Study On The Mergers And Acquisitions Of Icici Finance Essay

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Amalgamations and acquisitions have become the most often used methods of growing for companies in the 20 first century. They present a company with a potentially larger market portion and open it up to a more diversified market. A amalgamation is considered to be successful, if it increases the geting house ‘s value ; most amalgamations have really been known to profit both competition and consumers by leting houses to run more expeditiously. However, it has to be noted that some amalgamations and acquisitions have the capacity to diminish competition in assorted ways. The amalgamation between ICICI bank and Bank of Madura presented ICICI Bank with the chance to spread out its position through holding entree to retail banking markets and patronages in the parts where its old exposure had been virtually inexistent. The amalgamation gave the house that excess growing and competitory border that it was looking for to vie with HDFC Bank, SBI and other challengers.
Research has shown that due to increasing progresss in engineering and banking procedures, which make minutess, among other facets of concern, more effectual and efficient, amalgamations and acquisitions have become more frequent today than of all time before.
Introduction:
ICICI is one of the taking private sector Bankss in India, which combines fiscal strength with a repute for invention and a cosmopolitan civilization that embraces change.ICICI, a immense presence on the Indian fiscal scene, has an component of outrageousness in all that it does from aspiration to projections and accomplishments. Ranked as the figure one Bank India several times, this establishment appears virtually unstoppable, but can it, in fact, autumn quarry to failing? ICICI ‘s impressive rise over the last twosome decennaries can non be denied, but now as the trade name starts to over extend with a dizzying array of merchandises and services Bank of Madura was established in 1943 by Karumuttu Thiagarajan Chettiar. It acquired Chettinad Mercantile Bank ( est. 1933 ) and Illanji Bank ( est. 1904 ) in the sixtiess. Bank of Madura was a Chettiar bank with a big client base of 2 million asset clients and a web of more than 280 subdivisions and 40+ ATMs Centres spread across about 100 metropoliss in India. The bank merged with ICICI Bank Limited Announcing the determinations of the two boards, ICICI Bank ‘s pull offing manager and CEO H N Sinor and the Bank of Madura ‘s president Dr K M Thiagarajan told a joint imperativeness conference in Chennai that one time the amalgamation was compelete the combined entity would be the largest private sector bank in the state in footings of assets which they said was estimated to be Rs 16,000 crore. ( Verma, 2010 )
LITERATURE REVIEW:
CHANGE MANAGEMENT:
It is an organized attack to merchandise with alteration, both from position of an organisation and on in the single degree.
As in an organisation alterations transform by the leader Jamie Dimon for the repute and profitableness of an organisation.
CHANGE MODELS:
Lewin ‘s alteration theoretical account is spliting three parts:
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Unfreezing: The first phase in Lewin ‘s alteration theoretical account in which group members become disgruntled with the position quo.
Change: The 2nd phase in Lewin ‘s alteration theoretical account in which group members alter their forms of behavior.
Refreezing: The concluding phase in Lewin ‘s alteration theoretical account in which group members institutionalize the new forms of behavior into a new position quo.
Leadership:
Directing & A ; organizing the plants of group members ( Fiedler, 1997 )
The procedure of act uponing an organized group toward carry throughing its ends ( Behling, 1984 )
The Chairman of Bank of Madura, Dr. K. M. Thiagarajan understood cultural and fiscal advantage interruptions refering ICICI ABNK AND MADURA. He considered that in future it will go really hard for smaller Bankss to vie, ” he told presspersons here that the determination to unify Bank of Madura with ICICI Bank was taken after a batch of idea. ” You have to take a long-run position, ” he said. In a competitory environment where borders were under force per unit area this could turn out hard, he felt. Alternatively, these Bankss could raise fresh capital. The sort of premium that could be demanded depended mostly on the portion value. Unfortunately, markets and investors, justly or wrongly – in my sentiment wrongly – set all Bankss into one basket, ” he rued.
