Example Unilever Shares Ambrosia International Limited

Published Date: 02 Nov 2017

INTRODUCTION

When two or more firms to combine their operations into one business entity, generally they can combine their securities in to one company then the shareholders in the company exchange shares. "In the business, Merger is the combination of two or more companies or two or more banks which may or may not existing business".

Example Unilever shares Ambrosia International Limited, Mehran International Limited and Pakistan Industrial Co., Ltd. Promoters, which constitute what is called in many cases, a group of companies’ polka ice. Polka is one of the brands of the oldest and most famous ice cream in Pakistan. Team polka and three factories in the axis, and Karachi and Lahore, respectively. It employs more than 700 people and a combined turnover of about Rs. 725000000 in 1995. And Sangster told reporters at a press conference at a local hotel. For the benefit of the existing Unilever in Pakistan Lever Limited (Pakistan) Brothers, which manufactures and sells a wide range of consumer products? Unilever is the largest ice cream manufacturer in the world with a turnover of more than [pounds] (3) billion dollars from more than 50 countries. International experience in Unilever in ice and Polkas of experience of ice Pakistani market to deliver significant benefits to consumers in Pakistan. And Unilever will continue to develop and support all of the walls and polka brand and the brand will continue to invest in production activities Polka Company. In response to a question, Sangster said the total production of ice polka in Pakistan at the moment is 13 million tons while the ice wall of four million tons of the three companies’ polka groups and Pakistan Industrial Promoters (Pvt) Ltd (Pipl) was founded in 1970. The Mehran International Limited (Pvt) (MIL) it has a factory in Lahore, was established in 1975 and has a factory in Karachi, and the food delicious International, Ltd. (Pvt) (ALL) was founded in 1984 and has a factory in the hub. Ambrosia is a public company, while other private companies. The marketing of products from all three companies under the name of the polka.Movenpick AIL also produces under license.

Merger

Combination two or more companies, generally through the provision of securities of one company' s shareholders in the company in exchange for the surrender of their shares. For example The company A is the textile industry and it has earned the low profit due to the last Two years and there is another company B which is also a textile industry and it can gain the huge profits. The company B can decide to merger the company A because the strategy of the company A is good as compare to the company B so they can decides to merge the both companies and created the new company C. this is called the merger.

Consolidation

A new company or firms are created and the consolidation of businesses becomes extinct. Financial consequences: The costs or decrease in income resulting from disasters, and changes in market conditions, and the lack of product, or other events listed above or below management’s control.

Mergers are in the two forms which are illustrated below.

Merger via absorption.

Merger via consolidation.

Absorption:This is the form of the merger in which one or more companies to get be merge into the large companies. When the small companies are absorbed by large companies then the small companies lost their goodwill.

Consolidation: This is the form of the merger in which two or more companies can get together of the new company. All the consolidated firms or companies lost their goodwill after the consolidation and form a new body corporate. The asset and libelities of the small companies transferred to the large companies is called consolidated process.

Types of merger

Horizontal merger

Vertical merger

Conglomerate merger

Merger can be classified in the following types which can be given below.

Horizontal merger

A horizontal merger mean when the same natures of businesses are merged together. These types of merger are when two or more firms can merge together and the transaction which had been done between them in the same market line. The aim of the horizontal merger is that to maintain the good position in the market and gain a higher synergy affect by the combining the resources. The merger contains the process of production, technologically, marketing department and R&D business unit. Three major problems faced in horizontal merger which are given below.

Increase the focus in the similar market

For the combination or incorporation of merged companies

Example "The formation of Brook Bond Lipton India Ltd. through the merger of Lipton India and Brook Bond". "There are two motorcycles companies are merged with each other due to the same facilities of the motor cycle’s parts and the research and development cost can be combines".

Advantages of horizontal merger:

Economics of scope: Economies of scope refer to the potential of the combined company through the promotion of products or bundled products or services while reducing marketing costs. For example, the horizontal integration between the Telephone Company and Internet service provider and two of the companies and the media to create efficiencies of production by the newly merged company, which could promote bundled services at a discounted price. This could be a fierce competition to costing more than the phone and internet providers that offer a single service.

