Group 6Members

Shekhar Lal AmatyaAlok upadhayay

Pramila chapagain

MERGER AND ACQUISITION

• Introduction• History• Importance and process• Different between M & A• Why M & A Fall?• Types of M & A• Impact of M & A• Legal and provisions approaches• M & A Movement In Nepal

CONTENT

Merger:• It is the combination of two or more than two corporations

maintaining the identity of one of the corporation.• One new corporation will continue to exist & other losses its

currents existences. E.g. NIC Bank & Bank of Asia forming NIC Asia Bank Ltd.

• One corporation will became the subsidies corporation of large acquiring corporation.

Acquisition:• It refers to the acquiring the ownership in the property.• It is the process of acquiring the assets in the course of merger,

E.g. Prabhu Finance Acquired the business of Kist Bank.

INTRODUCTION

Period Name Feature1893–1904 First Wave Horizontal mergers1919–1929 Second Wave Vertical mergers1955–1970 Third Wave Diversified conglomerate mergers

1974–1989 Fourth Wave Co-generic mergers; Hostile takeovers; Corporate Raiding

1993–2000 Fifth Wave Cross-border mergers, mega-mergers

2003–2008 Sixth Wave Globalization, Shareholder Activism, Private Equity, LBO

2014- Now Seventh Wave

HISTORY

• Product improvement • Tax gain • Diversification of risk • Cost minimization • Increase market share• Mutual benefits • Maximizing profits• Access to global market • Economy of scale

IMPORTANCE

MERGER PROCESS OR TERRACES OF MERGER

• Preparation (generation of ideas on mergers)– Merger objective and planning, development of target criteria to suit the

objective, identification of potential target for merger, appraisal to evaluate short listed target candidate for merger and making plan of actions on post merger integrations.

• Negotiation and transaction (merger agreement and MOU):– Comprehensive financial and project analysis and appraisal of

alternative selected target.– Making negotiations with logical strategy and tactical solution.

• Integrations (comprehensive correlations and synergy): – Evaluating distinct similarities and differences under merger.– Planning ultimately post merger integrations and ensuring

implementation capabilities speedily.

Mergers Acquisition i. Merging of two organization in to

one.ii. It is the mutual decision.iii. Merger is expensive than

acquisition(higher legal cost).iv. Through merger shareholders can

increase their net worth.v. It is time consuming and the

company has to maintain so much legal issues.

vi. Dilution of ownership occurs in merger.

i. Buying one organization by another.

ii. It can be friendly takeover or hostile takeover.

iii. Acquisition is less expensive than merger.

iv. Buyers cannot raise their enough capital.

v. It is faster and easier transaction.vi. vi. The acquirer does not

experience the dilution of ownership.

DIFFERENCE BETWEEN M&A

• In theory synergy i.e.2+2=5 sounds good, but in practice things can go twisted.• Historical trends show that roughly two thirds of big mergers

will disappoint on their own terms.• Combining systems and merging departments may work, but

revenue and synergy may not be as expected.

WHY M & A FALL?

• Poor strategic fit, cultural and social differences, inadequate and incomplete due diligence , poorly managed integration.

• Costly when synergies are not realized, premium paid may not recaptured.

• Employee may be resistance to change.• merger done by imitation of somebody else.• Problems between top management.• Inability to achieve synergy.

SOME REASONS BEHIND FAILED MERGERS

TYPES OF M & AMerger

Conglomerate

Product Extension Mergers

Geographic Market

Extension

Pure Conglomerates

Mergers

Horizontal Vertical

• Impacts on employees– Suffer from emotional and physical problems.– Economics impact.– Possibility of the Layoffs.

• Impact on management– Higher job loss due to corporate culture clash.– Higher level of stress.

• Impact on shareholders– Gain profit of the acquired company. – Suffer losses of the acquiring company.

• Impact on competition – Increases in competition level.– Among market player change of power.

IMPACT OF M&A

• Companies Act 2006• BAFIA, NRB M&A Guideline/Policy• Insurance Board M&A Guideline/Policy

M&A IN NEPAL

• Article 177 of the Company Act 2063 has provisioned for the amalgamation of company.

• Articles 68 and 69 of Bank and Financial Institutions Act 2063 have provisions for amalgamations among bank and financial institutions.

• The monetary and fiscal policies of 2067/68 also initiated and encouraged for mergers and acquisitions.

• NRB Board has recently passed the by laws regarding the M&A of banks and financial institutions

• The by laws have provisioned various facilities to encourage amalgamations among banks and financial institutions.

• It covers both voluntary as well as Forced mergers.

LEGAL AND PROVISIONS APPROACHES

• Merger begin in Nepal when the Eastern Electricity Corporation merge with Nepal Electricity Authority.

• Standard Charted took Grind lays from ANZ Group.• Recent merger began 10 years back in 2004.• Laxmi Bank merged into Himalayan Saving Financial Company.• On May 2011 NRB came up with a special rule to facilitate merger between BFIs.• But many people still had doubt whether to merge or not. • Soon merger spree started among BFIs.• Birgunj finance & Himchuli Bikash Bank merge & form Himchuli & Birgunj Dev.

Bank.• The process get memorandum after that.

M & A MOVEMENT IN NEPAL