Mergers And Acquisitions In India An Analytical Study Finance Essay - Free Essay Example

Sample details Pages: 22 Words: 6469 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Business Combinations are a critical part of the fabric of doing business in a free market economy and are deeply ingrained in the business strategy the world over. Such combinations include mergers, acquisitions and other forms of corporate restructuring undertaken both within a country and across international boundaries. The intensity of MA activity in US in 1990s was unlike any other year in US history. Don’t waste time! Our writers will create an original "Mergers And Acquisitions In India An Analytical Study Finance Essay" essay for you Create order Following a drop in both the number of transactions and the total dollar volume during the 1990 recession, MA activity rebounded sharply in 1992.Deals during the nineties were prompted more by strategic considerations and used less debt as compared to 1990s. The financial environment which was quite favorable in terms of vibrant stock markets and relatively low interest rates facilitated the resurgence of MA activity in US. Mergers and acquisitions worldwide have jumped 30% in 2006 to hit an all time record $3.7 trillion in 2006, surpassing the 2000 high of $3.4 trillion, according to data released by Thomson Financial. While the US was the most targeted country for acquisitions, representing over 40% of global MA activity, the UK was the most targeted European country for acquisitions, with $339 billion of cross border and domestic transactions. The year 2007 was again a record year for global MA volumes which were estimated at a record figure of around $4.4 and $4.7 billion accordi ng to global deal tracking firms Thomson Financials and Dealogic respectively. The global financial crisis has sent many economies around the globe into recession and has dramatically changed the business plans and outlook the world over. The global economy plunged into recession in the latter half of the year 2008. This period witnessed a combination of severe banking crises in many mature economies like US, the squeezing of credit lines, colossal house price corrections and widespread collapse in fixed investments. While the recession may be easing, as a sequel to the massive fiscal stimulus measures taken by the governments of the countries concerned and world bodies, the recovery is going to be slow and patchy. [The Great Thornton International Business Report (IBR) 2009]. MA activities gained traction globally in the fourth quarter of 2009,witnessing a rise in value by 46% to $739.6billion which was $150 billion higher than any other quarter in 2009(Business Standard,20th Ma rch,2010). This has clearly thrown a hint at a resurgence of MA activity in the New Year 2010 according to deal tracking firm Dealogic. MAs in the Indian Context The Indian economy has experienced a major structural transformation following the introduction of economic reforms by the Government of India in 1991. The forces of Liberalization, Privatization and Globalization unleashed by these reforms have brought about a sea change in the traditional Indian business mindset. Indian business leaders started thinking in terms of inorganic growth both within and beyond the borders of the country. In this backdrop, MA presented a viable alternative for the businesses aspiring to grow quickly and gain the benefits of sustainable competitive advantage by realizing the benefits of scale and scope economies, fast changing technologies for effectively facing rapidly intensifying domestic and international competition. Many corporates embarked upon several corporate restructuring activities like MAs, Joint Ventures, Spin-offs and Divestitures. The major industry sectors affected by the forces of consolidation in India, though varied from time to time, were mostly in the realm of infrastructure sectors like cement, power, steel, drugs, telecommunications and media entertainment and banking. Caught between a global financial crisis and economic slowdown, merger and acquisition (MA) and private equity (PE) investments in India have almost halved both in volume and value terms in 2009. The total value of MA and PE deals announced in 2009 was $21.20 billion against $41.54 billion in 2008. Top deals in the year 2009 have occurred in the oil and gas sector followed by telecom, pharmaceuticals, healthcare and biotech while in the year 2008 the top deals were spread across various sectors. It may also be noted that in 2008, cash-rich Indian companies like Infosys Technologies made new acquisitions both in India and abroad as target companies valuations dropped significantly. A survey of Indian corporate managers conducted by Grant Thornton (2006), across various sectors, revealed that MAs continued to be a significant form of busi ness strategy for the Indian corporates. The results of the survey further indicated that improvement in revenue and profitability, faster growth in scale and quicker time to market, acquisition of new technology or competence and elimination of competition and increase in market share were by far the most important motives for MAs in India. Selection of Indian Banking Sector for the present study Recent times have