Increased investment: The great benefit of the company to be in the reduction of public expenditure, and strengthen the cross, the more money the company can invest in research and development to help the company grow. Companies can invest in the opinion polls and focus groups to understand how to recognize potential customers for their products. Companies can hire more workers is also developing new products and expand its operations to increase production to meet demand, and earn more money.

Vertical merger

This is a merger, being held in a combination of two companies operating in the same industry, but in different stages of production or distribution system. If the company carries out its supplier or producer of raw materials, can then lead to the backward integration of its activities.On the other hand, can lead to integration forward if the company decided to take the retailer or customer.May result in vertical integration in the operation of many economies and finance. The company tends to get a stronger position in the marketplace and in the production or distribution will be more integrated than that of competitors. Vertical integration provides a way to achieve total integration of the companies seeking to acquire all stages of the production program in collaboration with network marketing (ie, access to raw materials into final products).

Conglomerate Merger

"Conglomerate merger are different from horizontal merger and the vertical merger. It is totally different from the horizontal merger and the vertical merger is called the conglomerate merger. In the conglomerate merger in which synergy affect is low". A merger of two companies involved in different types of business. There are many ways to allow companies, such as the sharing of assets and reduction of benefit to risk, but can also pose a threat to the company and the new company is too large or if it is unable to use the success of blending the two companies. "Conglomerate merger is that when the two firms or banks are operating in different industries"

Advantages of merger

The advantages of merger must be considered when two or more companies’ merger with each other witch can be given below.

Good profit or earning as per share value

Manufacturing cost is low

Market share will be increased

Knowledge of the financial position of the company.

Increasing the incompatibility of the company

Increase the capital Good profit or earning as per share value:The main advantage of merge companies can earn per share value is good and the company can earn good profit as compare to before merge the companies.

Manufacturing cost is low: In the merge companies the manufacturing cost is too low due to the combine of the production department. This is the best way to earn the much profit and the manufacturing cost is too low.

Market share will be increased: When we merged the companies the market share will be increased due to the high price of the share value.

Knowledge of the company financial position: When we merged the company we can knowledge of the company financial position of the both companies. Increase the capital: When the company A merges with the company B the capital will rise up of the merged company.

Disadvantages of merger

Take over cost is high

Corporate performances is low

Clashes of the culture

Low management control

Legal cost is very high

Take over cost is high:When we purchased the new company the cost of the company take over is very high.

Legal cost is very high: When we merge the companies the most important disadvantage is that the legal cost is much high due to the merging effect.

Culture clashes: The main disadvantage of the merger is that to clash the culture between different types of business.

Low management control: The disadvantage of the merger is to management motivation is low due to the fire of the employees.

Low corporate performance:The main disadvantage of the merger is to when the two banks or firms can merged with each other they can required to following the rules and regulations. When the new rules or regulations can be impose on the firm the company performance of the company strategies can decreases or increases.

Purpose of study

The aim and objective of the study is to find out the reasons and circumstances causing a company merging with another company despite the clash of culture and the possibility of devalue of Shareholder investment

Problem statement

When the Two companies or banks has their own business decision to combing in one company. The problem behind the merger principle is (2+2=5). For example a company "X" value is 2 million and the company "Y" value is 2 million when their merge their companies in one company the value of that company are 5 million. The additional 1 million of that value is called "SYNERGY" value. Three form of Synergy value

Revenues: The combination of the two firms or banks, we feel it realize higher income, the firms or banks will work separately.

Expenses: The combination of the two firms or banks, we realize lower expenses, the two firms or banks operate separately.

Cost of Capital: combination of two banks or firms; we will experience a lower and overall cost of capital.

Research Questions

why do companies merge? What are the financial consequences after merger of two organizations?

