Post-Merger Review of Banks

This report provides a comprehensive post-merger review of the Northern Bank and Southern Bank merger. It begins by defining mergers and acquisitions and outlining the rationale behind the merger, driven by the need to compete with the larger Eastern and Western Bank merger. The report details the pre-acquisition profiles of both banks, comparing their financials, human resource practices, and loan portfolios. A key focus is the post-acquisition profile, analyzing changes made to human resource practices, loan approval processes, information technology systems, and product portfolios. The report includes a stakeholder analysis, assessing the satisfaction of internal and external stakeholders with the integration decisions. Finally, the report outlines the policy changes implemented post-merger, including changes to employee policies, infrastructure, rationalization strategies, loan procedures, and human resource practices. The conclusion summarizes the challenges and opportunities presented by the merger and highlights areas for future research.

Running head- Post-Merger Review
Post-Merger Review

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Post-Merger Review
Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................2
Merger & Acquisition of Southern Bank.........................................................................................3
The pre-acquisition profile of the both banks..................................................................................5
Post-Acquisition profile...................................................................................................................7
Stakeholder Analysis.....................................................................................................................10
Policy.............................................................................................................................................13
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
Appendices: Part A........................................................................................................................17
The satisfaction of the stakeholder of the Northern bank..............................................................17
Appendices: Part B........................................................................................................................18
The satisfaction of the stakeholder of the Southern bank..............................................................18
Appendices: Part C........................................................................................................................20
The satisfaction of external stakeholders.......................................................................................20

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Post-Merger Review
Executive Summary
The northern bank and southern bank have been merged with the intention to compete with the
eastern and western bank. The eastern and western banks have been merged and have become
one of the largest banks. It was very difficult for the southern bank as well as a northern bank to
compete with the eastern and western bank after the merger. In this paper, the post-merger
analysis of northern bank and the southern bank has been studied. Apart from this the pre-
acquisition profile of both the banks has also been added to have an understanding of the features
of the banks before the merger. The activities such as human resource practices of both banks as
well as product and services of both the banks before the merger and after the merger have been
studied. This study has included what changes have been made in the southern bank and what
changes have been made in the northern bank. What has been retained, replaced, and linked in
both the banks has also been studied. This study also gives precise information regarding the
concept of the merger & acquisition so that the readers can easily understand the concept and
rationale behind the merger.
Introduction
As a strategic decision Mergers & Acquisitions are among the major decision before the
organization. Mergers & Acquisitions can be defined as alliance of the companies. But both the
terms Merger and Acquisition are different from each other. Merger is a term used to define as a
combination of the two companies to form one (Cartwright et al., 2014). On the other hand,
when a company is taken over by the other company is called an acquisition. Therefore, merger
& acquisition is one of the major decisions taken by the companies. One of the main objectives

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of the companies is to go for the merger and acquisition is to maximize the values of the
company (Cartwright et al., 2014). The companies evaluate various opportunities with the aim of
maximizing the wealth through the merger and acquisition. Merger and acquisition among the
companies can take place in the following form;
 If one company is purchasing the assets of the other company
 If one company is purchasing the common share
 If one company is exchanging the share for assets
 If one companies is exchanging shares for share
There are two forms of merger; first one is through absorption and second one is through
consolidation. There are various reasons that induce the companies to go for the merger and
acquisition. The following are the reasons of merger and acquisition (Ledenyov et al., 2014);
 Financial cooperation for lower cost of capitals
 To improve the performance of the company and accelerate the growth rate of the company
 To get the economies of scale
 To diversify to increase the growth rate of the products and services
 To enhance the market share and position the business into the mind of the customers
 To mitigate the risk of business
Merger & Acquisition of Southern Bank
The potential of merger of southern bank was started earlier this year. First of all the northern
bank approached the southern bank for the same. The reaction of the management of the
southern bank was considerable for the merger but it became more positive with the passage of

