CHAPTER 1

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1. Introduction

1.1 Mergers and Acquisitions (Global scenario)

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 M&A

activity, in US in 1990s was unlike any other year in US history.

Following a drop in both the number of transactions and the total dollar

volume during the 1990 recession, M&A activity rebounded sharply in

1992. Deals during the nineties were prompted more by strategic

considerations and used less debt as compared to 1980s. The financial

environment which was quite favorable in terms of vibrant stock markets

and relatively low interest rates facilitated the resurgence of M&A activity

in US.According to the data furnished by Thomson Financials, the global

M&A activity jumped by 30% in the year 2006 to hit an all time record of

$3.7 trillion surpassing the year 2000 high of $3.4 trillion. The USA

which accounted for over 40% global M&A activity was the most targeted

country for acquisitions. The UK was the most targeted European

country for acquisitions, accounting for cross border and domestic

transactions valued at $339 billion.

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In the meantime according to the data released by Dealogic, a deal

tracking firm, Europe had overtaken the United States of America (USA)

as the most targetd region, accounting for $1.34 trillion or about 40% of

the total deal value compared with the USA share of 36%, or $1.22

trillion. This increase in M&A activity in Europe was caused by

demographics and economic changes which were the major factors

driving M&A activity as an integral part of the overall corporate

restructuring activity in Europe according to experts. The cash surplus

held by private equity firms (PEs) and public companies, the interest

rates which touched their historic lows and the willingness of banks to

provide financing were found to be the key factors for the global surge in

M&A activity in 2006. The year 2007 was again a record year for global

M&A volumes which were estimated at a record figure of around $4.4

billion according to Thomson Financials and $ 4.7 billion according to

Dealogic. Volumes in Europe were higher than in the US for the first time

in five years and only the second time ever: $1.78 trillion vs. $1.57

trillion according to Thomson Financials. This has been partially

attributed to the lag in Europe being affected by the credit markets.

1.2 Global Financial Crisis and global M&A outlook for the

future

The global financial crisis has pushed many countries around the

globe into deep recession and has dramatically affected their business

plans and outlook the world over. The global economy plunged into

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recession in the latter half of the year 2008. This deepened in the early

months of 2009, as global trade contracted sharply, investment was

slashed and consumer demand faded. This nine month period coincided

with the steepest decline in global economy in the post war era. This

period witnessed a combination of severe banking crises in many mature

economies like US, the credit squeeze, massive house price corrections

and dramatic 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].

Mike Hughes, global leader-mergers and acquisitions for Grant

Thornton International while attributing the large scale reduction in

transaction volumes to the tight lending policies exuded optimism that

these turbulent times could also provide attractive opportunities to cash

rich/well capitalized businesses to register substantial improvement in

their growth by acquiring ailing but fundamentally sound rivals. The

next 12 months are likely to be a buyers market offering opportunities to

make strategic acquisitions at attractive valuations (Mergers and

acquisitions release, 2009-Thornton). M&A activities gained traction

globally in the fourth quarter of 2009,witnessing a rise in value by 46%

to $739.6 billion which was $150 billion higher than any other quarter

in 2009(Business Standard,20th March,2010). This has clearly thrown a

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hint at a resurgence of M&A activity in the Year 2010 according to

Dealogic.

Some key factors for the heightened M&A activity were:

the surplus of cash held by private equity(PE) firms and public

companies

interest rates that touched their historic lows and

the keenness of banks to finance M&A deals.

1.3 M&As 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, M&A 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 M&As, Joint Ventures, Spin-offs and

Divestitures. The major industry sectors influenced by the forces of

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consolidation in India, though varied from time to time, were mostly in

the realm of infrastructure sectors like cement, power and steel, drugs,

telecommunications, media & entertainment and banking. A major

change evident after 2002 in the corporate restructuring activity in India

is that of Indian companies making forays into developed foreign markets

through acquisitions and joint ventures (JVs). During this period India

also became an attractive destination for foreign direct investment (FDI)

as the inbound acquisitions also gained considerable momentum. Merger

and Acquisition activity in India comes under the purview of the various

provisions of the Companies Act, Securities Exchange Board of India

(SEBI) and Competition Commission Act of India, 2002.

In the year 2009,M&A and PE investments in India almost halved

both in volume and value terms due to the economic slowdown

precipitated by the global financial crisis. According to Grant Thorntons

Deal Tracker report, the total value of M&A and PE deals announced in

2009 stood at $21.20 billion as against $41.54 billion in 2008. PE and

qualified institutional placement in the same year was at $11.17 billion

($10.59 billion). The M&A and PE investments in 2007 were of the order

of $70.14 billion. There were 488 deals in the year 2009 against over 766

in 2008.Domestic M&A volumes dipped to 142 from 172 in 2008.

Outbound M&A was down at 64(196) while inbound M&A to 61(86).

