Analysis of UOB acquisition of Loan company of Asia

United Overseas Loan company (UOB) which was founded in 1935 is a respected loan company in Singapore and has subsidiaries in Malaysia, Indonesia, Philippines etc. In 2001, UOB implemented the merger and acquisition as its expanding and growing strategies by effectively received Overseas Union Bank Ltd. UOB then undertook acquisitions in Thailand, Malaysia and Indonesia. UOB expanded steadily through the 1990s in the growing Asian economy and even during the economic turmoil refrained from consolidating the lender. They sustained their growth by acquiring banking companies in the region so that they can end up being the region's leading lender.

Bank of Asia, founded in 1939 situated itself as a leader in the number of banking services it includes and is also headquartered in Bangkok. ABN AMRO became a significant stakeholder in the lender in 1998 and in 2003, the lender reported possessions of 171 Mil THB.

UOB, which possessed 79 percent stake in UOB Radanasin Bank (Thailand) bought 80 percent stake in the Bank of Asia from ABN AMRO and later went on to merge both these entities into United Overseas Lender (Thai) (UOBT). Although there were only few changes in the organization of Loan provider of Asia and UOBT, the former's panel of directors was changed by a new management team from Singapore's United Overseas Bank.

The objective of the project is to investigate the explanation for the acquisition of Lender of Asia by the United Overseas Standard bank. Also, the group wish to analyze and comment about how successful the acquisition is at conditions of performance of the bank post acquisition, the culture fit between your two organizations by studying several performance indications including interviewing employees of the lender.

The last 2 decades have witnessed some major changes in the business climate brought about by various events such as 9/11, the monetary crises etc. These situations have reshaped the organization panorama and priorities for M&A's especially in the bank sector. Financial institutions now face an extremely challenging environment.

The motive for globalization is no more limited to increasing profit margins. The investment industry has become a global business and traders are looking for internationally varied portfolios. This necessitates global growth for several bank and financial organizations. Due to the financial turmoil witnessed in the past few years, it has become important for companies to restructure their organizations and improve transparency and efficiency to entice more investments. To carry out so many finance institutions are acquiring others to leverage their insights to their corresponding home markets and usage of their large customer bottom part.

Analysts be prepared to see a whole lot of domestic consolidation in this sector in the Asian region along with increasing variety of just offshore acquisitions and proper investments. The entire year 2004 noticed 23% more M&A's compared to the yr 2003 which noticed only a 7% increase as compared to the entire year before. The maximum in such activities was in the year 2000 but latest data shows that there were only one third that number of acquisitions in 2007. With banking companies currently trying to combine their positions following the economic crisis got occurred recently, they are really mainly in the capital-preservation setting and would be more cautious about starting mergers and acquisitions ie. this sort of activity would be assigned lower main concern. As the Asian economies retrieve and stabilize in the future, increased M&A activities should be expected with banks venturing into greener pastures and more beneficial investment opportunities.

Rationale for deal

Today's business environment is quite turbulent due to improve in economic occasions frequently. During the last decade several monetary events occurs in various continents which drive to the organization to rethink and restructure their commercial strategies in order to gain the sustainable competitive advantage. The existing economic pushes such as Global financial meltdown, high-profile corporate and business misconduct cases in america and emerging monetary dominance of China and India all these event leads company reshape their corporate strategies. Besides, the business needs to identify various other styles e. g. government deregulation which creates opportunities with new competitive stresses, consolidation poses troubles to commercial management, emergence of local players, globalization, corporate and business governance and so forth. UOB is not out of the prone business environment, and it has to find the current and future developments, intensity and sensitivity of the makes, and control over the forces which it will make it steady running a business. Keeping the reality at heart, The UOB developed mission "To be a Premier Bank in the Asia-Pacific region, focused on providing Quality Products and Excellent Customer Service". Further, UOB's aim is to consider the market leadership in Asia-Pacific areas in consumer and commercial bank services by creating more shareholder value. These economic forces and strong long term targets initiates UBO to group of acquiring.

During the acquisitions time, UOB use selective method of acquire banks in the region where a strategic fit is. In addition, UOB also looks local lovers and professional to reap the benefits of their knowledge of the indigenous environment. In case there is Thailand, UOB wanted spouse and professional in banking sectors such as Loan company of Asia that can meet the strategic fit. Standard bank of Asia possessed extensive market and customer knowledge in banking sector with considerable existence in Thailand. UOB found similar corporate and business culture, highly encouraged and profitable employees, homogenous product and services, all most same organizational composition, easily modifiable technology, lower opportunistic action of Bank or investment company of Asia which helps UOB to acquiring Standard bank of Asia. Furthermore, various other factors like flexible government rules, low development and deal cost, lower communication and coordination cost, better physical location leads UOB for acquiring.