LITERATURE REVIEW

"Terry Belcher", "Lance Nail" The fame of fast globalization is increasing day by day by keeping in view the stunning integration across the borders. It is also noticed that the cultural clashes are rapidly increasing due to many different social norms and customs. This study is mainly focusing the integration of Upjohn and Pharmacia Corporation of United States and Sweden respectively. The clinical study explores the problems of integration and then it discuses in details to all these problems. "Muhammad Usman Kemal" The analysis of accounting ratios on the financial performance of Royal Bank of Scotland is being thoroughly discussed in this study. The twenty dynamic of descent has helped us to analyze the financial statements for a period of four years i.e. (2006-2009). Though there are some limitations but still we consider it a very helpful tool for analyzing the accounting rates. All the financial decisions of operations use this i.e. ratio analysis method which is very common and approved by the authorities. During this analysis it was also observed that the merger or consolidator was very much satisfied with all the financial performances of Royal Bank of Scotland in terms of assets, profitability, liquidity, management, leverage, and cash flow. It approved that the integration is better than the agreement for the improvement of bank’s financial performance. Rainer Lenz The collaboration evaluation is very much important for the success of the merger and this evaluation should minutely focus on the existing methodologies, the price of mergers and the difficulties faced by the merger during the task. We can use some traditional methods for this evaluation like the numbers of sales and gains of market share can easily be converted to the new item. The functions of lemmatizing the operations of large companies in the unification of different costs are also being assumed by some current practices. The lack of analysis of each company and of a complex system which contains the several elements and relationships is missing from the current methodologies. Such a fragmented system as a result of merger cannot predict the accurate result measured in sales figures and profits by simply adding the key financial figures. This study aims to go beyond the simplicity of all the current methods to the development of an appropriate methodology to assess or evaluate the effects of collaboration. The elements of the framework of knowledge management and the theory of social systems & components are included in this new approach. All the alternative proposed methods in this article for innovative and creative solutions for the improvement of mergers’ success are available at the same time. The shortcomings experienced by the traditional methods and ultimately leading to an inevitable destruction of shareholder’s wealth are also proposed in this article. In the world of today the merger and acquisition has acquired the great importance. This process is used on a large scale to restructure the business. The Indian government has initiated to implement the concept of mergers and acquisitions in its country. Some necessary initiatives to restructure economy through the adoption of the policy of mergers and acquisitions have been taken by some financial institutions in India. These financial institutions also brought many economic reforms in India since 1991 after facing a lot of domestic and international challenges. The quest for mergers and acquisitions as a strategic option importantly has increased the competition in the global market for Indian companies and this competition has changed the trends in mergers and acquisitions in India over the last few years. It also changes from the direct effects of mergers and acquisitions between different sectors of Indian economy and still the percentage of Indian companies getting foreign companies are not as common. The situation is changing rapidly since the last few years and the Indian business is getting a sharp momentum by the acquisition of foreign companies with the Indian companies as a latest trend. This acquisition has proved that the Indian IT and ITES sectors have a great potential in the world and some other industries in India are following the same trend. Through the activities of mergers and acquisitions in India, it is easy to increase the participation of Indian companies in the business community. Although mergers and acquisitions are an important part of business strategy in all parts of the world for many decades but still the study of mergers and acquisitions were not capable of conclusive evidence on whether they increase inefficiency or destruction to the given wealth. But still there is an ongoing discussion on implications faced by global mergers and acquisitions of companies. So this article seeks to explore the trends and state of mergers and acquisitions in India. Jstor 2002 The banking industry and promote a rapid pace, however, it has become no conclusive results of the benefits of mergers and acquisitions. To investigate the causes and consequences of each type of supply to consider the acquisition of a unit (ie the purchase of most of the voting shares) and mergers based on data from the Italian. Mergers seek to improve the income of service, but this increase is offset by higher personnel expenses, and improves the return on equity due to a decrease in the capital. Acquisitions aim to restructure the bank's loan portfolio acquired and improved lending policies result in higher profits. James p walsh (2006) This study examines the implications of mergers and acquisitions in the subsequent negotiations management target turnover of the company. Are examined three features of companies and seven attributes of transactions in mergers and acquisitions? The results indicate that the main impact of the negotiations is evident in the fourth year after the settlement date. When it comes to the buyer company had nothing to do have been buying interest prior to the merger proposal, and agreement is reached, the goal of the management team are likely to face high turnover is abnormally 4 years later. And suggest other ideas to help in the interpretation of turnover rates of some of its strength in the 3 years immediately after the merger or acquisition.

