It was the former as Allen Bank’s acquisition of a part of the Bradbury Bank - what the latter termed NEM (Newly Emerging Market) operations - seemed an acquisition scripted in heaven. Both were venerable institutions of British origin. Allen was the biggest international bank in developing markets. Is it core businesses? Retail and corporate banking, treasury ops and trade financing. The bank employed over 33,000 people across 740 offices in 55 countries Bradbury bank was smaller, however only marginally so. It employed 28,000 people and was present in 42 countries. Its core businesses were retail and corporate banking and trade financing. Though, its NEM business was focused exclusively on high-net worth individuals and large corporate. Therefore, when Bradbury wished to sell its NEM operations — it wanted to exit NEM as most economies there boasted a low credit rating and it wished to lessen its overall credit risk; besides, it wished to focus its efforts on the first world - it was only natural that Allen, which wished to expand its presence in developing countries, buy them.
It was the worst of times as the Cultures of the two banks were as dissimilar as blues-grass and Bhangra-pop. Allen was a systems driven bank that boasted of strong internal controls and placed an emphasis on training and performance. Bradbury was a old-world type, inward-looking firm with weak control Systems and condoned pedestrian performance. Worse, it did little to spread its customer base and aggressively get new business.
It was as well the worst of times since the two companies had different organizational structures. Allen favored the matrix with the head of each division or function reporting directly to the regional head of that division or function, and only informally to the country head. Bradbury preferred a linear reporting relationship, with everybody reporting to the country head. Expectedly, Bradbury employees who became part of the rechristened Allen Bradbury Bank (ABB - no relation to the energy giant, though the bank could have learned a thing or two from that company’s integration of Asea and Brown Boveri) felt lost. “There is no symbol of authority I can relate to in my workplace,” was a generally heard refrain.
None of these, although, worried Surinder Sawhney, the 53-year old CEO of ABB, as much as the issue of people. Similar to most CEOs discover during the process of integration Sawhney was discovering that ABB seemed to have two people for every position. Worse, Allen-employees considered their counterparts from Bradbury, who had been taken on, as baggage. “They’re here as that was part of the deal with Bradbury”, confided one young manager from ABB (he was from the Allen-side). “By themselves, such people would have never been hired by us. “Not surprisingly, the acquisition had as well thrown a spanner into Allen’s well thought out career— progression plans. Sawhney and his HR head were discovering that they would have to redefine these for a bigger group of employees. At similar time, they had to convince old Allen employees that they were not being short-changed in the process.
One senior HR manager had recommended that they get senior executives to make short presentations on why they were necessary to ABB. Sawhney had thought the idea brilliant; his executives hadn't. Nor had the media. Within days hotter stories, mostly apocryphal, regarding people having to re-interview for their jobs were doing the rounds. And all the while, ABB was steadily losing people. Head-hunters and rival banks were making a beeline for some of ABB's renowned human capital. And insecure employees were signing up with lesser companies instead of negotiate an uncertain future at the bank.
In desperation, Sawhney turned to an old friend, Vinay Sen, a HR professional who had made a career for himself as an independent consultant. That had not helped much. True, Sen had shared some fascinating thoughts on the issue of synergy. “Apart from valuation, the most hyped phrase in an M & A deal is synergy, “he had said. “People talk of dove-tailing strengths and capabilities, bringing complementary skills and exploiting cross-marketing opportunities. To me, synergy simply means one plus one, is not two, but six, or may be, eight. When a merger merely maintains the existing equilibrium, it doesn’t make for synergy. It is only when there is a geometric leap in the benefits accruing to a merged entity that synergy makes sense”. All sound stuff; only, it did little to help Sawhney tackle the problem at hand.
And this, the beleaguered CEO realized, was only the starting. Convincing the best talent to stay put in the bank was the instant objective. However there were other long-term ones. Like realizing the advantages of the synergy Sen spoke about and making sure that ABB ended up with a larger share of the market than any of its constituent entities. Sawhney had read all the right books on getting M & As to work for you, however this was real. And it was painful. “Heck,” he thought, “we don’t even share a common e-mail system”.
problem 1: Integration is vital to the success of a merger. Examine the statement keeping the Allen and Bradbury case in mind.
problem 2: What must Sawhney do to strengthen both banks and develop a concrete business plan?
problem 3: What are the areas of compatibility and conflict between Bradbury Bank and Alien Bank?
problem 4: What type of organizational structure must be put in place with a view to make sure smooth translation of rhetoric into action plans?
problem 5: As a consultant, what steps do you propose to implement the integration?