METHODOLOGY FOR EVALUATION OF THE MERGER
This study is done following a before and after approach for evaluating the merger's impact. Accordingly we have tried to analyze the profitability, total income, efficiency of branch and share holding pattern has been looked into.
The analysis of pre merger has been done for the financial year 1999-2000 while the post merger has been done for the financial year 2000-2001.
Ratios have been broadly categorized under the following heads:
PROFITABILITY
Profit is the ultimate aim of any business. And the future of a business depends upon the level of profitability. Here the Spread -Burden model has been adopted to measure banks profitability. Where Spread denotes the difference between interest income and interest expense, Burden implies difference between non-interest income and non-interest expense and profit margin refers to the profit earned by the bank before making provisions and contingencies.
Item Pre Merger Post Merger
Spread/ Total Income -0.128 -0.081
Burden/ Total Income 0.344 0.350
Profit margin/ Total Income 0.246 0.355
Table 1: Profitability ratios for HDFC- Times Bank
It can be observed that all the above three ratios have shown a positive improvement, comparing the pre merger and post merger scenario. HDFC has been beneficial with higher non-interest income, though the interest income has decreased. Profit margin has also increased significantly creating synergy between the mergers of the banks.
INCOME RATIOS
Item Pre Merger Post Merger
Interest Income/ Total Income 0.472 0.389
Interest Expense/ Total Income 0.592 0.465
Non Interest Income/ Total Income 0.539 0.611
Non Interest Expense/ Total Income 0.195 0.261
Contingencies/Total Income 0...
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...specially at the junior levels. Non private Indian banks will greatly benefit from productivity improvements, such as a re-engineering of the institutions knowledge processes, better use of technology and building industry level utilities.
Criticisms
Although we have analysed Mergers in great detail and have found more positives than negatives many people argue that Mergers, thought aim at creating profits for an organization, may have many adverse ill effects too.
For example, A merger between a large scale Bank and a small scale Bank may prove to be beneficial for the large scale bank, however, it is not going to prove to be beneficial for the small scale bank as it will be a case of the Big Fish eating the Small fish and if these types of mergers keep increasing, the Indian Banking Sector will slowly turn into an Oligopolistic Market.
In the year of 2005, the companies eventually found a way to make it easier for the companies to combine without having any major issues or problems. Unfortunately, around the year of 20010 the merging com...
Integration after merger is often tricky. As a merger, Bournemouth and Poole need to learn to combine their individual efforts and resources by bringing every essential element of their organizations together. This process requires a lot of planning and
Mergers and acquisitions in financial services business area are very common and result in consolidation of the business unit. Acquisition is beneficial for all sides involved and Santander's acquisition of Abbey National of the UK is an evidence of this. Abbey has a major position in the United Kingdom mortgage market. Its strong distribution network represents for Banco Santander and Abbey shareholders a valuable opportunity: application of Banco Santander's commercial and technological practices to Abbey's banking operations.
A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate clinical and managerial interventions.
Negative Results. The negative outcomes of consolidation are often seen in the financial and public relations aspect of consolidating. One of the most prominent and controversial as...
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
...dditionally, the merger can take place in smaller phases. For instance the first phase may include change of the physical look of the branches and the signage - – so as to convey a consistent view and experience for its customers. This phase may also include effective communication to the employees to educate them about the merger, ensure them of their positions and encourage them to participate in the merger. Second, the firm can totally combine the bank’s technology and the information systems which will allow the merged firm to operate as a single entity and to become fully operational. The management should implement the merger with care and prudence, aiming for minimal disruption for the customers and should communicate extensively to ensure all its stakeholders are kept fully informed as they make changes.
The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structuresBased on the case study, extensive research and annual reports of AT&T the writer has mapped AT&T in the different domains. AT&T should strive to attain a perfect circle as close to the centre as possible, which indicates total synergy, order and equilibrium. Where the circle is skewed drastic change is needed as it moves closer to the outer ring of chaos:
As the business, people put it, to maximize the wealth of shareholders (Peavler, 2016). This could be done by pursuing more of an immediate reason that will realize the shareholders wealth maximization goal. However, this main reason may fail to be realized as most mergers depict negative results.
When two companies decide to combine forces and become one bigger, richer mega company, it is called merging. This process forms a new company, combining the money and ideas of what used to be two different entities into one. This, however, is not the only thing that results from merging two different companies, and since we will be discussing the merging of two companies in the pharmaceutical industry, the impact will be incredible. Of course, the merging of two companies will not only have positive impacts but it will have many negative side effects as well. Furthermore, depending on the size of the merging companies and the goals of the people leading these companies there will always be contradictions according to the long-term goals or short-term goals depending on what both parties’ interests are. Our company, Verduga Inc. is contemplating to merge with Coronado-Salinas Inc., so before we rush into such a merger we must contemplate the positive and negative aspects of such a move. When it comes to mergers there are always many possible positive and negative impacts due to the effects of merging; these effects more widely impact the fields on research and development, on employment and management, stocks and shareholders, monopolization, and ingenuity.
Conflict seems inevitable when trying to merge two companies. Conflict is described as the “Process which begins when one party perceives that the other has frustrated or is about to frustrate, some concern of his” (Kumar, 2009). Synergon’s CEO uses a “take no prisoners” approach and would fire most of the management team within 12 months of taking over a company using an approach they call neutron bombing. In cases where both companies are successful, like in the case of Synergon Capital and Beauchamp, you add even more conflict. The managers of Beauchamp are used to operating in a positive way that has produced profits for the company and you add Nick Cunningham a manager of Synergon who is used to restructure management in newly acquired poorly run companies; something has to give to make it successful.
A change in revenues can be caused by variations in selling price, sales volume or both. Therefore, the manager should consider the effects of reduction in selling price in both relative and absolute terms to understand the future prospects of the merger. The measure of profitability as a financial measure involves considering contribution and the net profits of the organization. Contribution refers to the difference between the total sales revenue and the variable expenses incurred to produce such revenues while divisional net profit refers to contribution less any proportion of common expenses such as administration, and marketing and distribution
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.
A variety of groups are concerned in bank profitability for various reasons. The bank shareholders would want to know if the value of their investments is high or low. The investors also use current and past performance to predict future price of the banks’ shares traded on the stock exchanged. The management of the bank as trustee of the shareholders is evaluated and compensated on the basis of how well their decisions and planning have contributed to growth in assets and profits of their banks. Employees of bank also are concerned with profits, since their salaries and promotions are frequently tied to the profitability performance of their banks. Depositors use bank performance and profitability as indicators of security for their deposits in the banks. Finally, business community and general public are concerned about their banks’ performance to the extent that their economic prosperity is linked to the success or failure of their banks.
This is followed in section 5 by an analysis of the recent changes in the banking industry. With the development of the financial system, declining entry barriers and the deregulation of the banking industry make banks no longer the monopoly suppliers of banking services and reduce their comparative advantages which they usually hold in the past. Whether the reasons give rise to the existence of banks are still powerful will be examined here, while section 6 offers a way of considering whether banks are declining by looking at the value added by the banks. When the value added by banks is examined, banks are not a financial intermediation, which not only conduct the traditional services but also provide more diversified