1. Nirav Bhadra 04
Govind Dhuri 14
Kathireasan 24
Anita Pansare 34
Sachin Sangare 44
Khushal Thakkar 54

2. What Is Merger
 Strategic tools in the hands of management to achieve
greater efficiency by exploiting synergies.
 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. Advantages of Merger
 Does not require cash.
 Accomplished tax-free for both parties.
 Lets the target (in effect, the seller) realize the appreciation
potential of the merged entity, instead of being limited to
sales proceeds.
 Allows shareholders of smaller entities to own a smaller
piece of a larger pie, 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.

4. Disadvantages of Merger
 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.

5. Procedure for Merger
Stage I – Application to the court
 Parties are for compromise and arrangement
 A Company and its creditors
 A Company and its members
 Application to the court can be made by the
Company/Liquidator/creditor/member
 The Application must be accompanied by a scheme of
compromise/arrangement.

6. Procedure for Merger contd.
Stage II - Direction by the court
 The court shall give direction for holding the meeting only
if it is satisfied that the scheme of arrangement is workable
and reasonable. Meeting shall be conducted in manner as
directed by court.
 The court has no power to dispense with the holding of
meeting even though the shareholders might have
unanimously approved the scheme.

7. Procedure for Merger contd.
Stage III – Notice of compromise and arrangement
 The notice shall be given by the court to CG. CG has right
to make a representation (i.e. objections, comments and
suggestions) in respect of compromise and arrangement.
Representation must be considered by the court but it is
not bound by representation.
 Notice calling the meeting shall be sent to the members or
creditors
 The Notice shall contain Terms and Effect of compromise
or arrangement, material interest of directors or manager
and interest of debenture trustees.
 Every director, manager and debenture trustee shall their
interest in the scheme and how their interest will be
effected by scheme.

8. Procedure for Merger contd.
Stage IV – Approval of the scheme by
creditors/members- conditions
 The scheme must be approved by a majority in number of
creditors or members (any class of them) who are present
and voting.
 The creditors or members (or any class of them) approving
the scheme must represent ¾ in value of
creditors/members who are present and voting.
 The Scheme must be approved by equity shareholder as
well as preference shareholders. Such approval may be
received in a meeting of Equity and preference
shareholders or in a separate meeting as per order of the
court.

9. Procedure for Merger contd.
Stage V – Court to be satisfied that scheme is bonafide
 Compliance of direction of the court in holding the meeting,
provision of the companies act. Arrangement is a real and was
accepted by a competent authority.
 Disclosure of material facts including latest financial position,
auditors report and other information.
 Members or creditors or any class of them are fairly represented
by those who attended the meeting.
 The majority is not coercing minority
 There is no oblique motive of the scheme.
 Scheme is based on commercial consideration, workable,
feasible, financially viable and in public interest
 Scheme is in interest of company, members or creditors.
 Majority is acting reasonably, prudently and bonafide.

10. Procedure for Merger contd.
Stage VI – Sanction of the Scheme
 It is discretion of the court to sanction or reject the scheme.
Stage VII – Filing of the order of the court with the
Registrar
 The Scheme becomes binding only on the filing of the
court’s order with the Registrar.

11. Reason for Merger
Industry Consolidation
• Tactical move that enables a company to reposition itself
(with a merger partner) into a stronger operational and
competitive industry position.
Improve Competitive Position
• Reduces competition, and allows the combined firm to use
its resources more effectively.
Defensive Move
• Attractive tactical move in any economic environment -
particularly in a cyclical down-turn where a merger can be a
strong defensive move.

12. Reason for Merger contd.
Synergies
• Allowing two companies to work more efficiently together
than either would separately.
Market / Business / Product Line Issues
• Whether the market is a new product, a business line, or a
geographical region, market entry or expansion is a
powerful reason for a merger.
Acquire Resources and Skills
• To obtain access to the resources of another company or to
combine the resources of the two companies

13. 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.
Product Extension Mergers
• May merge when they sell products into different niches of the same
markets.

14. Types Of Mergers contd.
Conglomerate Mergers
• Occur when two organizations sell products in completely
different markets.
• Diversity in business portfolio is one of the key benefits.

15. 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 Crs 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.

16. 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.

17. 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.