate philosophies. From the business structure perspective, some of the most common and significant types of mergers and acquisitions are listed below:

Horizontal Merger This kind of merger exists between two companies who compete in the same industry segment. The two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits. This kind substantially reduces the number of competitors in the segment and gives a higher edge over competition.

Vertical Merger Vertical merger is a kind in which two or more companies in the same industry but in different fields combine together in business. In this form, the companies in merger decide to combine all the operations and productions under one shelter. It is like encompassing all the requirements and products of a single industry segment.

Conglomerate Merger Conglomerate merger is a kind of venture in which two or more companies belonging to different industrial sectors combine their operations. All the merged companies are no way related to their kind of business and product line rather their operations overlap that of each other. This is just a unification of businesses from different verticals under one flagship enterprise or firm.

Difference Between merger and Acquisition

Merger and acquisition is often known to be a single terminology defined as a process of combining two or more companies together. The fact remains that the so-called single terminologies are different terms used under different situations. Though there is a thin line difference between the two but the impact of the kind of completely different in both the cases

Basis of Different

meaning

Merger Two or more companies combine in to one company or forms a new company

Acquisition When one company takes over the other and rules all its business operations, it is known as acquisitions.

Process

Merger is considered to be a process when two or more companies come together to expand their business operations. In such a case the deal gets finalized on friendly terms and both the companies share equal profits in the newly created entity.

This process of restructuring, one company overpowers the other company and the decision is mainly taken during downturns in economy or during declining profit margins. Among the two, the one that is financially stronger and bigger in all ways establishes it power. The combined operations then run under the name of the powerful entity who also takes over the existing stocks of the other company.

Nature

Mostly friendly

Unfriendly

Size

Big size company Same size company merge together smaller one for business expansion

acquire

Advantage of merger
Merger and acquisition has become the most prominent process in the corporate world. The key factor contributing to the explosion of this innovative form of restructuring is the massive number of advantages it offers to the business world. Following are some of the known advantages of merger and acquisition Maintaining and accelerating a companys growth Growth is necessary for a company, when there is a growth only then a company can earn maximum profit and company can achieve its growth objective by two ways Expanding its existing markets Entering in to new market Expanding its existing markets- it can be done in two ways

Expanding existing market

Internally

Externally

Internally
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 Physical and managerial Develop its operating facilities Manufacturing resource marketing

Externally Combining its operation with other companies

Enhancing profitability Merger may help companies in enhancing profitability because combination of two or more companies may result in more than the average profitability due to cost reduction and efficient utilization of resources profitability may be enhance because of Economies of scale Operating economies synergy Diversification of Risk Growth through the combination of firm in unrelated business .It reduce nonsystematic risk

Reduction in tax liabilities In some countries a profitable company may merge with a loss making company any for calculating its tax liabilities a company can carry forward its loss to set off against its gain

Limiting the competition competition to some extend

if

we merge with any competitor that will reduce our

Other motives For Merger

Merger may be motivated by two other factors that should not be classified under synergism. These are the opportunities for acquiring firm to obtain assets at bargain price and the desire of shareholders of the acquired firm to increase the liquidity of their holdings. Purchase of Assets at Bargain Prices Mergers may be explained as an opportunity to acquire assets, particularly land mineral rights, plant and equipment, at lower cost than would be incurred if they were purchased or constructed at the current market prices. If the market price of many socks have been considerably below the replacement cost of the assets they represent, expanding firm considering construction plants, developing mines or buying equipment often have found that the desired assets could be obtained where by cheaper by acquiring a firm that already owned and operated that asset. Risk could be reduced because the assets were already in place and an organization of people knew how to operate them and market their products. Many of the mergers can be financed by cash tender offers to the acquired firms shareholders at price substantially above the current market. Even so, the assets can be acquired for less than their current casts of construction. The basic factor underlying this apparently is that inflation in construction costs not fully rejected in stock prices because of high interest rates and limited optimism by stock investors regarding future economic conditions. Increased Managerial Skills or Technology Occasionally a firm with good potential finds it unable to develop fully because of deficiencies in certain areas of management or an absence of needed product or production technology. If the firm cannot hire the management or the technology it needs, it might combine with a compatible firm that has needed managerial, personnel or technical expertise. Of course, any merger, regardless of specific motive for it, should contribute to the maximization of owners wealth. 3. Acquiring new technology To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller company with unique technologies, a large company can maintain or develop a competitive edge.