Empirical research study

To help deepen the group's understanding of the UOB/BOA merger and also to have an opportunity to uncover cultural issues and more descriptive information on procedures, systems and communication, a well-planned empirical review can provide critical type.

To help get source for these areas, the group set up for just two qualitative, wide open and explorative interview consultations with manager-level employees at OUB. The respondents were chosen based on several criteria; these included position, job duties etc. , but also just how long they are with the company and which company they were at first attached to (pre-merger).

Mrs. Garnsita Nanphiravit VC HR Business Management Division. Originally BOA employee.

Mr. Nathapong Cheunban CUSTOMER SUPPORT Manager, Commercial Banking Section, Originally UOB employee

For each interview, a variety of open up questions were asked to get started on the debate. The questions asked is seen in appendix X.

Culture analysis

In merging two different companies as it's the case with UOB and BOA, one of the main factors to the success of the merged company is situated in the compatibility of the merging corporate and business civilizations. When mergers mix borders, the impact of culture on the ability for the firms to work together towards common goals is even stronger, as nationwide culture has impact on commercial culture as well.

Geert Hofstede is the main figure of a worldwide research study in collaboration with IBM, where data from more than 50 countries were analysed by the following four categories :

Power Distance Index (PDI)

The level to which users of the culture accept and expect inequality in modern culture.

Individualism (IDV)

The degree to which individuals are integrated into teams.

Masculinity (MAS)

Refers to the syndication of roles between your genders. The women in womanly countries have the same moderate, caring beliefs as the men.

Uncertainty Avoidance Index (UAI)

Deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's seek out Truth.

Long-Term Orientation (LTO)

Long-Term Orientation (LTO) versus short-term orientation

Based in Singapore and Thailand appropriately, the corporate culture of the pre-merger UOB and BOA bankers are influenced by the national culture from these two countries. To understand the differences between your two, the scores are compared to the right:

Uncertainty Avoidance

Thailand and Singapore have similar ratings in a number of categories, but range greatly within 'Uncertainty Avoidance'. As stated before, this credit score pertains to the tolerance of uncertainty and the lengths to which will go to alleviate uncertainty. An example of how doubt can be reduced is with the creation of control/hierarchy structures to induce re-checks at several stages. In the interview with both respondents, this was also shown to be evident also with BOA when questions about communication buildings and hierarchy were introduced:

"Before, [BOA] was a very traditional Thai standard bank when chatting communication. Many steps to the top. "

The merger brought changes to this structure, almost trimming the "steps to the top" in half. These changes have been part of a management initiative to improve inner communication, increase efficiency in work techniques and steps in BOA to better align the two lenders. However, while this has reduced the official hierarchy levels, the feeling of distance continues to be noticed by UOB employees today.

"We still do not simply go visit the boss whenever we want, must have reasonable. "

Individualism

Following the merger, a new staffing program 'Fast-Track' has been launched to fortify the bank's position as a strong contestant in the international bank or investment company environment. A fresh and direct necessity to applicants because of this career keep track of is strong British proficiency, which has resulted in a high ratio of new employees having British as first vocabulary - even "some who don't speak Thai".

Communication buildings have been put in place by management to ensure that information is conveyed in both Thai and English, officially promoting the increasingly diversified employee constellation. There is however evidence that has created ethnic problems, resulting in potential sub-cultures arising in the organization. While formal communication is done in British in addition to Thai, informal and interpersonal communication is still generally only in British.

"At lunch break breaks nobody talks English to me, we (referring to respondent and colleagues) only speak Thai to each other. "

This creates a problem in the integration of new employees in to the cultural environment of OUB, possibly leading to the establishment of sub-cultures that can eventually impair organizational performance.

It is crucial that the UOB management is aware and actively deal with these issues to ensure that the merged group can effectively reach its goals. Ethnic integrity is essential to the success of any M&A, and in the case of bankers like UOB that count on highly stabile and productive communication to deliver value to its customers, a top-performing company is essential to the ability to stay competitive.

