Question

Briefly describe a corporate merger that you have read about recently or been part of as an employee. What kind of a merger was it? How well is it working from the perspectives of the various stockholders? As far as you are able to determine, what factors are contributing to the success or lack of it?

Answer 1

I have recently seen Capital first and IDFC Bank merging as a stock investor in Indian equity market.

IDFC bank was a growing bank and capital first was a nbfc which was significantly growing .IDFC bank wanted it's consumer base to grow and it offered with a lucrative valuation to capital first, they could not ignore. It is a very common thing to have banks Acquiring NBFCs to grow significantly .

IDFC bank offered 139 shares of it's own to 10 shares of capital first and it was merged to form "IDFC FIRST" .

It was a kind of vertical merger in which firms operating at different level of industry which is similar in nature,got merged to form a new company. The banks and Nbfc operates in the similar industry and at different levels and different risk exposure.

It was a good merger as it benefitted both the company's shareholders and created value for them unless the Nbfc crisis hit Indian markets and it magnified during the recent lockdown amid fears of the pandemic Covid 19.

In the long run, this merger can be highly beneficial for the shareholders and it can create a lots of value for shareholders as it is two highly credible firms focused at creating value for it's shareholders.