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Legal procedure of merger and acquisitions

Mergers and acquisitions are regulated under various laws in India. The objective of the laws is to make these deals transparent and protect the interest of all shareholders. They are regulated through the provisions of the Companies Act, 1956. The Act lays down the legal procedures for mergers or acquisitions:

Permission for merger

Approval of board of director

Application in the high court

Shareholders and creditors meeting

Sanction by the high court

Filing of the court order

Transfer of assets and liabilities

Payment by cash or securities

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Permission for merger Two or more companies can amalgamate only when the amalgamation is permitted under their memorandum of association. Also, the acquiring company should have the permission in its object clause to carry on the business of the acquired company. In the absence of these provisions in the memorandum of association, it is necessary to seek the permission of the shareholders, board of directors and the Company Law Board before affecting the merger. Information to the stock exchange The acquiring and the acquired companies should inform the stock exchanges (where they are listed) about the merger. Approval of board of directors The board of directors of the individual companies should approve the draft proposal for amalgamation and authorize the managements of the companies to further pursue the proposal. Application in the High Court An application for approving the draft amalgamation proposal duly approved by the board of directors of the individual companies should be made to the High Court. Shareholders' and creators' meetings The individual companies should hold separate meetings of their shareholders and creditors for approving the amalgamation scheme. At least, 75 percent of shareholders and creditors in separate meeting, voting in person or by proxy, must accord their approval to the scheme. Sanction by the High Court After the approval of the shareholders and creditors, on the petitions of the companies, the High Court will pass an order, sanctioning the amalgamation scheme after it is satisfied that the scheme is fair and reasonable. The date of the court's hearing will be published in two newspapers, and also, the regional director of the Company Law Board will be intimated. Filing of the Court order After the Court order, its certified true copies will be filed with the Registrar of Companies.

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Transfer of assets and liabilities The assets and liabilities of the acquired company will be transferred to the acquiring company in accordance with the approved scheme, with effect from the specified date. Payment by cash or securities As per the proposal, the acquiring company will exchange shares and debentures and/or cash for the shares and debentures of the acquired company. These securities will be listed on the stock exchange.

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Process of Merger and Acquisition

Business Valuation

Proposal Phase

Planning Exit

Structuring Business Deal

Stage of Integration

Operating the Venture

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Business Valuation
Business valuation or assessment is the first process of merger and acquisition. This step includes examination and evaluation of both the present and future market value of the target company. A thorough research is done on the history of the company with regards to capital gains, organizational structure, market share, distribution channel, corporate culture, specific business strengths, and credibility in the market. There are many other aspects that should be considered to ensure if a proposed company is right or not for a successful merger.

Proposal Phase
Proposal phase is a phase in which the company sends a proposal for a merger or an acquisition with complete details of the deal including the strategies, amount, and the commitments. Most of the time, this proposal is send through a non-binding offer document.

Planning Exit
When any company decides to sell its operations, it has to undergo the stage of exit planning. The company has to take firm decision as to when and how to make the exit in an organized and profitable manner. In the process the management has to evaluate all financial and other business issues like taking a decision of full sale or partial sale along with evaluating on various options of reinvestments.

Structuring Business Deal

After finalizing the merger and the exit plans, the new entity or the takeover company has to take initiatives for marketing and create innovative strategies to enhance business and its credibility. The entire phase emphasize on structuring of the business deal.

Stage of Integration
This stage includes both the company coming together with their own parameters. It includes the entire process of preparing the document, signing the agreement, and negotiating the deal. It also defines the parameters of the future relationship between the two.

Operating the Venture

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After signing the agreement and entering into the venture, it is equally important to operate the venture. This operation is attributed to meet the said and pre-defined expectations of all the companies involved in the process. The M&A transaction after the deal include all the essential measures and activities that work to fulfill the requirements and desires of the companies involved.

