Wednesday, May 22, 2019
Rbs Abn Merger
The Acquisition of ABM AMNRO by RBS Introduction Mergers & Acquisition have become very popular throughout the world in the upstart times. This has become popular due to globalization, liberalization, technological developments & intensely competitive affair environment. Mergers and science are a big part of corporate finance world. This motion is extensively workoutd for restructuring the business organization. In India, the concept of unitings and acquisition was initiated by the government bodies.The Indian economic re course of action since 1991 has opened up a full lot of challenges both in the domestic and international spheres. The increased competition in the global market has prompted the Indian companies to go for coalitions and acquisitions as an important strategical choice. The trends of mergers and acquisitions in India have changed over the years. The immediate effects of the mergers and acquisitions have in like manner been diverse across the various sectors of the Indian economy. Acquisition Acquisition in oecumenical sense is acquiring the ownership in the property.In the context of business combinations, an acquisition is the purchase by one association of a controlling liaison in the allocate capital of another existing company. An acquisition may be affected by (a) agreement with the persons holding majority interest in the company management like members of the board or major shareholders commanding majority of voting power (b) purchase of shares in open market (c) to addle takeover offer to the general body of shareholders (d) purchase of clean shares by private treaty (e) acquisition of share capital or one company may be either all or any one of the following form of considerations viz. eans of cash, issuance of loan capital, or insurance of share capital. History On October 10,2007 Royal depone of Scotland led consortium with RBs, Fortis of Belgium and banco Santander central Hispano SA of Spain created history by acqu iring Dutch banking gaintABN AMBRO for US$ 100 billion. The consortium paying(a) US$ 51. 55 per share of ABM AMBRO, about 13% more as compared to the rival Barclays offer. This was one of the largest acquisition in the history of global banking attention . The consortium agreed to pay 93% of amount through cash and remaining 7% through RBS shares.Due to the 2008 financial crisis, the Dutch government nationalised the divisions owned by Fortis, while the UK government is now in effective control over the divisions allocated to RBS due to its financial bail-out of the Scottish bank. The process of integrating some of ABN AMROs divisions into the new owners, and divesting others, continues. Since 6 February 2010 the bank has been split into one organisation owned by the Dutch government called ABN AMRO Bank N. V. and another owned by The Royal Bank of Scotland Group renamed The Royal Bank of Scotland N. V.On this date the Dutch owned businesses legally demerged from those owned by R BS. The Dutch government own the ABN AMRO brand for use with the parts of the bank they purchased while other companies within the Group lead be renamed or closed down. Objective To study the acquisition of ABN AMBRO by RBS form various perspectives. We will try to answer the following questions- What would a SWOT analysis reveal? What were the various synergies? Was the acquisition strategy sound? Events after acquisition? Various parameters of the deal. Effect of recession on the deal. Major challenges faced by the firm.On 19 January, 2009 RBS issued a statement in which it admitted that acquiring ABN AMBRO was a mistake. It also issued in the statement that ? 10 billion that it had spent on ABN ABMRO was worth nothing by then. Also RBS incurred a loss of ? 24. 1 billion on a total income of ? 26. 9 billion. So in this report we will try to study and learn the after-effects of acquisition. Various other similar factors are act to be studies. Data & Research Methodology Data wil l be mainly sourced from secondary sources. However the management of certain firms under view will be interviewed through structured questionnaires.The data will be analysed using financial tools to access the effectiveness of the deal. An attempt will be made to label the efficiency of the merged firm with the help of selected financial ratios. Analysis and expected results Through the medium of this report an attempt will be made to analyse the financial benefits of the acquisition. In addition to strategic benefits, the acquisition would deliver significant financial benefits to the shareholders. Through major cost savings and improved profitability of business lines, substantial earnings improvements for shareholders will be realised.The expectations from the deal were to strengthen all three consortium banks in their respective markets and open up new ingredient to accelerate their growth. The analysis includes- Impact of mergers & acquisition on employees and working condit ions Looking at the financing of the acquisition and studying the possible financing options. Major challenges of the merger and the opportunities. RBSs current expansion plans Sensitivity analysis Synergy analysis Accounting and financing structure Risk assessment and cost of capital Leveraged buy-out Estimating merger gains and costOf course, it is easy to criticize another firms management but not so easy to improve it. Some of the self-appointed scourges of sad management turn out to be less competent than those they replace. Here is how Warren Buffet, the chairman of Berkshire Hathaway summarizes the matter Many managers were apparently over-exposed in impressionable childhood years to the story in which the imprisoned, handsome prince is released from the toads body by a coddle from the beautiful princess. Consequently, they are certain that the managerial kiss will do wonders for the profitability of the target company. Such optimism is essential.