witnessed the world economy develop serious difficulties in terms of failure of major banking financial institutions and declining demand. Prospects became very uncertain causing recession in major economies. However, amidst all this chaos engulfing the world economy, Indias banking sector has been amongst the few to maintain resilience. A progressively growing balance sheet, higher pace of credit expansion, expanding profitability and productivity akin to banks in developed markets, lower incidence of non-performing assets(NPAs) and increased focus on financial inclusion by the Government of India and RBI have contributed to making Indian banking vibrant and strong. Indian banks have begun to revise their growth strategy and re-evaluate the prospects to keep the economy rolling. The way forward for the Indian banks is to innovate to take advantage of the new business opportunities besides ensuring continuous assessment of risks. Against this backdrop, we have selected Indian banking sector as the theme of our Mergers and Acquisitions research study in the Indian context. MAs in the Indian Banking Sector During the last two decades, the Indian banking sector has undergone a metamorphic change following the economic reform process initiated by the Government of India. The forces of globalization, deregulation and liberalization unleashed by the economic reforms, set in motion in 1991, have transformed the face of the Indian financial services sector landscape , including that of the Indian banking sector in a big way. There has been a paradigm shift from a regulated to a deregulated environment. Deregulation in the form of elimination of exchange controls and interest rate ceilings have made the market place much more competitive. Innovation and keeping pace with technological change have become a must for survival of the firms in the financial services industry including banking sector. The changes that have taken place in the banking sector have witnessed quite a few mergers and acquisitions (MAs). The commercialbanking sector in India has made remarkable progress since the eco nomic reforms in 1991.The entire financial sector the banking sector in particular is of fundamental importance to a developing economy. The Narasimham Committee report in August 1991 highlighted the need for financial sector reforms and fostering competitive spirit in the Indian banking sector. The report also suggested a roadmap to achieve this objective. The central theme of the reforms was straight forward: providing a necessary platform to the banking sector to operate on the basis of operational flexibility and functional autonomy, thereby enhancing efficiency, productivity and profitability. The Government did not accept all the recommendations due to political compulsions and the practical difficulties in implementation. In 1997, a second committee was set up (under M. Narasimham) to specifically suggest further measures for banking sector reforms. The second Narasimham committee, in its report submitted in April, 1998 had suggested, inter alia mergers among strong banks , both in the public and private sectors. Since the onset of reforms in 1990, according to the RBI report, 22 bank amalgamations, have taken place in India (up to 2007). While, the amalgamations of banks were primarily driven by weak financials of the merging banks prior to 1999, in the post-1999 period there have been mergers between healthy banks prompted by business and commercial considerations. The mergers of the largest commercial bank of India, SBI with State Bank of Saurashtra and State Bank of Indore and the proposed merger of Bank of Rajasthan (BOR) with the ICICI Bank are the latest among such mergers. The main motivation for the study is the sustained effort made by the Government of India and the Reserve Bank of India towards consolidating the Indian Baking sector, especially in the post-liberalization period of the Indian economy. In this context, while the Government of India and the RBI argue that (in the words of Mr. Chidambaram, former finance minister) consolid ation of the banking sector would result in economies of scale and help the Indian banks acquire the much needed critical mass to compete effectively in the global arena, the present level of research does not clearly bring out the benefits of consolidation, especially in the banking sector. The research study (divided into three stages) therefore attempts to examine the effectiveness of the consolidation exercise of the RBI to enhance the competitiveness of the Indian Banking industry employing a ratio based approach in the first stage and makes a few suggestions which might enable the policy makers to sharpen their thinking in the area and help them in adopting a more rigorous and critical approach to consolidation, which is necessarily a time-consuming and complex process. The importance of an efficient banking system in the long term growth of a developing economy like India can hardly be overemphasized. Studies of this nature are very significant for the policy makers, indus try leaders and even the investing public who are keen to know the strengths and weaknesses of the banking system of the country. The analysis of bank efficiency is significant from both the microeconomic and