More
than one year back, my employer announced that it is going through merger
negotiations with another local bank in Qatar. My bank is the sixth largest
bank in Qatar, new to the market, with active retail, corporate and wealth
management banking. We have two branches and two-service center, and it is
listed in the stock exchange market. On the other hand, the other bank is
mainly a retail and wealth management bank, with fourteen branches, and
privately owned by members of the royal family and national bank of Kuwait, as
well the top management team members were outsourced from NBK. The main aim
behind the merger negotiations was to create the third largest bank in Qatar
with shareholder’s equity of $2.1 (Arabian Business, 2011).
It
worth to mention that Qatari’s government is encouraging companies and bank’s
merger lately, and we have seen a successful merger between two big
construction companies in 2010, as well the other bank we were supposed to
merge with, through the past years had two failure mergers with other banks in
the Qatar. Both banks were following two different management styles, two
completely different strategies; employee’s salaries were not close to each
other for the same position across both banks. In terms of IT strategy, we were
following two completely different approaches, my bank from day one were
following edge technology, top of line software and hardware were bought, IT
employees were outsourced, and management were kept in-house, plans to convert
the IT department into a profit center rather than cost center were set. On the
contrary, the other bank approach were to lower the cost of IT as much as
possible, no data resilience, core banking systems were residing on an obsolete
hardware and so on.
After
the announcement of starting the negotiations, both parties hired consultants
from their side to start the due-diligence and assessment, this period used to
be stressful for all employees, the banks started firing people, others
resigned. The moral of all employees reached its lowest levels, this led to job
uncertainty and insecurity, most of the employees were asked to prepare their
resumes for interviews, it was a mess. Everyone started his own rumor, analysis
if the situation as if he/she is a financial advisor, especially with lack of
information from management. At that stage, management held up a meeting with
all employees to try to control things, CEO used to visit each employee and
chat with them, but all that didn’t help. The change to happen and its rumors
were the main concern for everyone, and the most affected department was IT.
That because usually we execute what business requests, and at that stage
almost zero requests came form the business.
While
Consultants believed that our IT infrastructure was one of kind, and makes it
easier for future scalability, their recommendations were to use the IT
infrastructure of the other bank, and write-off our infrastructure due to its
high maintenance and operations cost, which will be a burden on the new
organization. As well, they recommended that the share value should be 60 for
the other bank and 40 for our bank. A merger committee was set and included top
management from both banks, the CEO of the this committee used to be the other
bank’s CEO, they started building the new bank’s strategy.
Mainly
all consultants’ recommendations were approved, and the deal was almost
approved, until Qatar Central Bank stated a new regulation that limits
borrowing levels for local and foreigners, and decreases profitability from
retails business (FitchRatings, 2011). At that stage, the board of directors of
our bank decided to revisit the recommendations and offered the other bank a
50-50 deal, with an acceptance or refusal without further negotiations. At that
stage, the bank refused the deal and this chapter was closed. The merger
failed, but the lessons learned form this changed the whole organization, its
strategies, mentality, behavior, and changed every single employee.
The merger failed, like 99% of the mergers at its final
stages, the reasons behind it were plenty and complex. For instance management
style differences, our management is open and any once can reach the CEO for a
valid reason, other bank’s CEO is really hard to reach, very strict, and bureaucratic.
Disagreement on share value, at the end any investor will decide to go on with
a deal or not based on potential business and value of his shares, and this
affected the final decision. In addition to that, the recent circulation from
QCB changed shareholder’s perspective and appreciation for consultant’s
recommendations, as it happened to be not valid anymore.
Merger changes a lot in organizations; regardless of its
outcome “succeeded or failed”. After the failure our organization started
marketing itself in a better way, such as internal marketing. They made big
posters. Presenting organization’s vision, mission and values, posted
advertisements for new products and initiated organizational restructuring, to
fill the gaps and hire replacements resigned emplyees.
Bibliography
Arabian Business, (2011), ‘Qatar’s Al Khaliji, IBQ end
merger negotiations’, [Online], Available from:
(Accessed 28 June 2011)
FitchRatings, (2011), ‘Qatari Banks: Annual Review and
Outlook, Strong Economic Growth to Drive Banking Sector’, [Online], Available
from:
(Accessed 28 June 2011)
