LIC Acquisition of IDBI Bank: The Corporate Marriage of Unfulfilled Promises

Abstract

The insurance business model is fundamentally different from that of the banking business model. The Government of India (GoI) is the sole shareholder, both for Life Insurance Corporation (LIC) and Industrial Development Bank of India (IDBI); therefore, it made a business case for LIC’s acquisition of IDBI bank as a proposition for bailing out IDBI bank and then foray into bank assurance, giving LIC a unique footprint in the banking landscape. This case study highlights the rationale of this acquisition by evaluating synergies, economies of size and scale of opportunities, forward-backward integration of their products and services. This case study illustrates that forced corporate marriages, where the ownership is entirely with the GoI, both before and after the acquisition has its advantages, but on the flip side, has many disadvantages.