DO MERGERS ENHANCE SHAREHOLDER WEALTH?

The reader probably expects the stockholders of acquired firms to earn positive, and highly significant excess returns. After all, merger premiums rose to 25-30 percent during the 1958-1978 period [Dodd and Ruback (1977)]. What about the acquiring firms? If the acquired firms’ stockholders profit handsomely from a merger, should not the acquiring firms stockholders lose? Are mergers zero-sum events? Is wealth created by mergers? Let us examine much of the empirical evidence. Mandelker (1974) put forth the Perfectly Competitive Acquisitions Market (PCAM) hypothesis in which competition equates returns on assets of similar risk, such that acquiring firms should pay premiums to the extent that no excess returns are realized to their stockholders. The PCAM holds that only the acquired firms’ stockholders earn excess returns. However, Mandelker studied mergers of 241 acquiring firms during the 1948-1967 period, and

found that acquiring firms’ stockholder earned 5.1 percent during the 40 months prior to the mergers, but excess returns decreased by 1.7 percent in the 40 months following the merger. Positive net excess returns (3.7 percent) were earned by the acquiring firms in the Mandelker study.

Thus, Mandelker found no evidence that acquiring firms paid too much for the acquired firms. Moreover, the acquired firms’ stockholders realized excess returns of 12 percent for the 40 month period prior to the merger, and 14 percent for the seven-month period prior to the merger. The Mandelker results have been substantiated by much of the empirical literature. Dodd and Ruback (1977) found that successful acquiring firms’ stockholders gained 2.8 percent in the month before the merger announcement during the 1958-1978 period, whereas the successful acquired firms’ stockholders gained 20.9 percent excess returns. Dodd and Ruback found that the acquired firms’ stockholders gained 19.0 percent even if the merger was unsuccessful, whereas the acquiring firms’ stockholders gained less than one percent. The empirical evidence for the 1973-1998 period is consistent, from 20 months prior to the merger to its close, the combined firms’ stockholders gain approximately 1.9 percent [Andrade, Mitchell, and Stafford (2001)]. Moeller, Schlingemann, and Stulz (2003) analyzed 12,023 mergers during the 1980-2001 period and found a 1.1 percent gain to acquiring firms shareholders.

Moeller et al. (2003) used a sample of public acquiring firms making acquisitions exceeding $1 million. Private acquired firms accounted for 5,583 of the 12,023 acquisitions involving subsidiaries. The private firm acquisitions tended to be more cash-financed (50.56%) than public firm acquisitions (29.57% cash, 55.32% in equity), and the subsidiary acquisitions were predominantly cash (75.92%). The three-day cumulative average returns (CARS) of the acquiring firms’ deals were on average 1.1%; however, the acquisition of private firms produced higher CARS (1.50%) than the public firm acquisitions (-1.02%), but less than the subsidiary acquisitions (2.00%). Smaller-capitalized firms’ acquisitions private firms financed by equity produced the highest CARS, whereas larger-capitalized, equity-financed acquirers produced the lowest CARS (-2.45%). The equityfinancing of subsidiaries produced excess returns of 5.40%. In general, Moeller et al. found that cash-financing produced higher excess returns than equity deals, led by cash deals for private firms and subsidiaries. The cash acquisitions by small firms produced statistically significant excess returns. Large firms make poorer acquisitions. Rapport and Sirower (1999) noted that the large 1990s mergers involved more stock and less cash than the large 1980s mergers. Rappaport and Sirower state that the acquiring firm’s management ask if its stock is under-valued; issuing new (more undervalued) shares would penalize current stockholders. Acquiring stocks should finance with stock if uncertain of synergy. Rappaport and Sirower (1997) calculate a stockholder value at risk (SVAR) which measures the merger premium divided by the market value of the acquiring firm before the merger announcement is made. The greater the merger premium and the greater the market value of the seller relative to the acquiring firm, then the higher the SVAR (if no post-acquisition) synergies are realized.