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Post-Merger Review
time due to the increased rumors of the possible merger of the eastern bank and western bank.
Both the bank made their transaction clear and prepared for the merger because it was difficult
for both of them to compete with the combination of western and eastern bank. The coverage of
the eastern and western bank was as much as twice of the coverage of the southern bank or
northern bank. Apart from this, both of the banks had numerous opportunities for saving the cost
significantly. The cross-selling activities were also an opportunity in front of the both if they
work as a combination. The actual arguments of conflict were the typical ones such as the value
of both entities, the governance structure of the joint franchise, the strategic method to take in the
ultimate post-combination period, etc. (Boschma et al., 2014).
The negotiation process between the two banks northern and southern bank started in July. In the
first week of July a transitory due assiduousness exercise was conducted for the northern bank
and in the third week of July for the southern bank. The due assiduousness process of the merger
of both banks was based on the intent which was signed on 29th June by the northern bank that
included non-binding and preliminary consideration of $1.34 billion in stock. Both banks were
cooperating with each other, and there was friendly environment all around both banks. None of
any other bank was involved in this negotiation.
Both the bank signed the agreement to merge on 12th September. The amount of price paid was
$15 billion in stock. The price paid was based on the share price of the northern bank on 12th
September at the close of trading.
The advisors of the merger from both the banks were;
The advisors of the northern bank- The investment bank consultant- Golding Ritter Sergeant &
company

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The advisors of the southern bank- the Investment bank consultant- Fort stein Berger Thomton &
Nickle
The pre-acquisition profile of the both banks
The profiles of both the companies were prepared by merger & acquisition team of New York
Sergeant. These profiles were based on the comparative analysis of southern bank as well as a
northern bank as per the data available on 31st August.
Southern Bank Northern Bank
Ownership
Public institution with greater than 5 percent 12 percent 23 percent
Funding family 12 percent 0 percent
Public- other 69 percent 63 percent
Management 7 percent 14 percent
Financials (30th June)
Non-interest income $ 106 million $91 million
Net interest income $231 million $314 million
Total income $ 337 million $ 405 million
Taxes $ 23 million $54 million
Non-interest expenses $229 million $239 million
Net earnings $85 million $112 million
Loan (non-performing) 90 days $68 million $72 million
Total assets $8.6 billion $10.4 billion

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Total portfolio of loan $5.4 billion $6.9 billion
The value of stock market (12th September) $1.2 billion $1.8 billion
Human Resource Practices (pre-acquisition profiles)
Salaries more than average
salary
almost equal to the
Industry
In the average
industry salary based
on individual.
fixed grade pay for
Negotiation. 17 grades
are available.
Contracts Based on individual
Negotiation
fixed
Bonus Scheme bonus was related to
them, Profit at the
bank level
based on performance
for all the employees
Benefits
Low-interest loan No For all
Company car For directors For all the employees
deducted from salary
Pension employees with more
than two years of
experience get 3% Of
annual salary by the
bank
contributions were
voluntary that was
deducted from salary
Expenses reimbursed company expense card
Holidays 18 days excluding 20 days excluding public

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Post-Merger Review
public holidays holidays
Before the acquisition, the total number of employees in the northern bank was 850 while the
southern bank had 635 employees. Out of the total 24 percent of the northern employees were
the members of bank employees union while 56 percent of the southern bank employees were
the member of bank employees union. The northern bank had 56 percent current account and 44
percent saving account while the southern bank had 24 percent current account as well as 76
percent of the saving account. This figure is based on the size of deposit portfolio. If we talk
about profitability rating, the northern bank had four current accounts and four saving accounts
while the southern bank had three current accounts and five saving accounts. The portion of
commercial/corporate lending was 64 percent; the portion of consumer/retail lending was 30
percent, the portion of mortgage/real estate 6 percent of the northern bank. If we talk about a
southern bank the portion of commercial or corporate lending was 15 percent, the portion of
consumer or retail lending was 78 percent, the portion of mortgage or real estate lending was 5
percent (Halkos et al., 2013).
Post-Acquisition profile
Human Resource Practices
The human resource practices of the southern bank were replaced with the northern bank. All the
human resource practices of the southern bank such as salary, bonus scheme, contracts, pension
benefits, expenses, holidays, etc. have been replaced with the northern bank.
The process of loan approval