Due diligence
Due diligence refers to the investigating effort made by an individual to gather all relevant facts and information that can influence his decision to enter into a transaction or not. Exercising due diligence is not a privilege but an unsaid duty of every party to the transaction. For instance, while purchasing a food item, a buyer must act with due diligence by checking the expiry date, the price, the packaging condition, etc. before paying for the product. It is not the duty of the seller to ask every buyer every time to check the necessary details. M&A due diligence helps individuals avoid legal hassles due to insufficient knowledge of important details. Due diligence is integral to business ethics. It is exercised in a simple over-the-counter transaction or a complicated merger and acquisition transaction. For instance, while acquiring a company, the buyer must do thorough research of the credentials of the company, its market valuation, status of accounts receivables, position in the debt market, past performance, etc. Another area where an individual needs due diligence is while investing funds in a company. The individual should study the previous financial reports to analyze the company's performance. He should check the company background, its promoters, general reputation, and return to the existing shareholders. Dealing in real estate is a risky business. One of the highest numbers of frauds takes place in this area. A buyer or a seller must investigate the authenticity of the other party. They should also ensure that the property title is clear. Mergers and acquisitions in the banking sector is a common phenomenon across the world. The primary objective behind this move is to attain growth at the strategic level in terms of size and customer base. This, in turn, increases the credit-creation capacity of the merged bank tremendously. Small banks fearing aggressive acquisition by a large bank sometimes enter into a merger to increase their market share and protect themselves from the possible acquisition. Banks also prefer mergers and acquisitions to reap the benefits of economies of scale through reduction of costs and maximization of both economic and non-economic
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benefits. This is a vertical type of merger because all banks are in the same line of business of collecting and mobilizing funds. In some instances, other financial institutions prefer merging with a bank in case they provide a similar type of banking service. Another important factor is the elimination of competition between the banks. This way considerable amount of funds earlier used for sustaining competition can be channelized to grow the banking business. Sometimes, a bank with a large bad debt portfolio and poor revenue will merge itself with another bank to seek support for survival. However, such types of mergers are accompanied with retrenchment and a drastic change in the organizational structure. Consolidating the business also makes the bank robust enough to sustain in the everychanging business environment. They find it easier to adapt themselves quickly and grow in the domestic and international financial markets.

Cost of Merger and Acquisition

Mergers and acquisitions are strategic business deals that are executed only after comparing its cost with the potential benefits to know the viability of the proposition. In an acquisition deal, the acquiring company estimates the cost of acquiring the other company to gauge how profitable will be the takeover in the long-run. Many methods are available to calculate the cost of mergers and acquisitions. However, the common ones are the Replacement Cost Method and the Discounted Cash Flow Method. Replacement Cost method Replacement Cost Method is ideally used for manufacturing firms that have a number of by-products. These by-products like machinery, furnaces, tools, etc. can be re-used by the acquiring company in the course of business. Therefore, the total cost of the byproducts is compared with the cost of replacing them with the new ones at market price to determine the profitability of the deal. However, this method is unsuitable for human resource-intensive firms. Discounted Cash Flow Method Discounted Cash Flow Method involves discounting future cash flow projections, from the newly formed company, to its present value. If the present value is higher than the actual cost of merger, then the merger is viable. The present value is calculated using the weighted average cost of capital.
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All these methods are different approaches to determine the value of the target company. Both the buyers and the sellers bid their own valuation. The buyers tend to bid a lower price whereas the sellers give a higher valuation. After negotiations, a final price is decided and finalized.

Waves of merger

Waves of merger

First Wave

Second Wave

Third Wave

Fourth Wave

Fifth Wave

First Wave Mergers

The first wave mergers commenced from 1897 to 1904. During this phase merger occurred between companies, which enjoyed monopoly over their lines of production like railroads, electricity etc. the first wave mergers that occurred during the aforesaid time period were mostly horizontal mergers that took place between heavy manufacturing industries.

End Of 1st Wave Merger

Majority of the mergers that were conceived during the 1st phase ended in failure since they could not achieve the desired efficiency. The failure was fuelled by the slowdown of the economy in 1903 followed by the stock market crash of 1904. The legal framework
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was not supportive either. The Supreme Court passed the mandate that the anticompetitive mergers could be halted using the Sherman Act.