Coming to the value of deals, the value of inbound deals dipped by about

75% to $ 3.11 billion from $12.55 billion in 2008, the Russian

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Governments acquisition of a strategic stake in Sistema Shyam Telecom

for $676 million was the largest inbound deal in 2009 while Daichis

acquisition of Ranbaxy Technologies for $4.5 billion was the largest

inbound deal in 2008. The value of outbound deals declined to $1.12

billion ($13.19 billion) in 2009. However, the top two outbound deals in

2008-Tata-Jaguar Land Rover and ONGC-Imperial accounted for almost

40% of the outbound deals. Top deals 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 following a

steep drop in the valuations of target companies.

According to global M&A(Mergers and Acquisitions) intelligence service,

Mergermarket, the overall improvement in economic and business

environment of India has resulted in an impressive (166.5%) jump in the

M&A deals (both inbound and outbound being nearly equal in volume

terms at around $25 billion) in the year 2010 as against 2009.Telecom

sector got the lions share with 16 transactions amounting to $19.6

billion while Bharti's acquisition of Zain Africa for $10.7 billion

contributed signifcantly to the M&A pie in the year 2010.

1.4 Motives for Mergers and Acquisitions

Infrastructure-related industries dominated M&As in 2008

(accounting for over 45% of the deals in value terms). According to

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Bundeep Singh Rangar, Chairman, Indus View Advisors Ltd, Europes

fastest-growing Indian M&A firm advising multinational companies on

business opportunities emanating from Indias rapidly growing economy,

the dominance of this sector in M&As symbolizes the growing need for

world class facilities, adoption of globally acceptable best practices,

experienced global management expertise & technology applications to

accelerate growth in the Indian economy. Grant Thornton (2006)

conducted a survey of Indian corporate managers across various sectors.

Their findings revealed that M&As continued to be a significant form of

business strategy for Indian corporate. The results of the survey are

furnished below:

Table 1.1

Objectives of Indian Corporate For M&As

( In percentage)

Objective behind the M&A Transaction Responses

To improve revenues and profitability 33

Faster growth in scale and quicker time to market 28

Acquisition of new technology or competence 22

To eliminate competition and increase market share 11

Tax shields and investment savings 3

Any other reason 3

Source: Grant Thornton (India), The M&A and Private Equity

Scenario, 2006.

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1.5 Scope of the research study

In recent times, the world economy has developed serious difficulties in

terms of failure of major banks & financial institutions and declining

demand. Future growth prospects became very uncertain exposing major

economies to deep recession. However, in the midst of all this gloom and

chaos engulfing the world economy, Indias banking sector has been

amongst the few to maintain resilience.

A progressively growing balance sheet, faster credit expansion, increasing

profitability and productivity similar to banks in developed markets,

lower incidence of nonperforming assets(NPAs)(around 2% on an average)

and increased emphasis on financial inclusion by the Government of

India and RBI have contributed to making Indian banking sector viable,

vibrant, and strong. In this backdrop, Indian banks have started to

revise their growth strategies 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 emerging business opportunities besides ensuring

continuous assessment and effective management of risks in the light of

Basel norms on Banking Supervision.

Against this backdrop, Indian banking sector has been selected as the

theme of the research study on Mergers and Acquisitions (M&As) in the

Indian context.

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1.6 M&As 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. Earlier, the banking industry was largely a nationalized

industry (since 1969). The larger developments in the economies across

the globe, the economic crisis in 1991 & more recently the sub-prime

crisis and the changing outlook of the policy makers in India have forced

the pace of change of the Indian banking industry. The economic

liberalization and deregulation measures intiated in the 1990s have

opened up the doors to foreign competition and made the markets more

efficient and competitive. Continuous innovation and keeping pace with

technological change have become a must for survival of the firms in

the financial services industry including the banking sector. The

developments in the Indian banking sector have witnessed quite a few

mergers and acquisitions (M&As).

The banking sector in India has made remarkable progress since

the economic reforms in 1991.The entire financial sector - the banking

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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 the much needed platform to the Indian banks to

operate from a vantage point on the basis of operational flexibility and

functional autonomy, thereby improving 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 Indian banks were mostly driven by

weak financials as reflected in the continuously deteriorating balance

sheets of the merging entities prior to the year 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

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Bank of Indore (in progress) are the latest among such mergers. A table

depicting the size and net profits of major public sector banks of India as

at the end of March, 2009 is furnished below.