Systems and processes

After acquiring to the Bank of Asia, UOB needs to take care of the integration process in the region of recruiting, capital resources, task and activities. Usually, main problems such as both company's different culture, different management system, different worth, different financial and control system happen through the acquisition period. First of all, UOB tried to find the behavior of worker which means doubt and anxiety, crisis of id, Inter-group conflict and unfair treatment etc. By remember these issues, UOB offers the employees to decide whether they will stay with UOB or not. Without putting any pressure on staff, UOB offers the staff special deal who are prepared to leave the company. In this way, the UOB is capable to reduce the uncertainty and nervousness of employee. Besides, by presenting some social program e. g. sports event, the UOB looking to connect up and make good relationship among the employee with a reasonably manner. The UOB bank has found some troubles in management system of Lender of Asia. Although bank of Asia has the good market presence in Thailand, but the employee and personnel has the challenges to operate business in various level. That's why; UOB introduces some dynamic staff and staff development program like management trainee, management affiliate etc. Main goals of UOB at Thailand to permeate market and grow its global market share; leads UOB to create and maintain fruitful employee who is able to satisfy the finish customer need at Thailand. UOB try to build the client relationship management who will be responsible for credit and lone section. Beside, UOB also found some weak points in its branch Management of Standard bank of Asia and focus to develop efficient branch manager. To meet the difficulties and attain the targets in Thai-market, UOB restructure its selection and recruitment process so that it can pick potential prospect and who can lead the business in future. In addition, UOB also changes in its top management level like the lender of Asia's table of directors has substituted by a fresh management team from Singapore's United Overseas Bank. Mr. Chavalit Thanachanan was changed as chairman by Wee Cho Yaw, and Mr. Chulakorn Singhakowin was changed as chief executive and CEO by Wong Kim Choong, Chua Teng Hui was a deputy president and deputy CEO of the bank and Wee Cho Yaw, the new chairman, offered as chairman of UOB in Singapore while Dr Wee's son, Wee Ee Cheong, was deputy chairman.

Since UOB acquired the issues in managing and coordinating on the list of team, UOB restructured and set up its division in conditions of entrance, middle and again desk. Front desk responsible for sales, customer care, profit, credit, corporate and business and trade marketing, contact etc. Middle office build with 150 branches which use to deal development of business banking, and do various other strategic operations. Again office consist with Human team, Management Information Department to support the businesses. UOB is wanting to build the move of information among the whole section to ensure faster customer support.

Discrimination regarding the core worth was found between Loan provider of Asia and UOB following the acquisition. It is necessary to determine common key value for successful business, and UOB identified its core worth with integrity, superiority, team work, and responsibility. UOB interprets and motivates its employees to uphold and methods core values during behaving and getting together with one another.

Another problem confronted by UOB after the acquisition is customer perceptions regarding the UOB product and services. When UOB released in Thai market, it will concern and track about how precisely customer perceive UOB. For keeping the same or above setting, it initiates to develop and appoint productive customer relation director who is liable to speak and influence customer. In addition they benefit keeping customer trust and self-assurance.

UOB also faces the problem moving over of the employee in other banks. Since UOB's top and some part of management use British inside any office which helps and promotes to other worker to learn British. At the same time, UOB undertook several vocabulary program which helps worker to develop British and communication skills. On the other hand, At Thailand communication skills in English is demanding due to investment and development of many multinational companies which creating opportunities for reliable works. The employees of UOB are taking the opportunities by switching other group which creates problem and management the human being source of information for UOB. Because of this, UOB would like to create a greater pipeline of staff with specific areas with future job path for the employee and to meet up with the demand of its.

Financial Examination of the Deal

There may be several goals for banking institutions to merge and/or acquire other finance institutions. Most popular out of the are usually to generate shareholder value, competitive benefit and leveraging synergies. In case of the BOA acquisition by UOB, the group wanted to analyze the effect on the financial performance of the mixed entity post acquisition.

Prior to the acquisition, the turnover for Loan company of Asia was about 6 Billion THB and increased to about 10 Billion THB in the entire year 2008 (known as UOBT following the acquisition). This increase can mostly be related to a result of the consolidated income of the two entities in question. In conditions of the profit margins however, it's very difficult to see any significant tendencies. There were improvements in the income for the newly formed entity set alongside the period prior to the acquisition but they have also observed poorly performing cycles where the profit margins have eroded significantly. This however could be owed to the current problems in the financial world.

After having analyzed other financial ratios such as Return on Capital Employed, Come back on Shareholder Funds etc from the accounting assertions of UOBT, the group concluded that financial synergies though witnessed, the primary drivers for this acquisition weren't financial. They were primarily focusing on conditioning UOB's position in your community as well as in Thailand in terms of increased customer bottom, quantity of branches, ATMs and the array of services offered.