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The loan approval process of the southern bank will be;
Retained- both the process has been retained, there is no integration. The procedures and
decisional autonomy of the southern bank are preserved.
Replaced- the process of the southern bank has been replaced with the process of northern bank.
The loan process has been centralized which will help in saving 4 percent of the combined cost
structure.
Linked- the process of the southern bank has been retained, but it has been linked to the process
of northern bank. To ensure the effective and timely exchange of information between the two
banks and to facilitate the coordination of the procedures in the medium term as well as in the
long term new procedures will be designed.
Information Technology Systems
The information technology system of the southern bank will be;
Retained- both the information technology system has been retained, and there is no integration
of the information technology systems. Both the systems will run as an independent unit.
Replaced- the information system of the southern bank has been replaced with the northern bank.
It has been estimated that with the replacement of the information technology of the southern
bank will save up to 22 percent of the non-interest expenses of the southern bank.
Linked- the information technology system of the southern bank has been retained, but it has
been linked to the information technology system of the northern bank. There is a proposal to
design a sophisticated interface that will help in translating the data of the southern bank I the
format that would be understandable by the information technology system of the northern bank.

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Management
The proportion of the managers of the southern bank replaced will be; 0%, 5%, 95%, 100%. The
total cost of compensation for the management at the southern bank will amount to the 6 percent
of the total cost structure of the southern bank.
Employees
The proportion of the employees of the southern bank replaced will be; 0%, 5%, 95%, 100%.
The total cost of the compensation for the employees of the southern bank will account for up to
32 percent of the total cost structure.
Portfolio of the Products
The portfolio of the product of the southern bank will be;
Retained- all the product has been retained as part of the offering of the merged bank.
Rationalized- for every category of the product ‘best practice’ product will be offered
Replaced- the merged bank has been allowed to offer only the products of the northern bank
It is very difficult to quantify the financial impact of the portfolio of the product decision at this
stage.
Announcement Regarding Replacement

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Post-Merger Review
Replacement is one of the euphemisms for layoff. The replacement announcement decision will
be; 1, 2, 3, 11, 12 weeks after 1st January.
Starting Date of Implementation
The starting date of implementation to integrate the decision will be; 1, 2, 3, 11, 12 weeks after
1st January.
Period of Implementation
The implementation period of integration decision will be; 1, 2, 3, 11, 12 weeks after 1st January.
Stakeholder Analysis
All the interested parties in the company or the organization such as employees, management,
customers, shareholders, government, etc. are the stakeholders of the company. All the interested
parties play a significant role in the organization. They are the parties who influence the
activities of the organization at a great level (Sindi et al., 2017). They influence the decision-
making process of the organization as well as the smooth functioning of the organization. For
example- If the management of the organization is not considering the interest of the
shareholders, customer, employees, etc. there might be differences of opinion among the key
stakeholders. These differences in opinion might influence the smooth functioning of the
organization. Therefore, to be a successful organization the management of the organization
needs to consider the interest of the all key stakeholders while taking any relevant and major
decision in the organization (Sindi et al., 2017). The management of the key stakeholders is also
very important because they are the key players who build the image of the organization in the
market. Apart from this, the management of the key stakeholders also helps in maintaining the

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corporate social responsibility of the organization. Today's business scenario has changed, and
all the companies are required to engage in social welfare or serve the corporate social
responsibilities. The government has directed the companies to follow at least certain limit of the
corporate social responsibility (Qingchun, 2017).
Stakeholder analysis is described as a tool or framework which is used to improve the activities
of the business as well as management of stakeholders. The analysis of the stakeholders helps the
management to identify the technique that could be used to provide values to the stakeholders
and improve decision making for the sustainable development. It is very important in the case of
merger and acquisition because it is not only a strategic decision but one of the major decisions
which influence the whole functioning of the organization. Merger & acquisition may create
differences among the key stakeholders because it is very risky for the organization. If the
merger and acquisition were not successful, there would be a huge loss of finance as well as the
company would be shut-down. Therefore, before going to the merger & acquisition, the company
should take consent of the entire key stakeholders. In the same way, if the northern bank and
southern bank would not consider the interest of the key stakeholders their merger would not be
successful (Qingchun, 2017).