Primary purpose of mergers and acquisition is to reduce competition and protect existing markets in
the economy. Overall mergers and acquisitions have their own pros and cons. But mergers are good
for the growth and development of country only when it does not give rise to competition issues.
Mergers improve the competition edge of the industry in order to compete in the global market but
mergers shrink the industry because number of firms reduces. Mergers help banks to strengthen their
financial base and access tax benefits and direct access to cash resources.
After analysing the merger trends in European Union (1990s) we can say that merger has led not only
to the emergence of large banking groups but also helped in consolidating fragmented markets.
But in the recent years these trends has been changed. One striking feature which was noticed in
comparison to domestic mergers and cross border mergers was that in domestic mergers if no
competition issue were raised then cost will reduce because of reduction in operating cost. But in case
of cross border mergers it has been noticed that revenue tends to improve without imposing negative
impact on consumers. Setting of priorities in advance is beneficial for the acquiring company.
If banks have priority to reduce capacity in domestic market then further consolidation is required in
domestic market. Banks should opt for cross border merger if they have managed to reach the
threshold level of concentration in domestic market.
Mergers and acquisition are done for consolidating strategies in order to expand the geographical
area of operation but optimal level of cooperation should be allowed and followed so as to gain proper
advantage of mergers.