macroeconomic perspectives (Berger and Humphrey, 1997).The issue is crucial from microeconomic perspective because of the emerging competitive business scenario and the steps taken by the government and the Reserve Bank of India (RBI) to liberalize the banking system. From the macroeconomic perspective the issue gains crucial importance in the context of the influence that efficiency exercises on the cost structure of the banking system and the overall growth and stability of the financial markets. The motivation for the second stage of the study stems from the crucial role of Mergers and Acquisitions (MAs) in shaping the restructuring process of the Indian banking sector in future. Quite a few studies conducted to evaluate the impact of bank mergers have adopted either acco unting based or market based approaches, with each one having its own strengths and shortcomings. The results of event studies seem to depend substantially on technical details such the length of the event window selected. Further meaningful price data exist only for those banks whose shares are actively, publicly traded (Yaakov Amihud et al, 1998). The bottom line of accounting studies is that there is no clear relation, on average, between acquisitions and subsequent accounting performance. One plausible explanation is that the accounting data are too noisy to isolate the effects of acquisition. This is plausible given the transformation the accounts of the merging firms go through at the merger (restatements, special amortization and depreciation, merger related costs etc) (Steven.N. Kaplan, 2006). While the period of study in many research studies conducted to evaluate banking efficiency, especially in the context of bank mergers in India is relatively short, the present study c overs a fairly long period over which a sizeable number of bank mergers (in India ) have taken place. The present study therefore addresses an important gap in the literature by providing the most recent evidence on the efficiency of bank mergers in the Indian context. To evaluate the post-merger efficiencies of acquiring banks undergoing mergers, Data Envelopment Analysis (DEA) and DEA-Malmquist productivity index approaches have been employed. Further, the study also employs Tobit regression technique to identify the major determinants of the efficiency of Indian commercial banks. The third and final stage of the study examines the customer perception of service quality post-merger/marketing implications of commercial bank mergers in India. The Indian banking sector has witnessed massive transformation in terms of the sophistication and innovation in the product and service mix, technological upgradation, customer reach and sectoral coverage fully exploiting the opportunities w hich help increasing revenues while optimizing on costs. At the same time, the expectations of the consumers of banking services have increased many fold. The entry of private and foreign banks has changed the competitive landscape and ushered in an era of intense competition. As a result, the customer has become the focal point in the decision making process of a bank and factoring his views/expectations in designing or developing various banking products, services and strategies is a must for achieving sustainable competitive advantage. Hence it is an imperative necessity to factor the customer view point on the post-merger service quality of commercial banks in India. Towards this end, a questionnaire based survey approach has been adopted to evaluate the marketing implications of commercial bank mergers in India besides employing Factor analysis methodology to identify the critical factors influencing the customer perception of commercial bank mergers in India. Objectives of the Study The present study has the following objectives: Ratio Analysis approach for evaluating the post-merger performance of select commercial banks: To evaluate the financial performance of the commercial banks before and after merger, during the period 1994-2009 (post-reform period) To summarize the findings and offer appropriate recommendations for the future banking merger policy of the Government of India/Reserve Bank of India. Data Envelopment Analysis (DEA) approach to evaluate the post-merger performance of commercial banks in India To understand the role of Data Envelopment Analysis (DEA) in evaluating the relative efficiencies (Technical, Scale, Cost and Profit) of Decision Making Units (DMUs) in a given sample. To investigate the empirical evidence on the efficiency/productivity gains of the Indian commercial banks during the post-reform (deregulated) period. To examine the role of commercial bank mergers in efficiency gains, if any, in the post-reform period. To identify the factors which critically influence the efficiency and productivity of commercial banks in India. To suggest measures to the policy makers (Government of India and the RBI) for effective implementation of merger policy of commercial banks in India. Marketing implications of commercial bank mergers/customer perceptions of post-merger service quality of commercial banks in India. To understand the marketing implications of commercial bank mergers in general and in the Indian context. To identify the key factors influencing the