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The practice of Merger and Acquisition has become a major part of many corporate business strategies for organizations with the motto to strengthen and maintain their competitive position in the marketplace. If we see the Nepali historical preference in the concept of M&A came into existence in 2011. M&A started in the banking sector in Nepal by Nepal Rastra Bank (NRB) Merger By-Laws Policy- 2011. The first two successful commercial banks NIC and Bank of Asia merged on 30th June 2013. A decade has passed with the practice of M&A in Nepal. It proves that M&A are more indulged in the banking sectors at present rather than other corporate business alliances. Many banks have flooded to the M&A practice to consolidate according to the time and crisis.

A merger is a concept of allying two or more existing structures into one identity. No doubt the structures can be the synergy to operate the business and address the market during the financial crisis. M&A is merely the strategy to adapt to those changing businesses. According to the efficiency theory, the bottom line and special alchemy of the M&A is for synergy. Even though the main bottom line of M&A is to have synergy, the element of necessity is equally important for the target banks to be considered.

A novice bank that is incapable of competing, facing financial distress and unable to maintain the requirement of common equity of risk-weighted assets, M&A could become a necessity in the first place rather than acquire synergy. Hence, it becomes necessary for the banks to be merged or acquired by other mature and stable financial institutions before reaching the target of having synergy in the deal.

The process of consolidation assumes that the acquired company transfers all its shares, assets and liabilities to the acquiring company using share or cash exchange. In its turn, acquisition assumes that the acquiring bank takes over ownership over other banks and combines all their operations within the framework of a sole new alliance.

The process of acquisition assumes that two or more banks may operate as independent legal entities, though they are usually prone to corporate control changes. Finally, through takeover one bank obtains management control over another bank.

Mergers and Acquisitions have become a necessity in the banking sector following the adverse effect of a global financial crisis.

In the banking sector, M&A take the form of horizontal merger assuming that the combined entities represent similar business and perform the same commercial activities. Moreover, M&A in the banking sector is a way for the banks to seek new opportunities and gain strategic benefits in financial markets as well as extend their market and customer base.


The end of 2023 has witnessed many mergers in banking sectors in Nepal. How far has the essence of M&A been observed and exercised for acquisition strategy, valuation, due diligence and other attributes to enhance the financial phenomena to set the goal of M&A?