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ABSTRACT
The liberalization of the Indian business has witnessed several business entities increasing their size through expansion, diversification and merger and acquisitions. The expectation of this exercise is that the large entity will bring in improved efficiency and profitability. The banking industry in India also has witnessed a few mergers like the Times Bank merging with HDFC bank, Bank of Madura with ICICI Bank etc. Since the merger is done with a view to improve the business performance metrics, it is imperative to evaluate whether the merger of the entities has created value to the shareholders. Hence this study of the merger of Centurion Bank of Punjab with HDFC bank.
Keywords: Banks, Merger and Acquisition, EVA.
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INTRODUCTION
The merger between HDFC Bank and Centurion Bank of Punjab (CBOP) was billed as one of the biggest mergers in the banking history of India in 2008. The talk at the time of merger revolved around leveraging the strengths of HDFC bank and CBOP in terms of branches, serving different segments of the market and the general synergy brought about by mergers.
It is interesting to note that citigroup was the single largest shareholder of HDFC, the parent company of HDFC bank. Also, all the top executives of HDFC and CBOP like Aditya Puri, Rana Talwar and Shailendra Bandari were ex citi bankers.
It is about four years since the merger was completed and hence the synergy effect that was envisaged at the time of merger would have played out its part. It is in this context that this exercise of evaluating the merger was taken up.
The merger of CBOP and HDFC bank was initiated in 2007 and completed 2008 with the requisite approvals.
LITERATURE REVIEW:
Kazushi Kan and Tara Ohno(2012) have studied the merger of banks using EVA. They researched the individual banks and the banking industry in Japan. They concluded that "the banking sector has not earned as much profit as expected by their shareholders up to this point. Also, although many major banks implemented mergers around the year 2000, not all the mergers have achieved successful result so far from the perspectives of EVA improvement. Based also on the result of empirical analysis, one of the important...