Mergers may enhance stockholder wealth; however, whereas Andrade, Mitchell, and Stafford further found that the target, or acquired stockholders gained about 23.8 percent for the 20 month period, consistent across the decades of the 1973-1998 period, the acquiring firms’ stockholders lost about 3.8 percent, during the corresponding 20 month period. For the largest merger in U.S. history prior to 1983, Ruback (1982) found that DuPont lost 9.89 percent ($789 million of stockholder wealth) in the month prior to the merger announcement whereas Conoco stockholders gained 71.2 percent ($3201.2 million) for the two-month period prior to the successful DuPont merger announcement. Do mergers affect the firms’ operations? Hall (1993) found that research and development (R&D) activities were not impacted

significantly by mergers. Hall found no lessening of R&D spending. Healy, Palepu, and Ruback (1992) reported that mergers seeking strategic takeovers outperformed financially-motivated takeover. Strategic takeovers generally involved friendly takeovers financed with stock whereas financial takeovers were hostile takeovers involving cash payments. During the 1979-1982 period, for the 50 largest mergers, Healy, Palepu, and Ruback found that strategic takeovers made money for the acquiring firms whereas financial takeovers broke even. Acquiring stockholders of strategic acquisitions made 4.4 percent for five years post-merger, assuming no premiums paid, whereas financial takeovers earned the acquiring stockholders 1.1 percent. The premiums paid in financial takeovers were higher (45%) than in strategic takeovers (35%), and the synergies were lower in financial takeovers. Trimbath (2002, p. 137) found "no significant merger effect on net profit, operating profit, or market value" when analyzing firms purchased by Fortune 500 firms during the 1981-1995 period. Mergers generate a net gain for stockholders in the U.S. economy, but one prefers to be a stockholder in the acquired, rather than the acquiring, firm.(Jhon B Guerard, 2007)

THEORETICAL FRAMEWORK

Nature of research

This study is based on descriptive research. The reason of descriptive research is that lot of research has been done on this topic but some aspects a still explored but not well understood.

H0: There is no significant difference in the pre and post, mergers and acquisition periods of banks in terms of gross earnings.

H1: There is no factor in the pre and post, mergers and acquisition periods of financial institutions with regards to earnings after tax

H3: There is no factor in the pre and post, mergers and acquisition periods of financial institutions with regards to net asset.

Variables

For this study the following independent and the dependant variables has been identified

Independent variable: Merger

Dependant variable: Financial performance and Shareholder wealth of merged company

In our research Financial performance will be measured on the basisi of EPS and Profit after tax.

Research methodology

Data collection

The research of our topic will concern with the secondary sources of data that can be easy and suitable provided in the markets but the drawback is the current market literatures are not available easily.

Data sources

We will collect the data through different resources for my research more solid.

Web sites

Articles

Newspapers

Books

Journals

Sample

Our research will be relevant and appropriate for merger of two organizations. As an analytical

Limitations

This research will include in secondary data only

Due to time boundaries current survey and collected data will not studied.

My data will more summarize due to words limitation.

Why do companies merge? Mergers are a normal part of business world. Some companies win after merger and some companies make loss. There are many resources just to exploit and small companies are more limited in the world market therefore it is more likely that mergers and acquisitions will occur. When two or more firms to combine their operations into one business entity, generally they can combine their securities in to one company then the shareholders in the company exchange shares. In the field of banking sector the merger of two banks can give better financial services. There are many reasons behind the company that wants to enact a takeover. These include the following.

Cash flows:The acquisition of another company can produce more cash flows of the parent organization. This cash flow can help increase investment and operational requirements and growth of the parent company. Cash gives them flexibility.

Economies of scale:The company may want to control the other company as they increase market share and this can lead to better profits. Also in the cost of doing business also reduces the company grew larger. Is not the total cost, but the cost per unit, with a lower volume. They are able to offer better terms to customers and suppliers. Knowledge: In some industries, it makes sense to take further action if this work has a unique knowledge that will help the parent company. For example, the company and invented a new product, but have not had the opportunity to take advantage of this product. BP has made an offer, as thousands of recognizing in the future profitability of this product.