Second Wave Mergers

The second wave mergers that took place from 1916 to 1929 focused on the mergers between oligopolies, rather than monopolies as in the previous phase. The economic boom that followed the post world war I gave rise to these mergers. Technological developments like the development of railroads and transportation by motor vehicles provided the necessary infrastructure for such mergers or acquisitions to take place. The government policy encouraged firms to work in unison. This policy was implemented in the 1920s. The 2nd wave mergers that took place were mainly horizontal or conglomerate in nature. industries that went for merger during this phase were producers of primary metals, food products, petroleum products, transportation equipments and chemicals. The investments banks played a pivotal role in facilitating the mergers and acquisitions.

End Of 2nd Wave Mergers

The 2nd wave mergers ended with the stock market crash in 1929 and the great depression. The tax relief that was provided inspired mergers in the 1940s.

Third Wave Mergers

The mergers that took place during this period (1965-69) were mainly conglomerate mergers. Mergers were inspired by high stock prices, interest rates and strict enforcement of antitrust laws. The bidder firms in the 3rd wave merger were smaller than the Target Firm. Mergers were financed from equities; the investment banks no longer played an important role.

End Of The 3rd Wave Merger

The 3rd wave merger ended with the plan of the Attorney General to split conglomerates in 1968. It was also due to the poor performance of the conglomerates. Some mergers in the 1970s have set precedence. The most prominent ones were the INCO-ESB merger; United Technologies and OTIS Elevator Merger are the merger between Colt Industries and Garlock Industries.

Fourth Wave Merger

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The 4th wave merger that started from 1981 and ended by 1989 was characterized by acquisition targets that wren much larger in size as compared to the 3rd wave mergers. Mergers took place between the oil and gas industries, pharmaceutical industries, banking and airline industries. Foreign takeovers became common with most of them being hostile takeovers. The 4th Wave mergers ended with anti-takeover laws, Financial Institutions Reform and the Gulf War.

Fifth Wave Merger

The 5th Wave Merger (1992-2000) was inspired by globalization, stock market boom and deregulation. The 5th Wave Merger took place mainly in the banking and telecommunications industries. They were mostly equity financed rather than debt financed. The mergers were driven long term rather than short term profit motives. The 5th Wave Merger ended with the burst in the stock market bubble. Hence we may conclude that the evolution of mergers and acquisitions has been long drawn. Many economic factors have contributed its development. There are several other factors that have impeded their growth. As long as economic units of production exist mergers and acquisitions would continue for an ever-expanding economy.

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Merger and acquisition in India

India in the recent years has showed tremendous growth in the M&A deal. It has been actively playing in all industrial sectors. It is widely spreading far across the stretches of all industrial verticals and on all business platforms. The increasing volume is witnessed in various sectors like that of finance, pharmaceuticals, telecom, FMCG, industrial development, automotive and metals. The volume of M&A transactions in India has apparently increased to about 67.2 billion USD in 2010 from 21.3 billion USD in 2009. At present the industry is witnessing a whopping 270% increase in M&A deal in the first quarter of the financial year. This increasing percentage is mainly attributed to the increasing cross-border M&A transactions. Over that increasing interest of foreign companies in Indian companies has given a tremendous push to such transactions. Large Indian companies are going through a phase of growth as all are exploring growth potential in foreign markets and on the other end even international companies is targeting Indian companies for growth and expansion. Some of the major factors resulting in this sudden growth of merger and acquisition deal in India are favorable government policies, excess of capital flow, economic stability, corporate investments, and dynamic attitude of Indian companies. The recent merger and acquisition 2011 made by Indian companies worldwide are those of Tata Steel acquiring Corus Group plc., UK based company with a deal of US $12,000 million and Hind Alco acquiring Novelist from Canada for US $6,000 million.

With these major mergers and many more on the annual chart, M&A services India is taking a revolutionary form. Creating a niche on all platforms of corporate businesses, merger and acquisition in India is constantly rising with edge over competition. It's a well-known fact that a good number of mergers fail because of various factors including cultural differences and flawed intentions. Most companies when sign an agreement often get a create a bigger picture of their expectations as they believe in pure concept of higher capital gains when two are combining together. This belief is not always true as conditions in the market and economy often rules the operation and functioning of any company.

