Anda di halaman 1dari 29

Presentation on the topic

Group Members
Aabha Amatya
Barsha

Shrestha
Durga Dulal
Milan Adhikari
Pooja Neupane
Punisha Tandukar

History of Merger And


Acquisition
Since

April 2011, when Nepal Rastra


Bank (NRB) introduced the Merger
Bylaws, 43 financial institutions have
merged so far and 13 more are in the
process of merging

So

far, the Nepali banking sector has


witnessed 21 sets of mergers three
were undertaken before the Merger
Bylaws were introduced.

Last

fiscal year saw the maximum number


of mergers taking place with nine sets of
mergers between 22 financial institutions
including commercial banks, development
banks and finance companies to form two
commercial banks, seven development
banks and two finance companies.

the

compulsion to increase the paid up


capital as of the end of fiscal year 2012-13
was the driving force behind the increase
in mergers
Four commercial banks, 18 development
banks and 21 finance companies have
undergone mergers

Concept of Merger and


Acquisition
A Merger

means a combination of two


companies to form a new company, while an
Acquisition is the purchase of one company by
another in which no new company is formed.
Merger
In a merger, the boards of directors for two
companies approve the combination and
seek shareholders approval.

After

the merger, the acquired company chooses to


exist and becomes part of the acquiring company.
Both companies' stocks are surrendered and new
company stock is issued in its place.

Acquisition
When one company takes over another and clearly
established itself as the new owner, the purchase is
called an acquisition.
In an acquisition, the acquiring company obtains the
majority stake in the acquired firms, which does not
change its name or legal structure
From a legal point of view, the target
company chooses to exist, the buyer "swallows" the
business and the buyer's stock continues to be traded.

Nepalese Perspective
Liberalization

policy led to mushrooming of


banking & financial institutions in Nepal
Nepal had only two commercial bank till
1984 A.D
The forces that led NRB to direct Banking
Institutions to go in the process of mergers
and acquisitions:
Liquidity Crunch
Capital requirement
Open Financial Market

State of financial institutions before


and after merger
Before merger

Data as on July 2012

Financial
Institutions

Number

Number Of
Branches

Commercial Banks

32

1423

Development Banks

88

687

Finance Companies

69

246

After merger

Data as on July 2016

Financial Institutions

Number

Commercial Banks

28 (3 are Under Process Of


Merging)

Development Banks

70 (17 are Under Process Of


Merging)

Finance Companies

42

Will M&A solve problems of


FI in Nepal????
If not What can be done??????

We can not blindly agree that the nepalese


banking sector problem will be best
addressed by the M&A strategy.
Government should just not rely on
mergers and acquisitions for addressing the
problem of banking sector
Rather, it should

Introduce deficit budget financing


Encourage the investments in the productive sectors.
Should provide additional benefits to encourage joint
venture, licensing, franchising, etc.

Classification by the Form of Integration:

Statutory Merger:
A statutory merger is one in which all the
assets and liabilities of the smaller
company is acquired by the bigger
(acquiring) company
Company A + Company B = Company A

Subsidiary Merger:
A subsidiary merger is one in which the
target company becomes a subsidiary of the
bigger acquiring company.
Company A + Company B = (Company A +
Company B)

Consolidation:
A consolidation merger is one in which
both the companies lose their identity as
separate entities and become a part of a
bigger new company.
Company A + Company B = Company C

on the Basis of Relatedness of the Business Activities:

Horizontal Merger:
A merger that happens between companies
belonging to the same industry.
The companies have businesses in the same space
and are generally competitors to each other
The motivation behind such merger is economies
of scale and control of bigger market share.

Vertical Merger:
A vertical merger is a merger between companies
that produce different goods or offer different
services for one common finished product.
Backward Integration: A vertical integration
where a company acquires the suppliers of its
raw materials.
Forward Integration: A vertical integration
where a company acquires the distribution
channels of its products.

Conglomerate Merger:
A merger between companies that operate
in completely different and unrelated
industries. A pure conglomerate merger is
between companies with totally nothing in
common.
A mixed conglomerate merger is between
companies looking for market or product
extensions.

Market Extension Mergers:


A merger between companies that have
same products to offer but the markets are
different.
The reason behind such mergers is access
to bigger markets and an increase in client
base.

Product Extension Mergers:


A merger between companies that have
different but related products but the
markets are same.
Such mergers allow the companies to
bundle their product offerings and
approach more consumers.

Cutting
costs
Increasing
capabilities.
Replacing
leadership

Reasons
of
Merger

Diversifying
Survival

Competitive
advantage

Examples of Banks Merger


Himalayan

Saving and Finance Company(HISEF)


with Laxmi Bank .
Mega Bank Nepal Ltd with Pashchimanchal
Development Bank Ltd.
NIC Bank with Bank of Asia.
Kist Bank Limited with Prabhu Bikash Bank
Limited.
Machhapuchhre Bank with Janata Bank.

Mega Bank Nepal Limited (MEGA)


Mega

Bank has been in operation in Nepal since 2009.


It was registered as private sector promoted public
limited company operation with issued capital of NRs
2.33 billion.
Pashchimanchal Development Bank Ltd, with its central
office at Rupandehi, has formally merged with Mega
Bank Nepal Ltd from13 Baishak, 2073.

Mega

Bank Nepal Ltd now has capital fund of Rs


3.24 billion, deposit of Rs 31 billion and credit
portfolio of Rs 25.5 billion.
Now it also has 53 branchless banking outlets, 45
Mega money machines, 1,350 Mega remittance
centres and one extension counter.
The reasons behind the merger was a step towards
progress and growth, to increase the amount of paid
up capital as per the policy made by NRB.

The swap ratio was finalised at Rs 104.25 per

share for Mega Bank Nepal Ltd and Rs 67 per


share for Pashchimanchal Development Bank
Ltd.

Success and
Failure
of Merger

Success of Merger
I.
II.
III.
IV.

Fully integrate the two businesses


Ensure cultural compatibility
Clearly define the specific value
Improve the competitive behavior

Failure of Merger
I.
II.
III.
IV.
V.

Flawed Intention
No common vision
Ignorance
Poor program management
Weak leadership