Tax exemptions: There are tax breaks to large companies that may not be available for small businesses. And therefore, these tax credits as a reason to make the highest bid.

Increase efficiency: When the two companies merged the companies’ efficiency will increase due to merged in one company. For example company "A" will not increase his efficiency due to decrease his capital but in another company "B" who can suffer losses but his strategy is good that why company A will merged with company B and increased his efficiency.

Market power:Market power is also the important part of the merger. When we merge two companies and established new company and they can increase the market power. Market power can increase when the companies can merged the same industry and the same produces the products in the market.

Increase market share: When we merged the two companies to increase the market share e.g firm "A" has the market share is low as compare to firm "C". The firm "C" can merge his business to the firm "A" due to increased the market share in the stock market.

Geographical coverage will Increase: In the geographical coverage will increase due to the merger of two companies. For example when the two firms can merge his business to increase the geographical coverage and services can offer in the largest population. Because the companies merged they form that largest company is able invested more.

Share the technological factor: The technology is also important part of the merger mean when the companies merge the technology of both companies can merged in one company and increase his technology to increase their efficiency.

Increase the firm size: Every company can want to increase his firm size that why the merger can affect to increases his size as compare to before merger affect.

FINDINGS AND ANALYSIS

Merger and acquisition in Pakistan

Merger gets the growth in Pakistan from the last 10 years. Merger and acquisition has regulated by the commission regulation 2007 in Pakistan. Merger and acquisition in Pakistan

Horizontal merger and acquisition

Year

Acquired

Acquirer

Types

2008

PICIC

NIB Bank

merger

2011

Dawood Islamic bank

Burj Islamic bank

Acquisition

2009

ABN Amro bank

Benefit of merger

When a firm wants to enter a new market

When a forms wants achieve administrative benefits

To increase market share

To lower cost of production or operation

To improve EPS and Profitability

The merger does not need the cash

Enter a new market: When a firm want to enter a new market they can merge with the other company and can enter a new market is good as compare to old market which has low efficiency.

Increase the market share: The benefit of the merger is that the both companies can merge and increase his market share in the money market.

Low production cost:Low production cost is also the important benefit of merger which means that the after merger the production cost is too low as compare to before merger.

Improve EPS and Profitability: Improve EPS and profitability is also an important benefit before merge companies. When some of the company’s earn per share of outstanding common shares.The Earnings per share as an indicator of profitability.

Merger does not need cash: The most important benefit of merge companies is that when the two companies merge they are not need for the cash.

Achieve administrative benefit: When the two or more companies merge in one company the both companies administrative can combine in one admin department and can work in the one big admin department and achieve his benefits of the administrative. Great importance when minority shareholders are the fact that after obtaining the required number of votes to support the merger, the transaction is made.

Barriers of merger

When two or more companies merged across the border due to the variation of the accounting system and the company bound to follow that amounting system of accounting. The split of the European market of the equity can impose the extra transaction cost on the merged company in abroad.

Implementation of the risks

In this way the merger can be limited.

Implementation of risk

Accounting procedure

There are two accounting procedure which are used of merged companies or banks. The methods are given below:

Pooling interest

Purchased method

Pooling interest: This is an accounting method of merged where the balance sheet item of two different banks or firms are simply added together and which is generally Tax free.

Purchased method: This is an accounting method containing the assets and liabilities of the merged banks and they are shown the date of their value market of merged firms. The liability of merged firms is equal to the separate liability of the two different banks or companies. Equity of the firm can be improved through the amount of purchasing price.

Name of merged bank

Atlas bank into KASB bank Previous to the merger it is established in 1990 as joint venture. This venture is among the Tokyo Mitsubishi and atlas bank. After the atlas bank get to the merged with KASB bank.

Financial analyses

Following are the financial analysis in the bank. The best pattern of the financial analysis is ratios, there are many ratios but we can define those ratios that are most significant.

