Why do companies opt for merger and acquisition and what are the risks involved? How many companies are in the process of M&A in recent times?

Wed, May 22, 2019 2:00 PM on Featured, Stock Market,
Why do com...

In recent times, the stock market has been greatly influenced by the announcements of mergers and acquisitions of number of companies from major sectors of the stock market like commercial banks, development banks, microfinance etc. The news of merger can influence the stock price of a particular company both in positive way and negative way. Nonetheless, companies opt for mergers and acquisitions even though it is an arduous process that involves a lot of cash flow and layoffs. This is because it enables a company to grab more market and increase the scope of their operations in the never ending conquest to grow and move forward.

However, sometimes the talks of merger do not always materialize and be implemented due to conflict of interests and mismatch in agreements like in the case of Prime Bank and Om Development Bank. Events like this have a huge impact on the market as they turn the sentiments of the stakeholders. Merger agreements may fail due to many reasons like difficulty in integration of businesses of two companies, overpayment to outbid rival bidders which may not materialize in the future, dissimilarity between the working cultures of the two parties etc. Due to this, a great degree of risk is involved with the decision to merge and acquire. But if the management is confident that opting for M&A is best for the company and its stakeholders, it can take the company to greater heights. The correct decision can change the fate of a company from an ordinary market player to market leaders.

The following is the list of companies that have agreed to choose M&A as means to grow in the recent time. It also shows if the companies in talks of merger have signed the Memorandum of Understanding (MoU) to finalize the process and seal the deal. The following list only includes those companies that are in the process of merger and acquisition.

While the above mentioned companies recently announced the decision the merger; earlier this year, Jyoti Bikas Bank acquired Hamro Bikas Bank and started the joint transaction from 29th March, 2019 under the name of Jyoti Bikas Bank Limited. The swap ratio for this purpose was determined to be 1:1.