Table1.2 Size of Public sector Banks in India: March 2009

Name of the Bank Total Business (Rs. in crores)

Net Profit (Rs. in crores)

State Bank of India 642288 9121

Punjab National Bank 364463 3091

Canara Bank 336383 2072

Bank of India 334440 3007

Bank of Baroda 325112 2227

Union Bank 236968 1727

Central Bank 218012 571

Syndicate Bank 198380 913

Indian Overseas Bank 175925 1326

UCO Bank 169880 558

Oriental Bank of Commerce 167434 905

Allahabad bank 144415 769

Indian Bank 124413 1245

Corporation Bank 122496 893

Andhra Bank 103818 656

United Bank of India 90563 185

Vijaya Bank 90410 262

Bank Of Maharashtra 87072 375

Dena Bank 72235 422

Punjab and Sind Bank 59590 437

Source: Statistical Tables Relating to Banks in India: March, 2009, RBI

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1.7 Need for the study

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) consolidation 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, particularly in the banking sector. The study

makes an attempt to examine the effectiveness of this consolidation

exercise of the RBI to enhance the competitiveness of the Indian Banking

industry employing a ratio based approach in the first phase.It also 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 bank consolidation, which is necessarily a time-

consuming and complex process.

The vital importance of an efficient banking system in the long term

growth strategy of a fast developing economy like India can hardly be

overemphasized. Research studies of this nature are crucial for the policy

makers, business and industry leaders and even the ever growing

investing public who are keen to know the strengths and weaknesses of

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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

overarching influence that efficiency exercises on the cost structure of

the banking system and the overall growth, vibrancy and stability of the

financial markets.

The motivation for the study stems from the crucial role of M&As 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 accounting 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 as

the length of the event window selected. Further meaningful price data

exist only for those banks whose shares are actively,publicly traded

(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

because of the transformation the accounts of the merging entities

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undergo during the merger (like restatements, special amortization and

depreciation, merger related costs etc) (Kaplan, 2006). While the period of

study in many research studies conducted to evaluate banking

efficiency, especially in the context of bank mergers is relatively short,

the present study covers a fairly long period over which a sizeable

number of bank mergers (in India ) have taken place. The present

study therefore addresses a critical gap in the literature by providing

recent evidence on the bank merger efficiency in the Indian context.

Secondly, in order to evaluate the effectiveness of the commercial bank

mergers in India, it is necessary to undertake a formal analysis. This

study thus makes an attempt to provide empirical evidence on the

efficiency changes of select Indian commercial banks over a period from

1995 to 2009 using the non-parametric Data Envelopment Analysis

(DEA) methodology, as the second phase of this research effort.

Employing this methodology, the overall, pure technical and scale

efficiencies & cost and profit efficiencies of the twenty seven sample

banks (both public and private sector) have been measured. The impact

of mergers on efficiency changes has been investigated by comparing

average relative efficiency scores three years before and three years after

the merger. Further, the study employs the Tobit regression technique,

which is a generally accepted methodology in the literature, to identify

the determinants of efficiency of the Indian commercial banks. This

technique also captures the long term trends. Tobit regression technique

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to identify the determinants of efficiency of the commercial banking

sector in India for a panel data covering a fairly long period has been

scarcely employed in the Indian context.

The Indian banking sector has undergone massive upheaval in terms of

the sophistication and innovation in the product and service mix,

technological up gradation, customer reach and sectoral coverage fully

exploiting the opportunities which 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

or services is a must for achieving sustainable competitive advantage.

Businesses feel the need to merge when they exhaust possibilities of

organic growth, or when they want to achieve increased market share in

good time. In the era of globalization, banks will have to be financially

strong and competitive to face the challenges and leverage the

opportunities. Many well publicized mergers have transformed regional

banks into national banking power houses. (Urban et al,2000).

The Indian banking sector has embarked upon consolidation &

restructuring that is expected to continue. Shri Purwar, the then

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Chairman of State Bank of India, in a round table conference arranged

by Business Standard said : Seven to ten years down the line, there

could be six to seven public sector banks and a couple of private sector

banks and certainly some foreign banks. According to Mr.

Chidambaram, former finance minister of the Government of India, the

three Cs, i.e. Competition, Convergence and Consolidation will be the key

drivers of banking sector in the future. Addressing the bankers

conference, R. Gopalan, Secretary, Financial Services, GOI said merger

should take place at banks own initiative based on pure business sense.

In mergers and acquisitions, banks should look at synergistic gains,

technology, scale economies and operational benefits (Business Line,

13th January, 2010). In this complex and gigantic effort of bank

consolidation, where does the customer stand? What are his views and

expectations? Does he stand to gain or lose? How does he perceive the

whole exercise? Does he feel that his voice is being heard or he feels let

down and helpless. These questions, though seemingly simple, are the

most difficult ones to answer.

