merger and acquisitions

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case study

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Concept of mergers & Acquisition Mergers 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 2

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3 Types of mergers Acquisition may be an act of acquiring effective control over assets or management Of a company by another company without any combination of business or company Acquisition

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Basis of Difference Merger Acquisition meaning Two or more companies combine in to one company or forms a new company   Act of taking effective control over the assets and management of another company without combining business Process Merger is considered to be a process of expansion This process of restructuring, one company overpowers the other company   Nature Mostly friendly Unfriendly   Size Same size company Big size company acquire small one   Difference between mergers and acquisitions 4

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5 Acquiring company Target company Industry Banking ;financial services Banking ;financial services Founded 1954 1943 Key people MS Chand a kochhar MD CEO G. Padmanabhan (MD & CEO) Employees 81254 NA Headquarter Mumbai Udaipur Swap ratio 1:4.72 Date of merger 23 may 2010 Effect of merger From August 13, 2010 Company profile

Methodology :

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 It has been collected from published and unpublished report, websites.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. 6 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. Secondary Data The term secondary data refers to the data which is not originated by the investigator himself, but which he obtained from someone else’s records. The present study includes analysis of six years ratios 2008 to 2010 before merger and 2011 to 213 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 .

Limitations of the Study :

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 few profitability ratios has been taken in to considerations

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Objective (1 ) Findings To analyse the motive of merger of ICICI bank expand its branch network with a view to growing its deposit base.   Comment on the finding Objective (2) to accomplish this objective 5 profitability ratios has been taken and formation of hypothesis is done To ascertain the profitability of bank with regard to pre and post-merger. BOR has a market capitalization of Rs 1,600 crore and 463 branches that will help ICICI Bank in expanding its network further. As most of BOR branches are in northern India, ICICI Bank would gain deeper access in these markets.

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Post-merger Pre-merger ratios mar'13 Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Interest Spread NA 4.44 4.01 5.66 3.66 3.51 Adjusted Cash Margin(%) 18.2 17.45 17.52 13.64 11.45 11.81 Net Profit Margin 17.19 16.14 15.91 12.17 9.74 10.51 Return on Long Term Fund(%) 51.77 52.09 42.97 44.72 56.72 62.34 Return on Net Worth(%) 12.48 10.7 9.35 7.79 7.58 8.94 Profitability ratios at a glance

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Parameters Hypothesis Net interest margin H 0: µ there is no significant difference between interest spread with respect to pre and post-merger H1:µ there is a significant difference between interest spread with respect to pre and post-merger Adjusted cash margin H 0: µ there is no significant difference between adjusted cash margin with regard to pre and post-merger H1:µ there is a significant difference between adjusted cash margin with regard to pre and post-merger Net profit margin H 0: µ there is no significant difference between net profit margin with reference to pre and post-merger H1:µ there is a significant difference between net profit margin with reference to pre and post-merger

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Return on long term fund H 0: µ there is no significant difference between return on long term fund with regard to pre and post-merger H1:µ there is a significant difference between long term fund with regard to pre and post-merger Return on net worth H 0: µ there is no significant difference between return on net worth with respect to pre and post-merger H1:µ there is a significant difference between return on net worth with respect to pre and post-merger

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Testing of hypothesis Result Findings t test Accept the null hypothesis Change in interest spread is insignificant t test Accept the null hypothesis Change in Adjusted cash margin has a significant t test Accept the null hypothesis Change in net profit margin insignificant t test Accept the null hypothesis Change in Return on the long term fund is insignificant t test Accept the null hypothesis Return on net worth is significant

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Change in interest spread is insignificant that’s 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 the overall efficiency of icici bank has gone up . As the ratio reveals how well the resources of the firm are being used, higher the ratio, better are the results.   Comment on the findings

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Thank you 15

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