Effect of Merger on Financial Performance in Banking Industry : A Case Study of ICICI Bank and BoR

In the era of 21 century, companies adopt various strategies to grow rapidly in their sector or new origin or field. One major aspect of such strategies is Merger and Acquisition, commonly known as M&A, widely used by the organizations. Where Merger is a mutually agreed decision by the companies, Acquisitions are the takeovers or unwilling deals between the organizations. Major benefit as considered by any organization is the benefit of synergy i.e., creating value which is greater than the simple total of its parts. Experiencing for other benefits such as entering in new market, cost reduction, cross selling, risk diversification, increasing shareholder's value, M&A can be done within the industry or outside the industry. Reports on daily basis provided by media for various update of any of the industry either bollywood for latest releases, sports for world cup matches or stock market for ups and downs. Banking Industry in India is also in news for its various deals of Mergers and Acquisitions from long years back. Various mergers have taken place in the industry such as State Bank of India acquired Bank of Bihar Ltd and National Bank of Lahore in the year 1969 and 1970 respectively. ICICI Bank has done many mergers with different banks. It got started to acquire banks in 2001 with Bank of Madura Ltd, in 2002 with ICICI Personal Finance Services Ltd and ICICI Capital Services Ltd, in 2007 with Sangli Bank Ltd., in 2010 with the Bank of Rajasthan (BoR). This paper focuses on one of these mergers i.e., ICICI Bank (Acquirer) and The Bank of Rajasthan (Target). The main objective of this paper is to analyze financial performance of ICICI bank pre and post-merger. Financial performance has been analyzed with the help of ratios specifically in the areas of profitability, Liquidity and Leverage. Further T-test has been used to determine the significance differences in these financial performance areas. Analyses show that there is a significant benefit has been achieved by ICICI Bank after the merger. Analysis also shows that there is significant improvement in company's return on equity, interest coverage, earnings per share and dividend per share in post merger period