Benefits and Dangers of Bank Mergers and Acquisition: The Access-Diamond Case Study

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Jegz
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Location: Naija
 

April 1st, 2019, 11:01 pm

The marriage of Access Bank and Diamond Bank has been a long way coming. Both banks were fully licenced and established commercial deposit money banks (DMBs) in Nigeria. And out of nowhere, we got wedding invitations.

The Wedding Bell
When did they start courting? Do they know each other so well? Are they compatible? Have they thought about it well? Are they really prepared for the ever-after? Are they prepared for their kids? Marriage has loads of benefits. Trust me.
access-new-logo.png
These are normal human-response to marriage situations. How about M&A (Merger & Acquisition) scenarios in banks?

Today, we shall examine the benefits of bank M&A, taking as case study the recent on in the Nigerian bankosphere:

Access weds Diamond


According to the MD of Access,
The merger created a Pan-African financial services champion. Access Bank today is the largest retail bank in Africa by customer base. One bank with 28,000 employees across more than 600 branches, spanning three continents, 12 countries and with 29 million customers.
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The merger is groundbreaking and the impact will be felt in the entire Nigerian and African banking sector.

THE BENEFITS

M&A is laden with a plethora of benefits which will help the new merger to the top.

1. Larger Customer Base
The Access-Diamond merger will help both banks, or the new #megabank scale up quickly and gain a huge number of new customers immediately. This is brought also about by the larger geographic footprint in which to play. With this, quicker growth is achieved instantly - spanning three continents, 12 countries and with 29 million customers.

2. Greater Efficiency
Talking about banking operations and efficiency ratio, merger help both suitors or the new megabank scale up quickly. With both Diamond and Access banks initially having in place their own infrastructure in place for compliance, risk management, accounting, IT and operation, with the merger, its now possible to consolidate and administer those infrastructure in synergy. With this, and as a larger bank, a lower aggregated risk profile i expected.

3. Individual Business Gaps Filled
Both Access and Diamond banks had their own specific and unique business gaps. But with this merger, it is now easier than ever to complement each other and empower the business to fill product or technology gaps. The unique products, strengths and solutions of either banks can now be capitalized on by the new megabank thus birthed.

4. Stronger, More Formidable Team and Talent Upgrade
The new pool of talented work force at management disposal will be a strength to recon with in the new merger. A merger makes it possible to bolster the sales team and strengthen the entire team of top managers - an important human element in the new mega Access Bank.

5. A Brand New Brand
It feels good to feel reborn. To wear a brand new look. This has a lot of psychological magic that can boost morale and help reputation. The Access-Diamond merger is an opportunity to reconstruct and renew clients confidence in the new marriage. This has far-reaching effects. The new Access Bank logo, which encapsulates the old two logos is so fresh and sweet.

THE DANGERS

Mergers and Acquisition pose some threats that need to be addressed and managed. These are inevitable especially when union is being formed between two separate entities.

1. Potentially Poor Culture Fit
It is not enough to just look at mergers on the papers only without taking into account the people and their cultures. Failure to access cultural fit is one of the major reasons many mergers ultimately fail.
As the merger process continues between Access and Diamond, the management do well to thoroughly communicate honesty and double-check that all employees are adapting seamlessly to the change.

2. Lack of Sufficient Commitment
Mergers face the danger of execution risk. M&A demands sufficient resources and time to completely blend the two systems. Access and Diamond run on two different platforms. Merging these two platforms into one demands sufficient time and resources. So the management will do well to commit and musch as needed time and resources to this single series of life-changing events.
Failure to do this may affect customer satisfaction. The management will do well to avoid this mistake by committing enough resources to ensure full integration of the two banking systems.

3. Customer Perception
During the M&A period, it is important to pay attention to the impact the news and processes have on your customers. So far, the modus operandi of the name change of Diamond into Access has been excellently managed by the management while assuring their customers of not only a new system but an improved one.

Key to this is regular honest communication going out from both Access and Diamond throughout this period.

4. Disparity in Compliance and Risk Consistency
Another major risk posed by mergers and acquisition is the risk and compliance culture of each bank involved - Diamond and Access. Prior to the marriage, either bank handled banking compliance and regulations differently. That is a given.
Now at this juncture, it is imperative that the two banks agreeon a single approach moving forwward.

If the two banks experience mismatched risk cultures during the merger, this negatively impacts the profitability of the new merger.

Bank mergers and acquisitions come with numerous gains as well as many dangers. And that is why the entire process from beginning to end must be handled with care.

On the case of Access-Diamond merger, the management have doe so well so far.

My sincere wish is that for as long as the process will take, the management must continue to exercise global best practice to protect and add value to all stake holders - customers, human resources and shareholders.

I wish the management can take note of these points and take the new Access Bank to a great new height, competing in the highest possible echelons of megabanks in Africa and in the global village.

This is #BestnaijaBank #MoreForYour #JustLoveAccess

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"Many of us are not living our dreams simply because we are busy living our fears" - Les Brown
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eMade
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Location: Abuja
 

April 1st, 2019, 11:15 pm

Good points. Noted. :clap:
Learn more about ✓ VIP Members: https://www.bestnaija.ng/61848 ✓ Referral: https://www.bestnaija.ng/62508
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AK Horsfall
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Location: Port-Harcourt
 

April 2nd, 2019, 6:26 am

All correct sir :clap:
I'm a living success and from a Royal Priesthood.
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Tec
Senior
 

April 4th, 2019, 8:31 pm

:mrgreen:
I buy & trade in Bestnaija βCoins. Any amount. PM me. :w:
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Jegz
Senior
Location: Naija
 

August 18th, 2019, 2:31 pm

:good:
"Many of us are not living our dreams simply because we are busy living our fears" - Les Brown
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