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Company profile

History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards
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universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transactionbanking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees. (Click here to view a copy of the Code) Awards 2013 2004 2012 2003 2011 2002 2010 2001 2009 2000 2008 1999 2007 1998 2006 2005

ICICI Bank Ms Chanda Kochhar received the 'Transformation Leader Award' by NDTV Profit Business Leadership Awards 2012.For the second consecutive year, Mr. N.S.Kannan, Executive Director & CFO, received the "Best Performing CFO", in the Banking / Financial Services category by CNBC - TV 18.For the third year in a row, Ms. Chanda Kochhar, Managing Director & CEO, is in the Power List 2013 of 25 most powerful women in India, by India Today.Ms. Chanda Kochhar is the only Indian to be featured in the Dow Jones list of Most Influential Female Executives in the World of the last decade. She is ranked 12th in the global list.

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ICICI Bank awarded the Most Admired Infrastructure Debt Financer and PPP Project of the Year: Yamuna Expressway Project, in the 5th KPMG Infrastructure Today Awards by ASAPP Media Information Group, publishers of Infrastructure Today in association with KPMGFor the 4th consecutive year, ICICI Bank won the Celent Model Bank for the next generation technology oriented banking solutions.ICICI Bank was awarded a "Special IT Innovation Award" by Lenovo - NASSCOM and CNBC-TV18.ICICI Bank was the winner of "6th Loyalty Awards" for My Savings Rewards by AIMIA (global leader in Loyalty).ICICI Bank UK PLC's online savings product HiSAVE won the "Highly Commended" (2nd rank) at the Consumer Moneyfacts Awards. ICICI Bank received the "Gram Samvad",Service for Low cost/Small budget marketing initiative Award by Rural Marketing Association of India (RMAI).Ms. Chanda Kochhar awarded the Businessperson Of The Year 2012 by Business India. She is the first woman recipient of this award in 31 years.ICICI Bank won the Best domestic bank, India by The Asset Triple A Country Awards

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The merger of icici bank with Rajasthan bank

Amalgamation of The Bank of Rajasthan On May 23, 2010, the Board of Directors of ICICI Bank and the Board of Directors of The Bank of Rajasthan Limited (Bank of Rajasthan), an old private sector bank, at their respective meetings approved an allstock amalgamation of Bank of Rajasthan with ICICI Bank at a share exchange ratio of 25 shares of ICICI Bank for 118 shares of Bank of Rajasthan. The shareholders of ICICI Bank and Bank of Rajasthan approved the scheme of amalgamation at their respective extra-ordinary general meetings. RBI approved the scheme of amalgamation with effect from close of business on August 12, 2010. We have issued 31.3 million shares in August 2010 and 2.9 million shares in November 2010 to shareholders of Bank of Rajasthan. The total assets of Bank of Rajasthan represented 4.0% of total assets of ICICI Bank at August 12, 2010. At August 12, 2010, Bank of Rajasthan had total assets of ` 155.96 billion, deposits of ` 134.83 billion, loans of ` 65.28 billion and investments of ` 70.96 billion. It incurred a loss of ` 1.02 billion in fiscal 2010. The results for fiscal 2011 include results of Bank of Rajasthan for the period from August 13, 2010 to March 31, 2011. The assets and liabilities of Bank of Rajasthan have been accounted at the values at which they were appearing in the books of Bank of Rajasthan at August 12, 2010 and provisions were made for the difference between the book values appearing in the books of Bank of Rajasthan and the fair value as determined by ICICI Bank. The amalgamation was part of our strategy to expand our branch network with a view to growing our deposit base. We believe that the combination of Bank of Rajasthans branch franchise with our strong capital base would enhance the ability of the combined entity to capitalize on the growth opportunities in the Indian economy.

'Swap Ratio'
The ratio in which an acquiring company will offer its own shares in exchange for the target company's shares during a merger or acquisition. To calculate the swap ratio, companies analyze financial ratios such as book value, earnings per share, profits after tax and dividends paid, as well as other factors, such as the reasons for the merger or acquisition. The boards of ICICI Bank and Bank of Rajasthan (BoR) today put their seal of approval on the share exchange formula arrived at last week, when Indias largest private sector lender announced the move to amalgamate BoR with itself.

