Axis–Enam: The Investment Banking Marriage—Will They Produce Superior Cash Flows?

Abstract

The India-based private-sector financial institution Axis Bank demonstrated its triumph moving into the investment-banking business by acquiring the privately owned Enam Securities. Indeed, Axis considered that the Enam deal would generate superior cash flows in the growing competitive prolific business, that is, financial advisory services. In other words, the merger with Enam was only a forward integration, which might help in collecting a fee-based income and advisory fee that strengthens future earnings. Axis shareholders were poignant when the corporate board declared a merger announcement with Enam. In this regard, had they been influenced by new market information, which was formally a merger announcement? Likewise, did Axis shareholders benefit from this merger? Will Axis sustain their acquired business in the growing advisory services? How did Axis benefit from the non-compete agreement with Enam? More importantly, will they produce superior future free cash flows? In addition, students would learn various motives behind bank mergers in India and business opportunities in investment banking. Specifically, students would acquire hands-on experience related to the estimation of future free cash flows and business valuation. List of supplementary materials: Teaching note, exercises with solutions (spreadsheets are available upon request).