Profitability ratio

EPS ratio

Profitability ratio

Gross profit ratio: This is the ratio which you can talk about the relationship between the gross profit and sale.

Formula. Gross profit/net sale*100

Before merger

In 2006 the ratio of the gross profit is good as compare of 2007. In 2007 the gross profit ratio is low 11% due to the cost of sale is very high and in 2008 the gross profit ratio is high as compare to 2007 ratio.

After merger: In the after merger of the banks the gross profit will increase from the 2008 is 15.25% as compare to 2007 the ratio is 11.0% due to the cost of sales is low. ‣ Operating profit ratio: In this ratio we can told about effective of the control of the cost of the company or bank Formula. Operating profit/sales*100 2006 2007 2008 58.26% 51.21% 65.25% Operating profit

13ratio 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

58.26% 51.21% 65.25%

Before merger In the year of 2006 of the operating profit is 58.26% of the bank before the merger. The ratio of 58.26% is good but it can decrease in 2007 the ratio is 51.21%.

After merger: The ratio of the after merger is 65.25% in 2008 which is increases due to the control of the cost of the company as compare to the 2007 51.21%.

Cash ratio: Cash ratio is that when the firm gets to be pledged stock or debtors at that time analyst face problems of liquidity in case of debtors or stock. Formula. Cash in hand or cash in bank/current liabilities 2006 2007 2008 0.5211% 1.2802% 1.207% Cash ratio 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 0.52% 1.28% 1.21% Before merger: The quick ratio in the year 2007 and 2008 are good result as compare to 2006. In 2006 the ratio of 0.52% was available to meet the 1 liability. That why 2 assets meet the 1 liability which is not good in 2006. After merger: In the year 2008 the ratio is decrease 1.21% as compare to the before merger year 2007 is 1.28%.

Quick ratio: Quick ratio is that ratio in which we measure the

6company's ability to meet its obligations in the short term with the most liquid assets. The higher the quick ratio and better position the company. Formula. Current asset-stock /current liabilities

2006 2007 2008 1.208% 1.181% 1.285% Quick

8ratio 1.30% 1.28% 1.26% 1.24% 1.22% 1.20% 1.18% 1.16% 1.14% 1.12% 1.21% 1.18% 1.

29% Before merger: In the quick ratio is equal to the current ratio is no availability of stock that why both the ratios are equal to each other merger. After merger: The quick ratio was increase in 2008 1.29% as compare in 2007 1.18%. 5.3.1

EPS ratio.Some of the company's earnings per share of outstanding common shares.Earnings per share as an indicator of profitability.Formula. Profit after tax-preferred dividend/Weighted average no of ordinary share 2006 2007 2008 0.64% 0.90% (2.43)% EPS

10ratio 1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00%

-2.50% 0.64% 0.90% -2.43% Before merger: In the bank the eps ratios in the 2006 is 0.64% and it can also increase in 2007 the ratio is 0.90% due to the expenses will be decreased and the net profit will be increased. After merger: In the before merger the eps of the year 2008 was (2.43) % decreased as compare to the previous years. The eps can be negative due to the bank expenses can be increased and the net profit will be decreased. HABIB BANK AG ZURICH TO HABIB BANK MAETROPOLITION Habib bank AG Zurich and Habib bank metropolitan are merged together on October 26, 2006 and his branches are 100 in all over the Pakistan.

Gross profit ratio: This is the ratio which you can talk about the relationship between the gross profit and sale.2 Formula. Gross profit/net sale*100 2005 2006 2007 2008 49.01 % 39.41 % 32.08 % 31.20 % Figure Gross profit

12ratio 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

49.01% 39.41% 32.08% 31.20% Before merger: In the bank gross profit before merger was 49.1% in 2005 and in 2006 the ratio is decrease 39.41% due to increasing the indirect expense of the bank. After merger: In the after merger of the banks the gross profit will decrease from the 39.41% to 32.08% and then increase it in 2008 the ratio will up to 31.20%.