Areas where the acquisition didn't succeed

Although, with looking at with other lenders at Thailand the UOB is satisfied with its goals and targets, still UOB has some areas problem where it might not successful. Corporate culture is enduring and can't be changed in a certain period of time. For minimizing the corporate ethnic distance between UOB and Standard bank of Asia, UOB got several communal activities such as sports activities event between your departments which is not sufficient. UOB should take on and add more social events frequently like issue, cultural show, talent hunt, spiritual and cultural incidents etc. so that the staff could come deeper with each other, talk about their ideas and feeling. These initiatives will help to establish common commercial culture and reduce doubt and anxiety, crisis of personal information, and Inter-group discord.

Secondly, for each organization it's very useful to units and develops short, medium and long-term plans. When UOB merged with Loan company of Asia, it had a permanent plan to permeate and expand the market, but it didn't establish short and medium term goals in the areas of marketing, human resources, and sales. Human resources team undertook some worker development program e. g. management trainee, management affiliate but didn't indentify and define what less than competency level and center specification the worker needed to fulfill the organization requirement. Beside, Human tool department could not have clear idea about the brief, medium and long term trends of recruiting for the UOB. Marketing office failed to speak effectively with existing customer and failed to attract possible client at Thailand, which implies insufficient efficiency of marketing talent. In addition, sales department could not establish shot, medium and long term sales plan. Sales division is concentrating mainly on current customer somewhat than future customer.

Thirdly, through the restructuring of the hierarchy among top, middle and first collection level, UOB failed to define getting rid of and adding position, position jobs, responsibility, and duties. UOM transformed its top management e. g. by changing new management team from Singapore United Oversea Lender who may have lake of idea regarding the Thailand bank sector and business environment. Such kind of decision leads UOB to deal business with doubt, because top management is accountable for generating corporate strategies and implement among the center and lower level management.

Fourthly, Changing and restructuring is a subject of huge budget. The Organization has to give consideration in various areas such as staff, infrastructure, integration etc. during and after the acquisition. UOB don't have concrete insurance plan to allocate budget among the list of departments integration, redesigning and restructuring. Besides, UOB didn't estimated budget during fantastic hand tremble with the lender of Asia's staff. Because, in those days they were give overall flexibility to the staff to stay and leave the organization.

Finally, UOB failed to gain access to the competitive environment in Thailand banking and business industries, because the majority of enough time UOB's management concentrate on less essential aspect such as deal with existing customer rather than searching future customer, welcoming young graduate on its management trainee program without looking experience banker from outsource, focusing on push reselling techniques ignoring yank strategies etc. Volume of well established bank can be found at Thailand with strong market talk about, but UOB does not have any well structured strategies to compete with them but still didn't forecast what ratio of market share UOB will gain and grab by employing its coverage.

Future prospects for the merged UOB

For future successful business in Thailand banking sector, UOB must redefine its strategies in some areas such as long-term competitive advantage in Thai markets, faster and more effective integration, define unique capacities and key competencies, full co-operation of the acquired company top management, key personnel stay in the new merged company. For attaining competitive benefit in Thai market, UOB should differentiate and define its primary competencies and capabilities in the regions of useful employees, faster services delivery process, keep determination at the time of working with customer etc. Providing superior service needs well integration on the list of department and continuous flows of information. Through the service delivery, UOB should also identify and eliminate some bureaucratic complexity which will ensure quick and faster delivery. Furthermore, it's important to establish assistance between UOB and Loan provider of Asia to management. They must have friendly mentality, and everybody should respect each other ideas, pondering and experience knowledge. Another important things, key personnel atlanta divorce attorneys level of management should stay in the new combined company. It is necessary because UOB brings new ideas and encounters from in foreign countries and once Bank of Asia has the knowledge of Thai market. In blend of both functions, I would work to develop and make future strategies.

Exhibit 1 - Interview guide

Please give a short intro of yourself (4-5 years)

How long you've been with the company?

How long have you been in this office?

From your point of view, how have you experienced the changes from UOB acquiring BOA?

Changes in firm/responsibilities/staff?

How many % of employees pre-acquisition will you say are still with the company today (after)?

Could you give three instances where in fact the acquisition is a success and three where in fact the acquisition has not been as effectively as prepared?

In your point of view, what may be the known reasons for this?

First for an optimistic, then for negatives

What has been the biggest impact on your projects following acquisition?

Additional questions

Would you have the ability to provide us with some data on company composition (diagrams), pr announcements, financial information etc. that might help us in the analysis of the business?

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