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The two had proposed a share swap ratio of 1:4.72, which means BoR shareholders will gain one share of ICICI Bank for every 4.72 shares of BoR. This exchange formula was recommended by Haribhakti & Co after due diligence and valuation of BoR.

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Under this study various researchers reviewed research papers for the purpose of providing an insight into the work related to Merger and Acquisitions (M&As). After going through the available relevant literature on M&As and it comes to know that most of the work done high lightened the impact of M&As on different aspects of the companies. A firm can achieve growth both internally and externally. Internal growth may be achieved by expanding its operation or by establishing new units, and external growth may be in the form of Merger and Acquisitions (M&As), Takeover, Joint venture, Amalgamation etc. Many studies have investigated the various reasons for Merger and Acquisitions (M&As) to take place, Just to look the effects of Merger and Acquisitions on Indian financial services sector. The work of Rao and Rao (1987) is one of the earlier attempts to analyse mergers in India from a sample of 94 mergers orders passed during 1970-86 by the MRTP Act 1969. In the post 1991 period, several researchers have attempted to study M&As in India. Some of these prominent studies are; Beena (1998), Roy (1999), Das (2000), Saple (2000), Basant (2000), Kumar (2000), Pawaskar (2001) and Mantravedi and Reddy (2008). Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of firms and concluded that it had positive effect as their profitability, in most of the cases deteriorated liquidity. After the period of few years of Merger and Acquisitions (M&As) it came to the point that companies may have been able to leverage the synergies arising out of the merger and Acquisition that have not been able to manage their liquidity. Study showed the comparison of pre and post analysis of the firms. It also indicated the positive effects on the basis of some financial parameter like Earnings before Interest and Tax (EBIT), Return on share holder funds, Profit margin, Interest Coverage, Current Ratio and Cost Efficiency etc. Kuriakose Sony & Gireesh Kumar G. S (2010) in their paper, they assessed the strategic and financial similarities of merged Banks, and relevant financial variables of respective Banks were considered to assess their relatedness. The result of the study found that only private sector banks are in favor of the voluntary merger wave in the Indian Banking Sector and public sector Bank are reluctant toward their type of restructuring. Target Banks are more leverage (dissimilarity) than bidder Banks, so the merger lead to attain optimum capital Structure for the bidders and asset quality of target firms is very poor. Anand Manoj & Singh Jagandeep (2008) studied the impact of merger announcements of five banks in the Indian Banking Sector on the share holder bank. These mergers were the Times Bank merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd with the ICICI Bank, the Global Trust Bank merged with the Oriental
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Bank of commerce and the Bank of Punjab merged with the centurion Bank. The announcement of merger of Bank had positive and significant impact on share holders wealth. Mantravadi Pramod & Reddy A. Vidyadhar (2007) evaluated that the impact of merger on the operating performance of acquiring firms in different industries by using pre and post financial ratio to examine the effect of merger on firms. They selected all mergers involved in public limited and traded companies in India between 1991 and 2003, result suggested that there were little variation in terms of impact as operating performance after merger.

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OBJECTIVE OF THE STUDY

To ascertain the profitability of bank with regard to pre and post-merger. To analyse the motive of merger of icici bank .

Methodology To accomplish the objective of the study, secondary data is used. It has been collected from published and unpublished report, websites. To make it more meaningful six financial year data has been taken & analyzing the data appropriate hypothesis was framed and especially the t-test was used to draw the inferences.

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Research process

DEFINE RESEARCH PROBLEM

REVIEW OF LITERATURE
REVIEW CONCEPTS AND THEORIES REVIEW PREVIOUS RESEARCH FINDINGS

FORMULATE HYPOTHESIS

DESIGN RESEARCH

FF

FF

COLLECT DATA (EXECUTION) FF F ANALYSE DATA

F INTERPRET AND REPORT

SUGGESTIONS AND CONCLUSION

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Research design
Descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. Some subjects cannot be observed in any other way; for example, a social case study of an individual subject is a descriptive research design and allows observation without affecting normal behavior. It is also useful where it is not possible to test and measure the large number of samples needed for more quantitative types of experimentation.

