ANALYSIS OF FACTORS CAUSING MERGER AND ACQUISITION: CASE STUDY OF BANKING SECTOR IN PAKISTAN

Abstract

Purpose:- The trend of merger and acquisition is increasing in the Pakistani banking sector. The purpose of this study is to find out the basic factors which beguile banks for the merger and acquisition. Methodology/Sample:- In this study researcher took the sample size 2 as two merger cases one is happened in year 2010 (Faysal Bank & RBS) and one in 2007 (SAMBA & CCB). Researcher critically analyzed the pre and post-merger performance of FAYSAL BANK & RBS and SAMBA &CCB with the help of five financial ratios, net interest margin ratio, Gross margin ratio, ROE, Debt ratio, Debt to equity ratio. The Researcher utilized the t-test for testing the hypothesis. This study has adopted exploratory research as its first research technique which helped us in clarifying the research problem. Many constraints have been faced during this study for example bankers were hesitating to fulfill the questionnaires. Findings:- The result of this study suggests that after merger and acquisition firms can increase synergy and can decrease the risk of solvency but merger and acquisition is not significant for the shareholders’ wealth (result will change with the different case). Practical Implications:- This study acquires the knowledge about the emerging trend of merger and acquisition and in future implement this knowledge in an effective way. In addition to that, this study will provide information that why companies take the decision of merger and acquisition.