Service Quality Level and Customer Perception

Many consumers are concerned that the level of service quality has been

declining over the last two decades. From the customer service

perspective, a decline in service quality can be attributed to the rise in

two-income households, and the busier lifestyles of the cosumers of such

services. Having higher incomes, better education, and less time has

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made consumers more demanding with regard to convenience and

service quality. Just as in the United States, the service sector is a

critical component of the economy of other countries, like India. (Clow et

al, 2008).Over the last decade and a half, lot of research has been

undertaken to evaluate the various dimensions of service quality, which

is being increasingly viewed as one of the key strategic values of service

sector organizations.(Lewis,1991). It is important to explain the word

perception in some detail. Perception is the act of discerning, realizing,

and becoming aware of through the senses. The customers perception

is what matters, not what we think it is (Tom Albrecht President aQsi,

October 10, 2003).To customers who are evaluating the quality of a

service, it is their perception that counts, not what the service provider

thinks. Service firms must understand the concept of service quality

from the viewpoint of the customer, not from the viewpoint of the service

firm or service provider. (Clow et al, 2008).

Importance of Customer Service Quality in Banks

State Bank of India, the largest commercial bank of the country, has over

150 million customers. In the words of O. P.Bhat, the Chairman of the

bank, One can not serve without a cause, nor become better without

one. And our cause has been the customer. We have been addressing

customer service in a million different ways. While responding to a query

from the media why the SBI has, of late, become aggressive, the

Chairman has replied: We have not become more aggressive, but more

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focused, agile, customer-centric. We have come closer to our

constituents. We anticipate their needs, we respond to them to the best

of our abilities, using technology. We have centralized every thing that

could be centralized and made the branches available for sales and

service.

The above statements are a clear reflection of the thinking of top

management of the banks about the importance the customer has in

their scheme of things. Banknet India, a banking research companys

Financial Sector Survey 2007 identified that Customer Service, Security,

Know Your Customer(KYC) were regarded as the top priority issues to be

addressed by the financial sector in 2007. The impact of bank mergers

on various stake holders including the communities involved and on

customers is significant and it is therefore important to study their

effects.

A plethora of information is available about the financial and human

resource implications of mergers in general and bank mergers in

particular from various sources. Many studies talk about the scale and

scope economies, diversification benefits, and growth in market share,

impact on valuation and other financial performance parameter

improvements. A good number of studies have also investigated into the

HR and cultural conflict related issues in the context of bank mergers.

However, there is very little quantitative information available about the

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impact of these mergers on consumers of banking services and on their

perceptions of banking services in India. The present study therefore

examines, in its third and final phase, the impact of commercial bank

mergers in India on the service quality perceptions of bank customers. It

also attempts to identify the factors which the customers consider critical

in this regard.

1.8 Objectives of the Study

The present study has the following objectives:

1.8.1 Ratio Analysis approach for evaluating the post-merger

performance of select commercial bank mergers:

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.

1.8.2 Data Envelopment Analysis (DEA) approach to evaluate the

post-merger performance of select 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.

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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.

1.8.3 Marketing implications of commercial bank mergers /

Customer perceptions of service quality in the face of commercial

bank mergers 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 service quality perception of

customers in the face of commercial 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 in the face of

mergers.

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To suggest measures aimed at improving the service quality of the

commercial banks in India in the face of mergers.

1.9 Hypotheses of the Study

1.9.1 The following hypotheses have been set up for testing for statistical

significance of each financial ratio separately (Ratio approach).

H0: There is no significant change in the financial ratio due to the M&A

event.

H1: There is significant change in the financial ratio due to the M&A

event.

1.9.2 Keeping the objectives in perspective, and having regard to the

results of past research in the area of measuring post-merger efficiencies

(DEA approach) 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 of acquiring bank will not improve in the post-

merger scenario.

H1: Technical efficiency of acquiring bank will improve in the post-merger

scenario.

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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.

1.9.3 To evaluate the marketing implications of commercial bank

mergers in India, having regard to the review of literature in this regard,

the following hypotheses are proposed:

Ho: There is no significant association between respondents

demographic/behavioral characteristics and perception of the effect of

commercial bank mergers and acquisitions on banking services.

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H1: There is significant association between respondents

demographic/behavioral characteristics and perception of the effect of

commercial bank mergers and acquisitions on banking services.

1.10 Limitations:

Non-availability of data for certain parameters for the period under

study.

Efficiency calculations (under DEA) cannot be performed in case of

inputs or outputs with negative values.

The present studys (marketing implications) sample of customers

is drawn from Hyderabad city only. To get better insights, a

broader sample comprising other regions/cities of the country may

be taken.

1.11 Fruitful avenues for future research:

The future banking M&A 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 conclusions there from as to the effectiveness of

mergers and acquisitions.

Future research may also look at the cross-industry M&As within

the financial services sector in India and abroad as this an area

which has not been investigated much.

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In future research should lay more emphasis on dynamic analysis

methods rather than static ones, which do not use data on M&As

directly 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.

BASEL-III norms which require more stringent risk management

standards to be put in place by commercial banks call for more

rigorous research into the M&A implications in the banking sector

in the light of these requirements.