Scope of the
The present study includes analysis of two years ratios 2010 before merger and 2011 after merger ratio of the icici bank .scope of the study is limited it is done for academic purpose only .we can understand concept through this study but merger and acquisition is very broad topic in itself so it require more knowledge and time and technique for such kind of study .

Data collection
(a) Primary Data The term primary data refers to the data which the investigator originates for the purpose of the inquiry in hand. In the words of John C. G. Boot and Edwin in B. Cox: When the data used in an analysis are specifically created for that analysis, they are refer to as primary data. (b) Secondary Data The term secondary data refers to the data which is not originated by the investigator himself, but which he obtained from someone elses records. Secondary data can be obtained from: Government Semi-government bodies Trade associations Trade journals Periodicals Magazines, Newspapers and web sites

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Limitations of the Study

The major drawbacks of the present study are as under: The major part of this study is based on secondary data taken from various web sites. Time period is also not enough to do such kind of study. The study is done on the basis of ratios calculated at the web site , money control.com only profitability ratios has been taken in to considerations

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To check the pre and post-merger profitability of ICICI bank the following ratios have been find out :

List of selected profitability Ratios

Profitability Ratios
Interest spread Adjusted cash margin Net profit margin Return on long term fund Return on net worth

Interest spread rate

In banking, the net interest rate spread is the difference between interest earned on loans, securities, and other interest-earning assets and the interest paid on deposits and other interest-bearing liabilities.

Adjusted cash margin

Adjustments to net income are non-cash transactions that appear on the balance sheet and income statement that must be factored in when determining a company's cash flow from operations. When measuring the cash flow in and out of a business, operating cash flow reflects how much cash is generated from a company's products and services. This includes accounts receivable, depreciation & amortization expense, inventory, and accounts payable. However, not all of these transactions involve actual cash items, and these non-cash expenses or revenues must be calculated into a company's net income as well as into its total assets and total liabilities. Depreciation, for example
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'Net Profit Margin'

A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every rupee of sales a company actually keeps in earnings .Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage. Also known as Net Profit Margin. Return on long term fund Return on capital employed (ROCE) indicates the profitability of a company's capital employed (capital investments). Capital employed equals long term debts plus shareholders equity.

Return on net worth ratio

It is the ratio of net profit to shareholders investment. It is the relationship between net profit (after interest and tax) and shareholders/proprietor's fund. This ratio establishes the profitability from the share holders' point of view. The ratio is generally calculated in percentage.

Profitability Ratios (pre and post-merger )

``ratios Interest Spread Adjusted Cash Margin(%) Net Profit Margin Return on Long Term Fund(%) Return on Net Worth(%)

Post-merger Pre-merger mar'13 Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 0 4.44 4.01 5.66 3.66 3.51 18.2 17.45 17.52 13.64 11.45 11.81 17.19 16.14 15.91 12.17 9.74 10.51 51.77 52.09 42.97 44.72 56.72 62.34 12.48 10.7 9.35 7.79 7.58 8.94

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70 60 50 40 30 20 10 0 Interest Spread Adjusted Cash Margin(%) Net Profit Margin Return on Long Term Fund(%) Return on Net Worth(%) mar'13 Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

Hypothesis H 0: there is no significant difference between interest spread with respect to pre and post-merger H1: there is a significant difference between interest spread

Interest spread
PrePostmerger merger d d-d 1 5.66 0 -5.66 -4.2 2 3.66 4.44 0.78 2.24 3 3.51 4.01 0.5 1.96 Total -4.38 SN 38

(d-d)2 17.64 5.0176 3.8416 26.4992

Mean

-1.46

S2 =

=13.24

S=3.64

t n-1

=0.69470

Tab 5%=1.895

Calculated value of t is less then tabulated value (at 5%los ) so accept the null hypothesis

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Adjusted Cash Margin (%)

H 0: there is no significant difference between adjusted cash margin with regard to pre and post-merger H1: there is a significant difference between adjusted cash margin with regard to pre and post-merger

SN

PostPremerger merger d 1 18.2 13.64 2 17.45 11.45 3 17.52 11.81

Total Mean

4.56 6 5.71 16.27 5.42

d-d (d-d)2 -0.86 0.7396 0.58 0.3364 0.29 0.0841 0.01 1.1601

S2 =

=0.58005

S=0.762
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t = n-1

=12.29

Tab 5%=1.895

Calculated value of t is grater then tabulated value (at 5%los ) so reject the null hypothesis

