Merger of Bank of Karad Ltd. (BOK) with Bank of India (BOI): A Case Study

Abstract

In an increasingly globalized and competitive world, it is imperative that all institutions not only follow global practices, but also that they are globally competitive, efficient and sound. In the corporate world it is said if you can’t beat your competitor then go with them i.e. merge your company with your rival or take them over. So all it boils down to is the survival of the fittest. This process helps in attaining greater market share, acquiring additional brands, cannibalizing competing brands, realizing improved infrastructure, creating new synergies, and capitalizing on efficiencies and economies of scale or to globalize in the shortest span of time. A banking merger is just the same as the merger of two companies except that it involves banks. Mergers and Acquisitions (M&A) in the banking sector may be in the form of amalgamation, absorption, consolidation, acquisition or takeover. The important point in the bank merger is that banking activities of the participants will always be regulated.  The present research paper delineates the effects of M&A on the Financials of the Merger of Bank of Karad Ltd. (BOK) with Bank of India (BOI) before and after merger. For this purpose various variables namely, capital, deposits, investments, advances, interest earned, interest paid, total income, total expenditure and net profit have been identified. In the analysis of variables figures for four year prior to merger and figures of variables for four years after the merger have been taken. Figures prior to merger are the total of value of variables of both amalgamating bank (the bank which loses its identity) and amalgamated bank (the bank which continues its existence). The result of regression equation has been found effective after merger of BOI and BOK from the point of view of capital, deposits, investments, advances,  fixed assets, interest earned, total income, net profit and total assets. In the case of interest expenditure and total expenditure result of regression equation has been found ineffective. The Null Hypothesis is rejected in all variables except interest expenditure.

Key Words: Merger, Acquisition, Capital, Deposits, Investments, Advances, Fixed Assets, Interest Earned, Interest Paid, Total Income, Total Expenditure, Net Profit and Total Assets