impact of mergers on organizational structure

8/3/2019 Impact of Mergers on Organizational Structure

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IMPACTOFMERGERSON Organizational

STRUCTURE


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CASESTUDY- BANKOF MADURAWITHICICIBANK


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PROFILEOF ICICI BANK

ICICI Bank is India's second-largest bank with total assets of Rs.

4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax

Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31,

2011.

The Bank has a network of 2,533 branches and about 6,700 ATMs in

India, and has a presence in 19 countries, including India.

ICICI Bank offers a wide range of banking products and financial

services to corporate and retail customers through a variety of

delivery channels and through its specialized subsidiaries in the

areas of investment banking, life and non-life insurance, venture

capital and asset management.


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PROFILECONTD.

The Bank currently has subsidiaries in the United Kingdom,

Russia and Canada, branches in United States, Singapore,

Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International

ICICI Bank's equity shares are listed in India on Bombay

Stock Exchange and the National Stock Exchange of India

Limited


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PROFILEOF BANKOF MADURA

Bank of Madura was established in 1943 by Karumuttu

Thiagarajan Chettiar.

It acquired Chettinad Mercantile Bank (est. 1933) and Illanji

Bank (est. 1904) in the 1960s. Bank of Madura was a Chettiar

bank with a large customer base of 2 million plus customers

and a network of more than 280 branches and 40+ ATMs

centers spread across about 100 cities in India.

The bank, along with Satyam Info way Ltd., announced a Joint

Venture to establish E-Commerce services targeting Persons

of Indian Origin (PIOs).
http://en.wikipedia.org/wiki/Karumuttu_Thiagarajan_Chettiarhttp://en.wikipedia.org/wiki/Karumuttu_Thiagarajan_Chettiar


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PROFILE CONTD..

It also entered into a 50:50 joint venture with Tata Consultancy

Services to undertake consulting in the areas of banking

software and banking software products for the financial

services sector.

The bank merged with ICICI Bank Limited, under Section 44A

of the Banking Regulation Act, 1949. The Reserve Bank of

India approved the merger effective March 10, 2001.


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REASONSFOR MERGERS

The key basis underlying every merger is the question of

synergy.

BoM is known to have a poor asset portfolio.

BoM is a very traditional bank with no technology and lack of

awareness. It was bankrupt entity which was headed for closure

given the low probability that it would manage to raise Rs.800

crore of equity on a base of Rs.100 crore of market capitalisation

BoM is strong in south India states and ICICI is very strong in

Central and North Indian states, which would give a complacent

advantage to both the banks.


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Closure of bom would normally involve pain for bom's

shareholders and workers instead both groups will get an

extremely pleasant ride if the merger goes through


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MANAGINGRURALBRANCHES

ICICI major branches are in major and cities, where as BOM

spreads its wings mostly in semi urban and city segments of

south India.

There in a task ahead lying for the merged entity to increase

dramatically the business mix of rural branches of BOM.

On the other hand due to Geographical location of its

branches and level of competition. ICICI Bank will have atough time to cope with


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HR PROBLEMSINTHEMERGER

This merger (ICICI Bank-BoM) brings together two entities

that have grown in different environments. The main Hr relater

problem would be work culture

Though the size of ICICI Bank is almost thrice that of BoM's in

terms of deposits, the number of employees in ICICI is around

1400 compared to 2500 employees in BoM.

With the manual interpretations and procedures and the lackof awareness of the technology utilisation in BoM, there would

be many hindrances in the merged entity.


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Another important problem is employee get together.

The staff of ICICI Banks are drawn from 75 various banks

mostly young qualified professionals with

computer background and prefer to work in metro or by either

with good remuneration packages

Whereas while under the influence of tread unions most of the

BOM employees have low career aspiration

There will also b change in strategy as both the banks are

considered to welcome new clients


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MEASURESTOOVERCOMEHRPROBLEM

To eradicate all problems like employee gelling together,

managing two different entities at one and the same time one

so there is a core group from both the banks has been

constituted to help in the integration.

Besides, ICICI also plans to set up sub-groups to look into

areas such as IT, audit and HR.


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impact of mergers on organizational structure

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