Pre and post merger analysis of SBI and BOB mergers

Abstract

Mergers and Acquisitions have become an admired trend in the Indian Banking industry. The sector has witnessed multiple mergers in the last decade that has led to consolidation of the banking industry in India. A merger is an agreement where 2 or more existing companies are united into one new company by combining their business and assets. The prime objective of mergers is to harvest the benefits of economies of scale (For ex: to achieve higher operational efficiency by reducing operational costs). Mergers serve as a large source of growth in any economy, especially the ones which are comparatively stagnant and mired in deep uncertainty. Some of the major mergers that Indian Banking sector has witnessed are the merger between ICICI bank and Bank of Rajasthan in the year of 2010, Kotak Mahindra Bank and ING Vysya Bank in the year of 2014. The most recent one being Bank of Baroda, Vijaya bank and Dena bank merger effective from April 1, 2019. Another major merger was the merger between SBI and 5 of its associated banks which took place on 15 February 2017. This mega merger took about 1.5 years to complete. We aim to analyse the positive and negative effects arising out of these mergers, i.e., whether the combined entity has been able to realise the synergy from the merger. We intend to evaluate the merger on multiple dimensions in terms of financial performance along with major management issues.