TITLE:
Effectiveness of Banks after M & A
AUTHORS:
Brajesh Kumar Tiwari
KEYWORDS:
Acquisition; Bank Merger; Consolidation
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.4 No.1,
January
9,
2014
ABSTRACT: The goal of a bank merger is to
increase the bank’s
value in one way or another. The days of liberalization and globalization are
in and there is a spate of mergers and acquisition which is sweeping the
corporate world. Consolidation in the banking sector should largely be
synergy-driven to acquire a quantum jump in the performance of the combined
entity (2 + 2 ≥ 5). It can be achieved by
combining complementary strengths, giving a better geographical spread, serving
a larger number of customers in a better way with more diversified products and
skills, realizing the opportunities for cross-selling, containing the cost of
the merged entity, reduced competition, better utilization of available
resources and deriving economies of scale. Over the last one and a half decade,
the banking sector in India has not only grown in terms of size but also matured, diversified and consolidated
to contribute towards building a robust financial system. In this paper, five cases of bank merger have been
taken and Null Hypothesis, i.e. there is no difference in mean value of selected variables before merger
and after the merger, is set and found rejected (in most of the variables). On the basis of the
overall analysis, merger of Bank of Karad Ltd. (BOK) with Bank of India (BOI) was more effective
in most of the variables as compared to merger of the New Bank of India (NBI)
with Punjab National Bank (PNB), Benaras State Bank Ltd. (BSB) with Bank of
Baroda (BOB), Nedungadi Bank Ltd. (NBL) with Punjab National Bank (PNB) and
Global Trust Bank Ltd. (GTB) with Oriental Bank of Commerce (OBC).