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The banking sector didnt perform that well at the time of inception of Pakistan .Political
turmoil, lack of trained professionals and poor Human Resource. This resulted in unsatisfactory
performance of the sector. Today, the banking sector is the most flourishing sector and is
contributing immensely towards the growth of Pakistans economy. In 1974 the banks were
nationalized ,followed by privatization in 1990s.The banking system of Pakistan is divided into
two tier system including State Bank Of Pakistan, Commercial Banks, Development Finance
Institution, Micro Finance Banks and Islamic Banks.
BANKS QUANTITY
Commercial Banks 36
Foreign Banks 7
Specialized Banks 4
Islamic Banks 6
BANK BRANCHES
JS Bank Ltd. 40
My Bank Ltd. 80
C)Foreign Banks 80
Barclays Bank 15
Citi Bank 17
Deutsche Bank 3
Merger transaction is the one in which two companies of equal size combine to form a new
enterprise. When one firm acquires another firm is is called an acquisition. Usually, the acquiring
firm is bigger in size and magnitude than the acquired firm. Acquirer usually acquires a company
by buying shares, assets or common stocks. Acquirer may also take over the management of the
acquired firm.
Types of merger and Acquisitions include Vertical M and A in which we take control of supplier
which is known as backward .When we take over distributors it is known as forward M and A.
Conglomerate Merger is the one in which the two business entities are involved in different
nature of business. In contrast, the Horizontal Merger is the one in which both companies are
doing similar type of business or making similar products, the reason for such mergers is to gain
market power.Hassan (2013) Mergers and Acquisitions made its mark in Pakistan in 1992-93
with the privatization process .This wave of M and A started to make its presence felt when 62
deals took place by virtue of the privatization. The M and A truly emerged as a strong force in
2001-2002,it was then when the real impact of Merger and Acquisition started to come. In 2012
this trend was at its peak with 78 deals, a growth of 86 % from 2011.The financial services and
banking sector was a major player in this upheaval of Mergers and Acquisitions in Pakistan.Hira
(2012) The trend of Mergers and Acquisitions activities of banks have shown a lot of promise in
recent past in developing countries and Pakistan is no exception in this regard. The pace of
mergers and acquisitions has increased, which is also evident from the listed companies in KSE
100 index, which have reduced.
According to the annual report of state bank of Pakistan, M and A transaction are not only
limited to banks but it covers the whole financial sector like Leasing Companies, Modarbahs and
DFIs. In the past 7 years SBP has undertaken 10 Acquisitions transaction and 40 merger
transaction .These figures and statistics clearly elaborates the growing trend of merger and
acquisitions in the banking sector of Pakistan. Most of these mergers were between Investment
Banks and Commercial Banks, others include leasing companies and DFIs with commercial
banks.SBP has taken certain steps to facilitate mergers and acquisition. It made amendment in
Section 48 to support the mergers of NBFC. It resulted in the number of banks listed decreased
from 46 in 1997 to 39 in 2008.More over the number of foreign banks operating in Pakistan
decreased from 20 in 2000 to 7 in June, 2008.The foreign banks sold their business to local
banks, allowing them to expand the branching networks.Wasif (2001) Mergers and Acquisitions
was in its early stages in Pakistan as compared to developed economies and other countries of
Asia in 2001 ,whereas M and A activities were not something new and became a phenomenon in
developed economies at that time. Mehboob (2011) Since 2000 many banks have opted for
diversification and consolidation. Mergers and Acquisitions for instance has remained a tool for
the banks to achieve this purpose. There have been as many as 40 Mergers and Acquisition
Transactions between banks and between banks and non bank finance companies. Currently
Mergers and Acquisitions activities are increasing and accelerating in Pakistan. Mergers and
Acquisitions can be observed in almost all the sectors including the Banking Sector, which will
remain our focus in this research.
Irfan Et al (2014) Following are the major Mergers and Acquisitions transactions during the
past years:
There have been past research studies on Mergers and Acquisitions on the topic of post merger
financial performance of acquirer. Some research studies explain effects of mergers and
acquisitions on employee morale and turnover. Moreover, further studies have been done on role
of values and culture of firms in bringing about change in the acquired or merged firms. It means
that this is an area on which extensive research has been conducted.
So, the aim of this research is to study the past trends of Mergers and Acquisitions in the banking
sector of Pakistan. We want to analyze whether these activities have gained momentum or have
slowed down in banks of Pakistan over the past years .We also wish to know the number of
banks acquired and merged in the past.
Q3-When was the trend at its peak and when was it at its lowest in Pakistan?
Q4-What were the reasons for the growth in the trend towards mergers and acquisitions in
Pakistan?
Q5-How are Mergers and Acquisition beneficial to Banking Sector? What are the reasons
corporations, in particular banks opt for Mergers and Acquisitions?
Q6- What are the factors that can deter or boost the trend towards mergers and acquisitions of
banks?
Q7-Is a growing or declining trend of M and A of banks in Pakistan useful for Pakistans
economy?
2. Research Methodology:
2.1 Natures of Research: The nature of our research is descriptive, as we aim to study the past
pattern and trend of Mergers and Acquisitions activities of banks of Pakistan.
2.2 Research Target: Our research target is the banks of Pakistan that have been merged or
acquired in the past 15 years in Pakistan
2.3 Research Population: Our population is the employees of banks merged or acquired.
2.4 Data Type: This research will primarily be based on secondary data, which already exists
.This is a secondary data dominated research as it is a descriptive study, which examines the past
trends. In this research we will describe the research topic on basis of past data available.
2.5 Sample Type: The sample type is neither probability sampling nor non probability
sampling, since this is census research and we will not take samples, rather it will include all the
banks merged or acquired.
2.6 Sampling Technique: Sampling technique becomes irrelevant in this research because its a
census research.
2.7 Sample Size: We will include all the members and every one will be counted, since it is a
census research. So, no sample needed.
2.8 Data Collection Method: Most of the research will be secondary. Main emphasis is on
secondary data. The sources of secondary data are research articles, reports and websites.
Primary data holds less relevance in this study, however we will try to get expert opinion on the
research topic by conducting interview or questionnaires of the relevant people to make our
findings feasible and credible.
2.9 Data Integration: We will mostly use tables, charts and graphs as a tool for integration of
data.
3. Organization of the Thesis: The thesis will contain the preliminary part, main text
referencing and appendices. It will also include several chapters as follows
Chapter 1:
Chapter one will comprise of:
brief introduction of the banking sector
problem background
aim of the study and research questions
Chapter 2:
Chapter 3:
The 3rd chapter will provide thorough and comprehensive analysis of the literature available on
different sources about the research topic. Here we will study the view points and past studies of
practitioners and academicians to enrich our research with their valuable work.
Chapter 4:
The fourth chapter will consist of secondary and primary data. Also it will involve the integration
of data and evaluation,analysis and interpretation of results.
Chapter 5:
This chapter will focus on debate on the critical review. It will compare the findings of the
literature with our findings.
Chapter 6:
4. Time Horizon: We will use reverse time scale, in which we will start from the submission of
thesis then going back towards starting dates. We will avoid longitudinal study because we are
time bound for the submission of research work for completion of MBA degree.