History of banking Among many other things, the Code of Hammurabi from BC recorded interest-bearing loans. Banking began with the first prototype banks of merchants of the ancient world, which made grain loans to farmers and traders who carried goods between cities and this system is known as a barter system. This began around BC in Assyria and Babylonia.
Cash[ edit ] Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target company are removed from the picture and the target comes under the indirect control of the bidder's shareholders.
Stock[ edit ] Payment in the form of the acquiring company's stock, issued to the shareholders of the acquired company at a given ratio proportional to the valuation of the latter.
They receive stock in the company that is purchasing the smaller subsidiary. Financing options[ edit ] There are some elements to think about when choosing the form of payment.
When submitting an offer, the acquiring firm should consider other potential bidders and think strategically.
The form of payment might be decisive for the seller. With pure cash deals, there is no doubt on the real value of the bid without considering an eventual earnout. The contingency of the share payment is indeed removed.
Thus, a cash offer preempts competitors better than securities. Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers. If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders.
The risk is removed with a cash transaction. Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results.
On the other hand, in a pure stock for stock transaction financed from the issuance of new sharesthe company might show lower profitability ratios e. However, economic dilution must prevail towards accounting dilution when making the choice.
The form of payment and financing options are tightly linked. If the buyer pays cash, there are three main financing options: There are no major transaction costs. It consumes financial slack, may decrease debt rating and increase cost of debt. Transaction costs include fees for preparation of a proxy statement, an extraordinary shareholder meeting and registration.
If the buyer pays with stock, the financing possibilities are: Issue of stock same effects and transaction costs as described above. Transaction costs include brokerage fees if shares are repurchased in the market otherwise there are no major costs.
In general, stock will create financial flexibility. Transaction costs must also be considered but tend to affect the payment decision more for larger transactions.
Finally, paying cash or with shares is a way to signal value to the other party, e. The following motives are considered to improve financial performance or reduce risk: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.
This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products.
Increased revenue or market share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power by capturing increased market share to set prices.For example, the mergers and acquisitions in the banking sector of India are overseen by the Reserve Bank of India (RBI).
Major Mergers and Acquisitions in the Banking Sector of the United States Following are some of the important mergers and acquisitions that took place in the banking sector of the United States.
of these forces have made the Indian banking industry highly competitive1.
Mergers and acquisition in banks are very Mergers in Banking Sector in India: An Analysis of Pre & Post Merger Performance of.. Name of Conference: International Conference on “Paradigm Shift in Taxation, Accounting, 9 |Page.
efficiency benefits from bank mergers (since there exists substantial X-inefficiency in the industry), “but the data show that on an average, such benefits were not realized by the US mergers of the s” (Berger and Humphrey, ).
Usually merger occurs when an independent bank loses its charter and becomes a part of an existing bank with. In s, the Indian banking industry had turned into an efficient tool to facilitate the development of the Indian economy.
Jan 13, · In today's slower-growth environment, many businesses are on the hunt for high-quality companies that will add to the bottom line, despite higher valuations. Mergers in Banking Industry of India Author: admin \ November 25, \ Industry \ 0 Comments There are few efforts have been made to measure the impact of banks M&A on their employees and staff.