perception of customers on bank mergers in India. To explore whether different demographic/behavioral groups have unique service needs and deserve distinct promotional appeals in the marketing strategy formulation of commercial banks. To suggest measures aimed at improving the service quality of the commercial banks in India in the face of mergers. Hypotheses of the Study: The following hypotheses have been set up for testing for statistical significance of each financial ratio separately (Stage 1: Ratio analysis approach). H0: There is no significant change in the financial ratio due to the MA event. H1: There is significant change in the financial ratio due to the MA event. Keeping the objectives in perspective, and having regard to the results of past research in the area of measuring post-merger efficiencies under Data Envelopment Analysis (DEA) approach (Stage 2) in the global and Indian banking sectors, which were at best mixed, the following four hypotheses have been framed to seek empirical evidence on the impact of mergers on the efficiency of Indian banking sector in the post-reform period. Hypothesis: 1 (Technical Efficiency) H0: Technical efficiency (TE) of acquiring bank will not improve in the post-merger scenario. H1: Technical efficiency(TE) of acquiring bank will improve in the post-merger scenario Hypothesis: 2 (Scale Efficiency) H0: Scale efficiency of acquiring bank will not improve in the post-merger scenario. H1: Scale efficiency of acquiring bank will improve in the post-merger scenario. Hypothesis: 3 (Cost or X- Efficiency) H0: Cost or X- Efficiency of acquiring bank will not improve in the post-merger scenario. H1: Cost or X- Efficiency of acquiring bank will improve in the post-merger scenario. Hypothesis: 4 (Profit Efficiency) H0: Profit Efficiency of acquiring bank will not improve in the post-merger scenario. H1: Profit Efficiency of acquiring bank will improve in the post-merger scenario. To evaluate the marketing implications/customer perception (Stage 3) of commercial bank mergers in India, having regard to the review of literature in this regard, the following hypotheses have been proposed: Ho: There is no significant association between respondents demographic/behavioral characteristics and their perception of the effect of commercial bank mergers and acquisitions on the quality of banking services. H1: There is significant association between respondents demographic/behavioral characteristics and their perception of the effect of commercial bank mergers and acquisitions on the quality of banking services. Review of literature: About 200 relevant research papers from important journals and other pertinent text books and websites have been reviewed to identify the gaps, which offer s cope for the present study. Research Methodology and Sampling Design: To evaluate the post-merger performance of sampled commercial banks, Ratio Analysis approach has been employed in the first stage of the research. To test whether there was a significant difference between pre and post-merger 3-year average (window period selected, excluding the merger year) values of the selected ratios, t-test has been employed. In the second stage of the research, using the Data Envelopment Analysis (DEA) program written by Coelli(1996) , post-merger efficiencies of select commercial banks have been evaluated. While there is no consensus in the literature, on the best choice of inputs and outputs for efficiency evaluation of banks, the study adopts intermediation approach and input orientation for evaluating Technical, Cost(or X-) and Profit efficiencies. DEA- Malmquist Productivity Index (MPI) has been made use of to examine the impact of technological frontier shift in bringing about a change in average bank productivity subsequent to the merger. Further, Tobi t regression has been employed to identify the critical factors influencing the efficiency of the Indian banking sector. In the third and final stage of the research, to evaluate the customer perception/marketing implications of bank mergers, the survey-questionnaire method has been adopted. Each customer has been evaluated on 20 parameters and the degree of perception of customers has been quantified using a five point Likert scale. To test whether there is significant association between the demographic/behavioral variables and the customer perception, Chi-square test (at 5% level of significance) has been employed and Factor analysis has been done using SPSS version 16 to identify the critical factors influencing the customer perception in the face of commercial bank mergers in India. A sample of 11 commercial bank mergers has been employed for the purpose of ratio analysis (first stage of the study), the study period being 1994-2009.To arrive at this sample, all the commercia l bank mergers occurring during the said period have been taken from the RBIs data base (www.rbi.org.in) . However, in doing so i) the overlapping mergers during the window period and ii) those bank mergers where the target banks were either co-operative banks or Local area banks(LABs) whose cost structure and nature of operations would be substantially different from those of the commercial banks, have been excluded. For the second stage of the research study, the sample, chosen