Forms of Merger and Acquisition: Nepalese Case

institution forms of merger and acquisition market value
(Rs.in million)

Standard Chatered Bank expension-joint venture Rs.6460
Nepal Himalayan Bank expension-joint venture Rs.3861
Nepal Everest Bank expension-joint venture Rs.2576
Nepal State Bank of India expension-joint venture Rs.1205
Nepal Lever expension-joint venture Rs.1288
Bottlers Nepal(Terai) expension-joint venture Rs.484
Nepal Investment Bank expension-joint venture Rs.3358
Nabil Bank expansion-joint venture Rs.5358
Nepal Film Development sell-offs-acquisition Rs.20
Bhrikuti Pulp and Paper sell-offs-acquisition Rs.210
Harisidhi Brich and Tile Factory sell-offs-acquisition Rs.28
Nepal Bank Limited corp. control-manage.contract Rs.856
National commercial Bank corp. control-manag.contract Rs.635
HISEF Spin-off-acquisition Rs.128
Nepal Lube Oil change in own.struc.acquisition Rs.82
Leather-age Bansbari Tannery sell-offs divestiture Rs.32
Nepal Foundary Industry sell-offs acquisition Rs.15
Biratnagar Jute Mill Corp. control-manag.contract Rs.116
Nepal Jute Devt. and Trad.co. liquidation Rs.24
Tobacco Devt.and Trad. co. Liquidation Rs.30

Recently in Nepal

Recently, Himalayan saving and finance company(HISEF) was merged with Laxmi Bank providing one share of the bank to each share h0lding of HISEF shareholders. Himalayan Distillery and Jwalakhel Distillery operating under one management group had been already merged. Besides, Sri Lanka Merchant Bank is merging with Nepal Credit and Commercial Bank, etc. Similarly, many old public enterprises will be merging and acquired to form new company such as RNAC, Nepal Telecommunication Corporation, Nepal Electricity Authority etc.

In the last two decades, government following the economic liberalization policies has encouraged the growth of joint venture business in Nepal especially in initiating the growth of number of joint venture banks in Nepal. These include notable joint venture companies such as Nepal Arab Bank, Standard Chartered Bank, Nepal Everest Bank, Himalayan Bank, Nepal State Bank of India, etc. Even at the manufacturing sector, Nepal Lever Limited, Nepal Dabur Company, etc have developed. Presently, eleven listed commercial banks, four development Banks, forty-one finance companies, and thirteen Insurance Companies are operating in competitive financial market in Nepal. As Nepalese financial market is characterized by low volume of turnover, high interest rate in lending, high interest rate spread, inefficient management, lack of practice of project financing, problem of inadequate working fund and unhealthy competition between the companies in finance sector may compel the process of merger and acquisitions between the companies in operation in order to overcome these problem. Merger and acquisition becomes an urgent need, as Nepal had already become a member of WTO, especially in finance sector because foreign banks' branch will be supposed to allow operating in Nepalese market after 2010.

In context of Nepal

The merger and acquisitions are initiated to improve economic performance, improve capacity utilization, enhance productivity and achieve cost effectiveness of running the public enterprise through various modalities of conversion and transfer. In fact, mergers and acxuisitions are initiated due to inefficient management, synergy, diversification, market share, strategic realignment, information signaling, regulatory and political change, buying of undervalues assets, agency problems and mismanagement, managerialism and tax considerations.


In order to get the benefits of merger and acquisition, by exercising the required provisions of the company's act, many companies have been acquired and merged such as Bhrikuti pulp and paper factory, leather age Bansbari Tannery and Shoes factory, Nepal Film Development Corporation, Harisidhi Brick and Tile factory, Tobacco Developement corporation, Nepal Lube Oil Limited, Balaju Textile Industries, Bitumen and Barrel Industries Limited, Raghupatu Jute Mills, Nepal Bank Limited, Agriculture Tools factory, etc. Even at present, the regulating authorities are considering the amalgamation of weaker companies, banks, service industries and other nom-bank financial institutions to stronger ones.

0bjective

1. Downsizing of the government expenditure
2. Promotiom of functional expertise through active involvement of private sector to enhance internal growth, efficiency and productivity
3. Promotion of accountability and corporate culture and transparency in merged companies to have improved managerial and financial implicatioms.

History of mergers and acquisitions

Du pont springs a surprise $7 billi0n offer for resource-rich Conoco

While most Americans were enjoying fun and fireworks on the fourth of july weekend, teams of executives from conoco inc.. and Du pont and co. had forsaken friends and family to work almost round the clock on the biggest merger in U.S. Corporate history. Du pont, the largest US.

producer of chemicals, had secretly offered to buy Conoco, the ninth biggest American oil company. After five hectic days of staff work, the deal seemed set. On sunday night of the july fourth weekend, Du pont chairman Edword Jefferson flew from his headquaters in wilmington, Del. aboard a king Air twin-engine turboprop to stamford, conn, for a midnight meeting with Conoco chairman Ralph Bailey in that company's boardroom rotunda. Just after 1am. the two weary; rumpled chief executive settled final details, sealed the agrement with a hand shake and retired to of scotch and bourbon. Du pont was paying some $7 billion in cash and stock for Conoco. The union could form the seventh largest industrial enterprise in the U.S. ranking just behind the ford motor co.

That marriage, however' is not totally certain. The deal still has to be accepted by stockholders of both Du pont and Conoco. for two months of flock of suitors har fought over Conoco in a bidding battle as frenzied as a auction for a newly discovered Rembrandt. The other most serious contenders cash-laden seagram co. of Canada, the world's largest liquor distiller, and texaco, the third biggest US. oil firm.

The fierce competition for merger mania that is sweeping the US. This year alone, seven deals each worth $2 dillion or more have been started or completed lile baseball club owners plucking off free agents, corporate captains are choosing up sides in a wild scramble that could bring significant shifts in the balance of power throughout US. industry. The Reagan Administration seems to be encouraging the merger markess and Attorney General William French smill proclaims, " Bigness does not necessarily mean badness"

The Conoco- Du pont agreement was the climax of a complex drama of high finance. It began with unwelcome assaults on Conoco by two canadian companies. The first came in may, when pome petroleum bought 20% of Conoco's stock. The Us. Company fended off that threat by agreeing to trade. Its majority interest in the Hudson's Bay oil and gas co. in return for the Conoco. stock that Dome had acquired. At the same time, however, a more ominous canadian challenger appeared. In late may seagram privately approached Conoco with an offer to buy 35% of the oil firm's shares. Edgar Bronfman, Seagram's adrogt chairman, it currently on the hunt for new acquisitions with nearly $3 billion, gained largely from the sale of Texas oil and gas properties.