Issue:
I ICICI Bank, the trigger for this trade may hold had its beginning in the unfavorable market reaction to its proposed amalgamation program with its parent ICICI. It needed to turn — after all size helps derive entry into large ticket ” loaning. Small may be beautiful, but large is powerful, ” as a banking expert put it.
( 2 ) Get it, acquire it large, acquire niche or acquire out is the simple survival expression for Indian Bankss here on. The at hand amalgamation of ICICI Bank and Bank of Madura holds out that lesson. Ever since the ground-breaking amalgamation of HDFC Bank and Times Bank in November 19 99, all new private Bankss had begun the coupling dance.
( 3 ) The ICICI Bank-Bank of Madura amalgamation is that it is a mix of the old and new. They may non hold the duplicate tantrum ” — in footings of non-unionised, machine-controlled environment, with skilled and thin staff, that characterised the HDFC Bank-Times Bank amalgamation. ( Narayanan, 2010 )
Consequences OF Amalgamation:
1 The bank was looking at a subdivision web of 350-400, which would hold taken at least five old ages to accomplish. The amalgamation would supply this web instantly and would enable them distribute their web to 16 States.
2-Moreover, to acquire an extra 1.2 million clients, which is BoM ‘s client base now, it would hold required a lower limit of two old ages. Therefore, the amalgamation enables ICICI to hold an sum of 2.7 million client base and a combined plus base of Rs.16,000 crore, cross merchandising chances for assets and other merchandises, and good hard currency direction services.
3-BoM is strong in south India provinces and ICICI is really strong in Central and North Indian provinces, which would give a self-satisfied advantage to both the Bankss.
4-The book value of ICICI Bank portion is Rs.60 and that of BoM is Rs.233. The EPS of ICICI Bank is Rs.7 while that of BoM is Rs.44, and the last dividend paid by the former was 15 per cent while that by the latter was 55 per cent. Thus the amalgamation is considered to be EPS accretive for ICICI Bank stockholders by 23 per cent, from Rs.7.10 per portion annualised to Rs.8.70 per portion annualised, based on September 2000 figures.
THE Amalgamation:
The indicant is varied as to whether amalgamations increase company ‘s public presentation. As times, companies make prognosiss for development, increased competency, and greater net incomes. Though, more habitually before non, those estimations prove to be over exaggerated, and this besides leads to dissatisfactions on the side of investors, stockholders and the direction composite in the amalgamation.
Amalgamation WITH BANK OF MADURA:
ICICI BANK AND BANK OF MADURA.
This amalgamation ( ICICI Bank-BoM ) brings together two entities that have grown in different environments. ICICI follows Banks 2000 package, which is wholly different from that of BoM ‘s ISBS package bundle. Though the size of ICICI Bank is about thrice that of BoM ‘s in footings of sedimentations, the figure of employees in ICICI is around 1400 compared to 2500 employees in BoM. With the manual readings and processs and the deficiency of consciousness of the engineering use in BoM, there would be many hinderances ‘ in the incorporate entity. Hence to eliminate all such jobs, a nucleus group from both the Bankss has been constituted to assist in the integrating. Besides, ICICI besides plans to put up sub-groups to look into countries such as IT, audit and HR.
ICICI Bank, after holding been reconnoitering for long clip to get a private sector bank, had held negotiations with Global Trust Bank and Centurion Bank and has eventually merged with Bank of Madura at a barter ratio of 2:1 i.e. , two portions of ICICI Bank for each portion of BoM. The trade has created one of the biggest entities in the private sector with the merged entity holding entire assets of Rs.16, 000 crore as on September 2000. The portion exchange ratio was worked out by Deloitte, Haskins and Sells, which acted as independent valuers to the dealing. DSP Merrill Lynch Ltd had acted as advisers to BoM while Kotak Mahindra Capital Company advised ICICI Bank on the amalgamation procedure. ( Babu, March 2001 )
The proposed amalgamation of ICICI Bank and Bank of Madura lead to sustained market involvement in the two stocks in the short-run. BoM closed at Rs.131.60 on the BSE, up from Rs 121.90 and ICICI Bank closed at Rs.169.85, up from Rs.151.40 on Dec 11, 2000. On Dec 15, 2000, BoM closed at Rs.166 on BSE and ICICI Bank ended at 157 despite the steep autumn of the markets.