on a judgmental basis and by seeking expert opinion, consisted of 27 commercial banks (twenty major public sector banks and seven new generation private sector commercial banks).This would encompass 8 commercial bank mergers(of which six include a public sector bank as acquiring bank and two from private sector as acquiring banks). For the final stage of our analysis, the customer sample size was 280 drawn from both the public and private sector banks in Hyderabad city, in the ratio of 75:25 respectively, t he ratio having been decided on the basis of the number of public and private sector bank branches in the Hyderabad city and the volume of average business handled by them. Findings, Conclusions and Recommendations: To sum up, the evidence reviewed here examines the issue of Mergers Acquisitions in the Indian banking sector from three broad perspectives i) ratio based analysis of post-merger performance of the commercial banks in India ii) DEA based evaluation of post-merger efficiencies of the commercial banks in India, the role of technological progress/technical efficiency in enhancing the productivity of the banks post-merger, and identification of the major factors influencing the efficiency of the banking sector in India and finally iii) studying the marketing implications of commercial bank mergers in India. While the ratio analysis yields mixed results concerning the impact of bank mergers on the performance of Indian commercial banks, DEA analysis looks at the post-merg er scenario of commercial banks of India more positively and favorably. The ratio analysis lends credence to the thinking that mergers can help commercial banks achieve superior profitability if the bank management looks at the following crucial dimensions of bank financial management: Analysis of operational parameters indicates a significant increase in Operating expenses to Average Working Funds (AWF) and a significant decline in Efficiency ratio (not efficiency) post-merger. The smaller the efficiency ratio, the more profitable is the bank, all other factors being equal. It is also observed from the results that the ratio of Operating expenses to Total expenses has increased significantly after the merger. While the increase in operating expenses to some extent is natural post-merger, better control over operating expenses in the change scenario could help the merged bank in converting more of total income into net income or net profit. Improved and more sophisticate d techniques need to be employed by the bank in managing the asset portfolio to meet liquidity need in order to achieve increased returns from the assets acquired through merger. The results further indicate that there is a significant improvement in the Equity multiplier (EM) or the financial leverage of the acquiring bank and its Return on investment (ROI) has increased from 13.70% to 15.80% post-merger. Earnings multiplier or financial leverage should be used very carefully by the bank management. Literature indicates that top-earning banks generally economize on using high cost equity capital and lay more emphasis on the earnings-leveraging effects of relatively less costly short and long term debt. In this context, the financial synergies that the merged entity (bank) is likely to enjoy, gains prominence. Financial leverage works in favor of the bank when the earnings are positive, but on the flip side, it magnifies the negative impact of losses. EM represents a risk meas ure because it reflects how many assets can go into default before a bank becomes insolvent. It is also found that the Net interest margin (NIM) has increased from 1.90% to 2.30% post-merger. This is an extremely important measure in evaluating a banks ability to manage interest rate risk. State of the art risk management techniques should be put in place post-merger so that banks exposure to various types of risk is minimized and losses do not overtake income and equity capital. The need for expanding fee income has become a key element in bank strategies to increase profits in recent years. Deregulation of the banking industry has put added pressure on banks to charge fees for every service they render to their clients. This has led to many innovations in developing new fee-generating services, like portfolio management, wealth management and depository services which MAs in banks facilitate. Management of non-performing assets is a another critical area for banks faci ng mergers as it has often been found that the target banks, especially in the regulator dictated mergers, are generally saddled with their own share of bad debts. While the proportion of NPAs is broadly controlled (around 2% to 3%), there is an increased need to for the commercial banks in India to manage their credit risk by monitoring their loan portfolios efficiently in the post-merger scenario. Analysis of productivity parameters shows that the average net income per employee has increased from 2.70% to 3.40% post-merger. Further, significant increases have been observed in average Business per employee(BPE),Operating profit per employee, Assets per employee and the Loans per employee ratios of acquiring banks post-merger.Employee productivity is generally higher among top earners. A merger offers logically more scope