1. Presentation on Mergers Presenting By: SAMIM MIRZADA GULBODDIN AIMAQ FARIDULLAH AMANI KAMAL AHUJA VAIBHAV AGGARWAL USAMA 1

2. INDEX  Mergers Meaning Types of Mergers Advantages & Disadvantages Cases of merger 2

3. What Is Merger? Merger means the combination of two or more companies in creation of a new entity. Arrangement where by two or more existing companies combine in to one company. Shareholders of the transferor company receive shares in the merged company in exchange for the shares held by them in the transferor company as per the agreed exchange ratio. 3

4. Mergers In India, merger is called amalgamation Merging companies are called Amalgamating Company New company is called Amalgamated Company  Merging can be through –Absorption or –Consolidation 4

5. Ways of Merging  By purchasing of assets  By purchase of common shares  By exchanging of shares for assets  By exchanging of shares for shares 5

6. Reasons of mergers Reasons for Mergers Maximizing Profit Expansion of business Increase market share Product Improvement Remove competition Expansion of product Future Goal 6

7. Types Of Mergers Horizontal Mergers Occurs when two companies sell similar products to the same markets. Vertical Mergers It joins two companies that may not compete with each other, but exist in the same supply chain. Market Extension Mergers To help two organizations that may provide similar products and services grow into markets where they are currently weak. 7

8. Types Of Mergers Product Extension Mergers May merge when they sell products into different niches of the same markets. Conglomerate Mergers Occur when two organizations sell products in completely different markets. 8

9. Advantages of Mergers Does not require cash. Accomplished tax-free for both parties. Allows shareholders of smaller entities to own a smaller piece of a larger entities, increasing their overall net worth. Merger of a privately held company into a publicly held company allows the target company shareholders to receive a public company's stock. Allows the acquirer to avoid many of the costly and time-consuming aspects of asset purchases, such as the assignment of leases and bulk-sales notifications. 9

10. Disadvantages of Mergers Diseconomies of scale if business become too large, which leads to higher unit costs. Clashes of culture between different types of businesses can occur, reducing the effectiveness of the integration. May need to make some workers redundant, especially at management levels - this may have an effect on motivation. May be a conflict of objectives between different businesses, meaning decisions are more difficult to make and causing disruption in the running of the business. 10

11. Merger Cases Positive 11

12. Case Study of HDFC Bank and Centurion Bank of Punjab 2009 The largest merger and perhaps the beginning of the consolidation wave in the BFSI sector. Bank’s main task was to harmonize the accounting policies and, as a result, HDFC Bank took a hit of Rs. 70 Crores to streamline the policies of erstwhile CBOP itself. Of this 70% went toward the harmonization of accounting policies relating to loan- loss provisioning and depreciation of assets, And the balance 30% reserves write-offs were toward the merger- related restructuring costs like stamp duty, HR and IT integration expenses. 12

13. Case Study of HDFC Bank and Centurion Bank of Punjab Contd…… The cost/income ratio of the merged entity has increased to around 56% from 50% levels for standalone HDFC Bank HDFC Bank has retained almost all the employees of CBOP and expects to achieve full synergies and efficiencies, in terms of the restructured HR and IT processes, in the next 2-3 quarters This merger with CBOP would result in the combined entity having 1148 branches at present, which is the largest branch distribution network for a private bank in India This apart, HDFC Bank would gain dominance in states like Punjab, Haryana, Delhi, Maharashtra and Kerala. 13

14. Case Study of HDFC Bank and Centurion Bank of Punjab Contd…… The merger will add close to 394 branches to HDFC Bank’s network of 750 branches, almost 50% increase in the existing network, while adding close to 19% to its asset base On the product portfolio side, both the banks have a strong foothold in vehicle financing, which is a natural synergy CBOP has a strong and experienced management team. The management has demonstrated its capability to integrate diverse organizations by successfully reaping synergies of the merger with Bank of Punjab. CBOP team has strengthen HDFC Bank’s management bandwidth and consequently the latter added international banking to its services kitty. 14

15. Case study of Merger of bank of Rajasthan with ICICI bank The boards of both the banks on May 23, 2010 approved the merger. On 12th of August 2010, Alpana Killawala, CGM, department of communication, RBI has published a press release that- All branches of Bank of Rajasthan Ltd. will function as branches of ICICI Bank Ltd. with effect from August 13, 2010. The Reserve Bank of India approved the merger of Bank of Rajasthan with ICICI Bank Ltd, India's largest private sector Bank. ICICI paid Rs.3000 Crores for it. 15

16. Contd….. Each 118 shares of BOR will be converted into 25 shares of ICICI Bank All customers will be extended seamless services as per existing Bank of Rajasthan procedures. All existing BOR products will continue with current features and charges. Customers can continue to transact using their current BoR cheque books, ATM cards, lockers etc. The minimum balance requirements and service charges on all type of accounts will remain unchanged. Post the system integration customers can benefit from ICICI Bank's enhanced branch network of over 2500 branches and over 5600 ATMs spread across 1400 locations in the country. 16

17. Reasons for merger The Bank of Rajasthan with the asset base of Rs incurred the net loss after provisions and taxes remained at Rs. 102.13 crores for the year ended 31st Mar 2010.. 17,300.06 crores ICICI Bank is learnt to have indicated that it’s willing to pay more than BOR’s present market valuation. According to banking circles, the Tayals, who acquired BOR a decade ago, have been under pressure to sell the old private bank which is grappling with directives from SEBI and RBI. In March, SEBI banned 100 entities allegedly holding BOR shares on behalf of the promoters from all stock market activities. RBI had slapped a penalty of Rs 25 lakh on the bank for a string of violations like deletion of records in the bank’s IT system, irregular property deals and lapses in the accounts of a corporate group 17

18. Merger Cases Negative 18

19. HP – Compaq mergers  Merge champion (Fiorina)  Initiated Sept 2001  25$ billion all stock purchase  Biggest merger in IT history 19

20. Why Merger  HP and Compaq suffer similar risks of ‘Standing still’  Increase competition with major competitors like IBM, DELL  Cut Costs by US$3 billion annually within 3 years & Increase earnings for shareholders.  Merger will enhance business segments as individual and complimentary each other like supply chain.  Face the challenge of a Shrinking market. 20

21. HP-COMPAQ Merger - Negatives  HP’s business portfolio will be worse  The integration risk of the proposed merger is substantial  Negative financial impact on HP stockholders  HP’s strategic position will not materially improve 21

22. MERGER BETWEEN AIR INDIA AND INDIAN AIRLINES The government of India on 1 st March, 2007 approved the merger of Air India and Indian airlines. Consequent to the above a new company called National Aviation Company of India limited was incorporated under the companies act 1956 on 30 th March, 2007 with its registered office at New Delhi. 22

23. Reasons for Failure The merger coincided with a flurry of increased domestic and international competition. Weak management and organization structure. More attention to non-core issues such as long term fleet acquisitions and establishing subsidiaries for ground handling and maintenance, than to addressing the state of the flying business. Bloated workforce Unproductive work practices Political impediments to shedding staff 23

24. THANK YOU 24