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The event in which two or more companies come together and create a new company, mostly with a new name, is known as a merger. The merger of companies assists in increasing the strength of the organisation or business. It also helps in getting a competitive edge in the market. In merging, the companies share all the information regarding debt, technologies involved, assets, and beyond. The prime purpose of bank mergers is to enhance the competitiveness of Indian banks at the global level. The total number of Public sector banks in India is 12.
Bank merger in India
In India, the union cabinet approved the merger of banks list on 4th March 2020, after its announcement on 10th August 2019 by Nirmala Sitharaman. The first merger was Punjab National Bank + United Bank of India + Oriental Bank of India (PNB + UBI + OBC). The second merger was Syndicate bank + Canara Bank. The third merger was Andhra Bank + Corporation Bank + Union Bank of India. The fourth merger was Allahabad Bank + Indian Bank. After the first merger, PNB is now the second-largest Public Sector Bank after the State Bank of India in the category of the branch network. The total branches of the PNB are 10,528 across India and two international branches as of 2020. It should be noted that when Andhra Bank and Corporation Bank were merged with the Union Bank of India, it made UBI the fifth-biggest Public Sector Bank in India. This particular bank merger increased the potential of the new bank formed by 2 to 4.5 times.
Merger and Acquisition process
The entire process is very complex, as there are multiple factors to consider. The time and effort it takes are immense from all the parties. To successfully merge any companies, it is very important to resolve all the issues regarding taxes, accounts, operations, services, and business. Out of various considerations, valuable is the most important input while making crucial decisions. There are several Mergers and Acquisitions strategies to achieve maximum benefits from the deal. The process is divided into three phases: 1) Strategy phase, 2) negotiation and investigation phase, and 3) finalisation and integration phase. In the strategy phase, buyers refine the whole business plan, determine target criteria, organise M&A teams, manage M&A plans, analyse targets, and identify candidates. The sellers refine the business, enhance their company value, identify potential buyers, and develop selling documents. In the second phase, buyers finalise their negotiating strategy, write intent letters, contact targets, and perform due diligence. The sellers finalise their negotiating strategy, review tax consequences, and assess the offer in this phase. In the final phase, the buyers develop the final transaction structure, finalise financing, complete all the required transactions, and integrate entities. The sellers review the final agreement and complete the necessary transactions.
Conclusion:
There are several aspects of bank merger in India. The merger of banks list was decided based on ranking, services, competition, global reach, and recovery. After the bank merger, all the new banks formed improved their banking sector ranking. The services get better because there are more bank branches, more ATMs available, and several employees. After merging, the net worth of banks increases and can now compete at the global level in a more challenging manner. A bank merger can also be the need for recovery from losses or debt by a certain bank.