for the larger bank to manage more assets and increase its income per employee which in turn will enable them to pay higher salaries to the more productive emp loyees. From the efficiency analysis(Using DEA), It is observed that the scale efficiency has improved in a majority of the sampled acquiring banks post-merger though the same can not be said about the pure technical efficiency (PTE), a kind of input oriented efficiency of the bank. This lends credence to the view that bank size is clearly an important factor in maintaining improved profitability and technical efficiency. This view also receives support from the Tobit analysis of the TE of the sampled banks. Based on existing trends and changes in economic environments, future consolidation of the banking sector in India will likely involve mergers between both public sector and private sector banks. Though the mergers of SBIs associates with itself (the latest one in the news being State Bank of Indore) have been happening at regular intervals, the same is not the case with public sector banks in general though they account for about 75% of the market share of the business. Henc e to remove inefficiencies primarily of technical nature, it is suggested that mergers among public sector banks is a strategic imperative. The global trends also indicate the continuation of consolidation of banks in EU, Asia to exploit the synergies of mergers. While the study does not find significant cost-efficiency gains in bank mergers, consolidation appears to increase profit efficiency and to help diversify the portfolio risks of the participants on an average. Y.Amihud et al(1998) argue that profit efficiency is more appropriate than the analysis of cost efficiency to the MA study because it includes the revenue effects of changes in output that typically occur after mergers. Profit efficiency is a more general concept that includes cost X-efficiency effects of the merger plus any revenue and cost effects of changes of output. The Tobit analysis of Technical Efficiency(TE) shows that the size has a significant positive influence on the TE of the bank possibly due to scal e efficiencies derived from the merger. The TE has also been found to be positively influenced by the capitalization, non-interest income to total income (NIITI) and PBDIT to average total assets (PBDITATA).However the new generation private sector banks are found to be more technically efficient than the public sector banks under both the TE models considered for analysis. The Tobit analysis of Technical efficiency also demonstrates the significant positive influence of size, capitalization, PBDITATA and ROCE on the TE of the bank even under the second set of inputs and outputs which reflect the core banking activity (Model 2). Tobit analysis also indicates that the X-efficiencies are influenced by Size, RONW, NIINI and PBDIATA. This is in line with the literature findings that when profitability is measured by ROE, the largest banks in the industry lead the pack, by making better use of their financial leverage. Tobit regression also points that the profit efficiency of the ban ks is influenced by RONW and PBDITATA. This finding has implications for the capital adequacy norms to be followed by the commercial banks as per RBI directives. The capital adequacy of a bank is measured by the Capital to the risk weighted assets ratio (CRAR) for which the RBIs stipulated standard is 9%.However for many banks in India, the CRAR is well over the prescribed bench mark (Around 13% for example for, SBI, the market leader).But there has been a paradigm shift in the emphasis following the implementation of Basel-II norms (for improved and integrated risk management of banks) ,i.e a shift from capital sufficiency hither to emphasized by the regulators to capital efficiency. Referring to the other two significant variables, NIINI and PBDITATA, while the growing role of non-fund based income in determining the net income of a bank hjas already been emphasized, it is quite intuitive that PBDIATA is a significant contributor to the profit efficiency of the bank. Further, r eferring to the Malmquist Productivity Index (MPI) analysis, it is observed that the change in mean MPI (productivity measure) of acquiring bank post-merger is brought about more by the technological progress (frontier shift) rather than by the technical efficiency change. Hence it is necessary for the Indian public sector commercial banks to emulate the new generation private sector banks which provide the efficiency benchmarks in implementing the latest technologies in banking industry, so as to augment their productivity. In this context, we may refer to a study on the efficiency of public sector banks for the period 2003-2007 by G.M.Sanjeev(2008) which has not found any clear cut evidence of improvements in efficiency levels of public sector banks over the years. This is in line with our Tobit analysis where the sign of the estimates for the regression coefficients of Dummy variable DSECTOR have always been negative indicating that public sector banks are less efficient under al l the models. Technological innovation has been a major concern of Financial institutions in the recent years. Technology has entered the banking sector over the years