CHANGE AFTER Amalgamation:
The amalgamation refering ICICI bank and Bank of Madura accessible ICICI bank with the opportunity to increase its position over supplying the house with admittance to retail banking markets and usage in the countries where its old contact had been about inexistent. The amalgamation gave the house that extra growth and cheap advantage that it was looking for to contend with Citigroup and other rivals. Investigation has shown that due to cumulative progresss in engineering and banking processs, which type minutess, among other characteristics of concern, excess effectual and well-organized, amalgamations and successes have become more revenant. ( Nilesh, 2009 )
CHANGE AGENT:
Change agent human ability or company organic structure of things to gating a higher grade of result. Start with the coating in head, the purpose of a alteration agent is truly to do alterations. Consequence of alteration agent work is to let people to make more, or seek a new and good position on life. K V Kamath as alteration agent When K V kamath came back from ADB ( Asian Development bank ) in 1996, working at that place for 8 enriching old ages. Kamath, have seen the alterations happening in the fiscal sector abroad, wanted ICICI to go a one-stop store for fiscal services. But there were basic jobs in the organisation like ignorance in the organisation about the loaning patterns in the new sectors like substructure, job of wasting ( which was deep rooted in the organisation ) , deficiency of motive to turn and better client services and adapt to new engineering ( usage of cyberspace, standard pressure for fast services ) . ( Alias-i, 2010 )
Resistance TO CHANGE:
ICICI had to confront alteration opposition one time once more in December 2000, when ICICI Bank was merged with Bank of Madura. Though ICICI Bank was about three times the size of BoM, its staff strength was merely 1,400 as against BoM ‘s 2,500. One-half of BoM ‘s forces were clerks and around 350 were low-level staff.
There were big differences in profiles, classs, appellations and wages of forces in the two entities. It was besides reported that there was edginess among the staff of BoM as they felt that ICICI would force up the productiveness per employee, to fit the degrees of ICICI. BoM employees feared that their places would come in for a closer examination. They were non certain whether the rural subdivisions would go on or non as ICICI ‘s concern was mostly urban-oriented.
The apprehensivenesss of the BoM employees seemed to be justified as the on the job civilization at ICICI and BoM were rather different and the accent of the several direction was besides different. While BoM direction concentrated on the overall profitableness of the Bank, ICICI direction turned all its sections into single net income centres and fillip for employees was given on the public presentation of single net income centre instead than net incomes of whole organisation. ( Anon. , 2002 )
Decision:
In the twenties century amalgamations and acquisitions are the most recurrently used methods of growing for companies. They present a company with a hypothetically larger market portion and exposed it up to a more differentiated market. A amalgamation is considered to be fruitful, uncertainness it growths the geting house ‘s value. The grounds is diverse as to whether amalgamations improve company ‘s public presentation. As times, companies make anticipations for growing, increased efficiency, and greater net incomes. ( Kottler, 2009 ) . Most amalgamations have truly been known to advantage both battle and clients by allowing companies to run more professionally. As was besides presented, the United Nations ‘ World Investment Report 2000 ” proposes that the alone addition in cross-border amalgamations and acquisitions is chiefly due to an addition in the globalisation of markets he procedure of amalgamations and acquisitions carnival for both the consumers and houses in the market several controls. As a instance in point icici and bank of Madura is a perfect illustration of how a smart strategic move can do important betterments to a company ‘s public presentation. ( still active CEO ‘s, 2007 ) . After the acquisition, as we have already established the amalgamation ” within icici bank and bank of madura is, the latter company ‘s market portion, grosss, and net income all rose to impressive highs, taging the initial success of the acquisition.

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