Bank Mergers and Acquisitions

 
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Mergers and acquisitions in the banking sector is a common phenomenon across the world. The primary objective behind this move is to attain growth at the strategic level in terms of size and customer base. This, in turn, increases the credit-creation capacity of the merged bank tremendously. Small banks fearing aggressive acquisition by a large bank sometimes enter into a merger to increase their market share and protect themselves from the possible acquisition.

Banks also prefer mergers and acquisitions to reap the benefits of economies of scale through reduction of costs and maximization of both economic and non-economic benefits. This is a vertical type of merger because all banks are in the same line of business of collecting and mobilizing funds. In some instances, other financial institutions prefer merging with a bank in case they provide a similar type of banking service.

Another important factor is the elimination of competition between the banks. This way considerable amount of funds earlier used for sustaining competition can be channelized to grow the banking business. Sometimes, a bank with a large bad debt portfolio and poor revenue will merge itself with another bank to seek support for survival. However, such types of mergers are accompanied with retrenchment and a drastic change in the organizational structure.

Consolidating the business also makes the bank robust enough to sustain in the every-changing business environment. They find it easier to adapt themselves quickly and grow in the domestic and international financial markets.

 
 

Contact Mr Ajay Gehi

Call : +91-9987037761 / Email : gehiajay@gmail.com
 
 
 
 
Acquisitions
Types of Mergers and Acquisitions
Joint Venture
Amalgamation
Merger and Acquisition in India
Difference Between Merger and
          Acquisition
Investment Banking
Due Diligence
Problems of Merger and
          Acquisition in India
Process of Merger and Acquisition