in various forms: core banking solutions which will reduce transaction costs by as much as 15% immediately and more in course of time; Real Time Gross Settlement, Electronic Funds Transfer (EFT), Electronic banking, ATMs, Structured Financial Messaging Systems (SFMS), Plastic money (credit cards, debit cards and smart cards), Biometric ATMs and Transactional kiosks etc are a few prominent examples in this context. Evolution of technology is taking place at an enormous pace and if the banks fail to keep pace with it they will lose the competition race. Technology risk occurs when technological investments do not produce economies of scale or scope. Diseconomies of scale can arise if there is excess capacity, redundant technology, and organizational bureaucratic inefficiencies (red tape) that get worse as an FI(Financia l Institution) grows. Diseconomies of scope arise when a FI, say a bank fails to generate anticipated synergies or cost savings through major new technology investments (A.Saunders, 1994).Technology is a key driver in the banking industry, which creates new business models and processes, and also revolutionizes distribution channels. The beneficiaries in this sector are those that have invested in technology. Adoption of technology also enhances the quality of risk management systems in banks( especially under Basel II). It is therefore necessary that technology management is given the pride of place and should rightly be treated as an integral part of sound bank management process. A further challenge which banks might face in technology investments is to ensure that they derive maximum advantage from their investments and avoid wasteful expenditure which might arise on account of peacemeal adoption of technology; adoption of inappropriate/inconsistent technology and adoption of obsolete technology (V.Leeladhar, 2006).This calls for a critical evaluation of costs and benefits of technology investments by banks concerned in a systematic and co-ordinated manner to derive maximum mileage from such investments. The third and final stage of the research study, highlights the importance of customer perception of the implications of commercial bank mergers in India. After all, customer is the king and every banking effort is aimed at improving his lot. The findings on marketing implications of commercial bank mergers in India (customer perception of bank mergers) reveal that customer perception of bank mergers is significantly influenced by their demographic and behavioral variables. This has important implications to the bank management in developing an effective marketing strategy. This study demonstrates clearly that in a banking environment marked by frequent commercial bank mergers demographic/behavioral differences and customer service perceptions are re lated. By providing banking products and services which match the segmental requirements, bank marketers are more likely to be crowned with success in retaining their market share apart from roping in customers affected by the turbulence created by mergers in the banking environment. Factor analysis attempted to identify the major factors influencing the customer perception of bank mergers has produced six constructs out of which we observe that the innovation in developing appropriate banking products and services and customer relationship management (CRM) are crucial. While the former has been discussed in detail in the context of technology management, the latter is a sheer necessity in the emerging competitive scenario.CRM clearly underscores the fact that in implementing best practices in marketing, there has been a paradigm shift from product focus to customer focus and bank managers have found that the enhancement of existing customer relationships through managing customer e xpectations automatically brings the benefit of profitable and sustainable revenue growth. Looking at the findings from a policy perspective, it is time that in the best interests of maintaining public confidence and transparency, the central government and the RBI streamlined the rules governing bank mergers. While the issue whether these mergers should be brought under the purview of the Competition Commission of India (CCI) continues to be hotly debated, it is appropriate for the regulators to lay down clear guidelines so that the CEOs of the banks do not talk out of turn in this regard. This is the first and foremost necessity. Norms for separating weak from strong banks for merger or acquisition should be clearly laid down so as to avoid confusion in the minds of the banks themselves and the customers. Secondly, it is of utmost importance to examine whether the acquiring bank has a good work culture and efficient style of functioning that needs to be spread to the target ban k. Third, the role of strategic intent in mergers is extremely important. Complementarity of assets, operations and synergistic considerations should be made the most important criteria for authorizing bank mergers. Finally, the most attractive targets could well be those where the merged entity (bank) has a wider and highly diversified business portfolio and a product mix. For example, two banks one of which is strong in corporate and mid-corporate finance and the other with strengths in