The Impact of Merger and Acquisition on Financial Performance in Banking Sector of Pakistan

Abstract

This section explored the idea of mergers and acquisitions in general, highlighting how it has been practiced in many aspects of the industry over a period. The banking business in Pakistan was also examined, as well as how mergers and acquisitions were conducted. 1.2. Introduction There are times when companies are unable to meet their objectives or achieve their goals. At these times the company can either shut down or if it believes that it has the resources to survive in the market, the company can employ different strategies to attain its goals. There are cases when the company has to only restructure itself in order to achieve its objectives. There are different ways through which a firm can restructure itself, these can be as follow: ➢ Divestiture ➢ Ownership restructuring ➢ Proxy contest ➢ Joint ventures and strategic alliances ➢ Merger and Acquisition Divestiture involves selling the company’s assets in part or as a whole or turning a subsidiary of the company into a separate entity. While in the case of ownership restructuring, the debt and equity ratio are changed. A public limited company is turned into a private limited company, where the common shares are repurchased by the firm’s management or by a small group of investors. It is the same thing with the proxy contest, the firm’s management is completely changed. At other times, two or more companies join hands to work on the same project, and a new company is formed, but at the same time, the separate companies retain their separate entity as well. Merger and Acquisition, on which the following research is based, is a little different from the above-mentioned techniques. In M & A, two firms join together and turn into a single 5 unit, or a firm acquires another firm. In simple words, we can say that M & A is a combination of two or more companies in which only one firm survives as a legal entity. At the best of times, integration after a merger or acquisition can mean expended carrier opportunities, access to clients and technology, and training you through you had to go elsewhere to get. At the worst of times, they mean downsizing, reduced benefits, turf-wars, cultural challenges, and months of confusion. In recent times, businesses are collaborating to enhance their competitiveness and acquire a competitive edge to secure substantial market share, enlarging the business portfolio to minimize the risk and set foot in a new market above the firms. The acquisition and mergers have become prominent universally due to the advancement of technology, globalization, and an extremely cut-throat environment. A merger is a mixture of two firms into one like acquisition is the way when a big firm buys a small firm and makes a huge firm. A merger is the joining of two or more organizations by the purchase, acquisition, or pooling of interests