Net Profit Margin

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H 0: there is no significant difference between net profit margin with reference to pre and post-merger H1: there is a significant difference between net profit margin with reference to pre and post-merger

SN

PostPremerger merger d 1 17.19 12.17 2 16.14 9.74 3 15.91 10.51

Total Mean

d-d (d-d)2 5.02 -0.58 0.3364 6.4 6.4 40.96 5.4 5.4 29.16 16.82 70.4564 5.6

S2 =

=35.23

S=5.935 t = n-1 Tab 5%=1.895

( )

=-1.64oo

Calculated value of t is less then tabulated value (at 5%los ) so accepted the null hypothesis

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Return on Long Term Fund (%) H 0: there is no significant difference between return on long term fund with regard to pre and post-merger H1: there is a significant difference between long term fund with regard to pre and post-merger

PostPremerger merger D d-d (d-d)2 1 51.77 44.72 7.05 12.7 161.29 2 52.09 56.72 -4.63 1.02 1.0404 3 42.97 62.34 -19.37 -13.72 188.2384 total -16.95 350.5688 mean -5.65 SN

S2 =

=172.28 S=13.24 t n-1 Tab 5%=1.895 =

( )

=-0.739

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Calculated value of t is less then tabulated value (at 5%los ) so accepted the null hypothesis

Return on Net worth (%) H 0: there is no significant difference between return on net worth with respect to pre and post-merger H1: there is a significant difference between return on net worth with respect to pre and post-merger

PostPreSN merger merger D d-d (d-d)2 1 12.48 7.79 4.69 1.95 3.8025 2 10.7 7.58 3.12 0.38 0.1444 `3 9.35 8.94 0.41 -2.33 5.4289 total 8.22 9.3758 mean 2.74

S2 =

=4.6879 S=2.165 t n-1 Tab 5%=1.895

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=2.1930

Calculated value of t is greeter then tabulated value (at 5%los ) so reject the null hypothesis

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 Change in interest spread is insignificant thats mean bank has not got any advantage on interest spread after merger . Change in Adjusted cash margin has a significant difference that means the operating cash flows has been improved after the merger .

Change in net profit margin insignificant and that shows that after merger net profit margin has not gone up

Change in Return on the long term fund is insignificant

Return on net worth is significant that means this ratio is one of the most important ratios used for measuring the overall efficiency of a firm. As the primary objective of business is to maximize its earnings, this ratio indicates the extent to which this primary objective of businesses being achieved. This ratio is of great importance to the present and prospective shareholders as well as the management of the company. As the ratio reveals how well the resources of the firm are being used, higher the ratio, better are the results. The inter firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher.

The motive of icici bank before merger with bank of Rajasthan bank was part of strategy to expand our branch network with a view to growing our deposit base.

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BIBLOGRAPHY

BIBILOGRAPHY:-

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Books

1) I.M. Pandey, Financial Management Visas publishing House Pvt.Ltd. New Delhi, eight editions. 2) Rustogi.R.P. Financial Management (Theory, Concept, and Problems) Golgotha publishing Co. New Delhi, Second Revised Edition. 3) Khan M.Y. & Jain P.K, Financial Management Tata McGraw4) Hill Publishing Co. Ltd., New Delhi. Fifth Edition.
5) Advanced Accountancy Ninth Edition S N Maheshwari , S K Maheshwari

6) Financial Management , V.K .Bhalla 7)Research methodology ,Deepak chawla 8) Merger and Acquisition , Andrew j. Sherman 9 )International M&A, PETER jenning buckley 10)M&A ,glenlake publishing. 11)M&S ,j. fred Weston,Samuel c. weaver

12)Rustogi.R.P. Financial Management (Theory, Concept, and Problems) Golgotha publishing Co. New Delhi, Second Revised Edition.

MANUAL

Annual reports

VISITED WEB SITES 49

www.investopedia.com www.business.mapsofindia.com www.bloomberg.com www.legalserviceindia.com www.slideboom.com www.papercamp.com www.moneycontrol.com

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