retail lending would logically be made for each other. Similar is the case for banks operating on technology platforms which are compatible. Once such norms are put in place, banks mergers become more acceptable without facing much reluctance, resistance or opposition from various quarters. To conclude, for a bank merger to succeed the role of Human Resources Management (HRM) and effective due diligence followed by integration planning and implementation are crucial. Proper leveraging of target banks employees talents and skills (HDFC Bank has successfully done this in its merger with the Centurion Bank of Punjab) besides dealing with problems of cultural conflict effectively during the merger plan implementation will go a long way in improving the chances of merger success of the banks concerned. The latest bank merger that has recently been approved in-principle by the boards concerned is that of Bank of Rajasthan (BOR) with the ICICI Bank. The dynamics of the said merger are furnished in the table below: Table 5.3 Merger Dynamics https://www.thehindubusinessline.com/2010/05/19/images/2010051953240101.jpg Source: Business Line Banks like HDFC Bank and Axis Bank are also reported to be on the lookout for acquiring smaller banks. The merger of ICICCI with ICICI Bank and even the reverse merger of IDBI and IDBI Bank served multiple objectives. First the institutions were strengthened financially. Second, they helped in avoiding the complex restructuring process the weaker bank would have had to undergo to foster financial stability. Finally, they have opened the doors for actively promoting universal banking (A.Vasudevan, 2004). The underlying logic of the thinking of managements of these banks is that the larger the bank, the higher is its competitiveness and better its prospects of survival and growth. The implication of this argument is that Indian banks are not able to compete internationally in various areas like funds mobilization, credit disbursal, investments and rendering of financial services-es sentially because of their small size, and the only Indian bank that would be able to do so is the banking behemoth, SBI, that too, probably after its merger with its associates. To end this dissertation, we go back to the opening sentences of the book Successful Mergers- Getting the people issues right by Marion Devine(2002) COMPANIES COME AND GO, chief executives rise and fall, industry sectors wax and wane, but an outstanding feature of the past decade has been the rise of mergers and acquisitions(MAs). Can we hope that the future decade will take MAs to still greater heights both in value terms and numbers? Time only will tell. Limitations of the study: Non-availability of data for certain parameters for the period under study. Efficiency calculations cannot be performed in case of inputs or outputs with negative values. Scope for further study: The future banking MA will be cross-border with substantial potential synergies but can create large systemic risk and hence future research should explore these perspectives more fully before we can draw summary conclusions as to the effectiveness of bank mergers and acquisitions. Future research may also look at the cross-industry MAs within the financial services sector in India and abroad as this is an area which has not been investigated much. In future, research should lay more emphasis on dynamic analysis methods rather than static ones, which do not use data on MAs but instead relate the potential consequences of consolidation, like the market power, service availability etc. DEA analysis may be attempted using slacks based models. Market efficiency measures may also be employed to evaluate the efficiency effects of mergers. If the sample size is large, parametric techniques like the Stochastic Frontier Analysis (SFA) can be employed in evaluating bank merger s. Chapterization: The study will be organized into five chapters which are detailed below: Chapter 1: Chapter 1 deals with the introduction and the need for the study. It sets up the objectives and the relevant hypotheses. It also describes the limitations of the study and the scope for further research. Chapter 2: Chapter 2 furnishes a detailed review of literature to identify the research gaps which help in developing the objectives and hypotheses for the research. Chapter 3: Chapter 3 gives a vivid account of the research methodology adopted for the study and the sampling design. This chapter describes in detail the ratio analysis, Data Envelopment Analysis (DEA), DEA-Malmquist Productivity Index (MPI), Tobit regression, Factor analysis and the other major statistical tools employed in the research study. Chapter 4: Chapter 4 deals with the data analysis, a very important aspect of the research project, employing the aforesaid analytical/statistical techniques. Chapter 5: Chapter 5 presents a detailed account of the findings, conclusions and recommendations from a policy perspective besides a critical evaluation of the managerial implications of the research study. Bibliography: The books, journals, articles and websites reviewed/ referred to are listed in this section alphabetically. Annexures: The details of the calculations/computations are furnished in the annexures A, B and C. ******************