Operating profit ratio: In this ratio we can told about effective of the control of the cost of the company or bank Formula. Operating profit/sales*100 2005 2006 2007 2008 45.98% 38.86% 28.39% 22.56% Operating profit

12ratio 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

45.98% 38.86% 28.39% 22.56% Before merger: In the year of 2005 of the operating profit is 45.98% of the bank before the merger. The ratio of 45.98% is good but it can decreases in 2006 38.86% and 28.39% in 2007. After merger: In the after merger the ratio of is 22.56% in 2008 which is decreases in the previous years due to the control of the cost of the company is low.

Cash ratio: Cash ratio is that when the firm gets to be pledged stock or debtors at that time analyst face problems of liquidity in case of debtors or stock. Formula. Cash in hand or cash in bank/current liabilities 2005 2006 2007 2008 0.08% 0.09% 0.06% 0.075% Cash

8ratio 0.10% 0.08% 0.06% 0.04% 0.02% 0.00% 0.08% 0.09% 0.06% 0.

08% Before merge In the year 2005 and 2006 the cash was increased which is better performance to the bank and the ash available to the bank to pay the liabilities. The ratio will be increase 0.08% upto0.09% in 2006. After merger: After the merger the ratio will be decrease from 0.09% to 0.06%in 2007. In 2008 the ratio performance will increase from 0.06% to 0.075% for meet there operation to full fill their liberties in shorten period.

Quick ratio: Quick ratio is that ratio in which we measure the

6company's ability to meet its obligations in the short term with the most liquid assets. The higher the quick ratio and better position the company. Formula. Current asset-stock /current liabilities

2005 2006 2007 2008 1.05% 1.065% 1.06% 1.05% Quick

8ratio 1.07% 1.06% 1.06% 1.05% 1.05% 1.04% 1.05% 1.07% 1.06% 1.

05% Before merger: In the before merger the answer of this ratio is same as quick ratio. After merger: The quick ratio was decrease in 2008 1.05% as compare in 2007 1.06%. ‣ EPS ratio.Some of the company's earnings per share of outstanding common shares.Earnings per share as an indicator of profitability.Formula. Profit after tax-preferred dividend/Weighted average no of ordinary share 2005 2006 2007 2008 (1.52) 0.64 0.90 (2.43) EPS

10ratio 1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00%

-2.50% -1.52% 0.64% 0.90% -2.43% Before merger: In the before merger the ratio in 2005 is (1.52) due to the net profit can decrease due to the expanses can increased but in the later it can increases his eps ratio in 2007.

After merger: When we merger the banks the ratio of the after merge eps is (2.43) will decrease due to the expenses will increased and the net profit will be decreased.

Recommendation

A companies or banks that can bear continuously loss and did not earn the profits. It can be merged together and stable or maintain his business for continues long time business. In this way I can recommend the something for the merger of the banks or firms which can be given below. It is the right of small companies to participate the decision making process to the upper management and the big banks of the big banks of must allow to exercise their rights.

CONCLUSION

In my conclusion the one thing is very clear for this thesis is that the merger is a main impact of the businesses in the banking sector. Many authors have a different opinion or views about the merger of organization or banks. In the occurrence when the two merger took place when two organizations or banks agreed to do the business together with the new name or by the consolidated accounts their business into new firms. Expand in the growth of business or organization is very much necessary for the long run business. Going concern is the also may expand of business about the form of the business merger view. Internal enhancement was lead towards the steady growth in the business activates. Whereas the external enhancement leads towards mergers. This article is final by taking all the concern about the merger in the banking sector of the Pakistan. In this thesis I have calculated some ratios of two banks Altas bank and Habib bank in which I investigate that the merger of the banks raise their paid-up capital and make them to face the challenges, barriers which into way of their business. In the banking sector they lead the enhancement of performance and earning of the profits of the banks. In the performance of the bank and earning of the banks are suddenly got to the higher performance after the merger which I found out through these ratios. A merger has increased his yield in the assets of the banks from limited to increase. In the banking sector the benefit of these banks were able to use more resources and start to earn the profits to set off their liabilities and decrease his fix cost.