The merging of the Al Hadadi and Al Sharooq Bank Proposal (Research Proposal Sample)
The task was to play the role of a consultant and offer consultancy services on the proper guidelines for the merging of Al Hadadi and Al Sharooq BanK TO FORM United Islamic Bank . The sample is about two united arab emirates banks that seek to merge to improve economic growth and prosperity, eliminate high risks in business, take tax advantage, and face the challenges associated with mergers and acquisitionsource..
The merging of the Al Hadadi and Al Sharooq Bank
Date of submission
The merging of the Al Hadadi and Al Sharooq Bank into the United Islamic Bank will create two powerful legacies in the banking sector. Deregulation in the UAE banking sector, together with favorable economic and financial conditions, and reforms in legislation will provide opportunities during the change process. The amalgamation of the two banks consolidates the survival process of the existing undertakings (Popp, 2013, p.64). The cooperation between the banks will create economic growth and prosperity, eliminate high risks in business, take tax advantage, and face the challenges associated with mergers and acquisition.
The merger aims at developing a leading regional financial institution that advocates for presence in the international market. The merger also expects to leverage financial growth and understand the appropriate market positioning that will capture opportunities in the domestic and regional market (Goyal, and Joshi, 2012, p 37). The United Islamic Bank aims at achieving a 50% increase in the total income per year. The enhanced distribution network created by the merger will develop the new institution into a banking powerhouse. Moreover, the competitive positioning will be strengthened, and this will help them to compete with their fierce rivals (Altunbaş, and Marqués, 2008 p. 210).
The Central Bank approached me to offer consultancy services as an expert. The compensation for the job will be 200,000 AED. My advice will provide insight on the appropriate guidelines during the merger process. I will support the planning and implementation process by outlining the steps that will be followed and adhered to the letter. In the past, I have garnered a wide range of experience from other merger practices. I believe I am well placed to offer the best advice concerning the merger of both banks.
The report will entail a detailed analysis of the benefits of amalgamation in the banking sector by paying close attention to different sections. The background of each organization, the SWOT analysis, and the internal and external stakeholders will be covered. It will also address the 5 phases of implanting the merging process. Other sections that will be covered include the main barrier, and success factor, employee resistance, motivation and development, the role of leadership and the importance of communication role. Nonetheless, the report will propose a change model that they will follow the section of how to prepare a culture that will accept change.
The History of Shurooq Bank of United Arab Emirates shows that it was launched in 2004 by the ingenuity of the World Bank, the government of UAE and the corporate leaders of the UAE sector. The Shurooq bank consist of 2,000 existing employees, seven countrywide branches and lacks regional branches. The Shurooq Bank is described as an internet bank because it relies on new technology and a team of skilled personnel.
The Historical background of Al Bawadi Bank displays that it was established in 2000 by the views of the World Bank, UAE government, and financial sector leaders. The primary goal of Al Bawadi Bank was to offer banking services to individuals based on Islamic values. For instance, the borrower is required to pay the funds that that the lender owe him. The financial transactions that occur in this bank occupy a certain culturally distinct kind of ethical investing. Al Bawadi Islamic Bank boasts of 10,000 present employees, 55 domestic branches, and 12 international subsidiaries. The Al Bawadi Islamic Bank is a traditional bank that is based on Islamic norms and does not depend fully on the new technology and team of professionals.
The strengths, weaknesses, opportunities and threats of the United Islamic Bank is described (Ip and Koo, 2004, p. 537)
* More branches will lead to reduced costs of funds (Ip and Koo, 2004, p. 539)
* Productivity will be enhanced as the Al Bawadi Islamic Bank is a large organization
* The new Bank will introduce innovative banking, a new mobile banking service that enables customers to conduct most banking transactions on their own
* The merger will also result in sustained growth in profits, and the new bank will become among the leading liquid banks in the UAE
* Both banks comprise of senior managers that have garnered a wide experience over time
* Profitability and the return ratios will be affected at the beginning (Goyal, and Joshi,2012, p.35)
* A weak management leads to increased business risks and reduced profitability
* The merger creates increased footprints and metro presence
* The cost-income ratio for the new bank will have room for improvement
* An enhanced management bandwidth that will enable the entry into international market
* The UAE banking sector has the largest assets in the GCC, and this allows the new bank to succeed further in the market
* The merger is likely to be EPS dilutive for the next three years due to valuations
* Integration of the Al Bawadi Islamic Bank branches may pose a challenge because Islamic clients are not used to internet banking.
* The UAE banking sector is mature and already pose a very competitive ground
* A decline in the economy has the capability to hurt the banking sector by reducing the number of potential clients
INTERNAL AND EXTERNAL STAKEHOLDER
The internal stakeholders in the merger will concentrate on the business processes within the bank while the external stakeholders deal with the external issues that are linked to products and services offered by the bank.
The internal stakeholders are comprised of the Board of directors, employees, and shareholders. The bank will provide a raining and career development capacity to the workforce, and this will increase the chances to attract and retain top talent. On the other hand, shareholders are responsible for crafting and generating the UAE banking franchise. They also ensure an increased financial strength and capital position with the ability to develop a sustained growth. (Morschett et al., 2015, p.300). Also, shareholders create value via revenue, cost synergies, and exchange of best practices established by expertise. The Board of Directors provide guidelines for the bank so that it can adopt the expected standards in governance.
The external stakeholders are concerned with views and experiences that will address the critical issues. The external stakeholders in the merger includes customers, suppliers and partners, the government, creditors, communities, etc. The New Bank will consider customers as the most immediate external stakeholders. The merger will attract, retain, and generate loyalty from the core consumer markets and this will ensure long-term financial success. It is essential to ensure the merging of the banks creates a broader product suite and deliver numerous customized financial solutions.
Furthermore, the New Bank will create a good relationship with its creditors. In the past, Al Shurooq Bank had been facing problems in meeting their payment deadlines to creditors in a responsible manner. Since the merger will increase productivity and profits, the business will be in a position to meet deadlines within the specified durations and at the same time maintain a good relationship with the creditors.
PHASES TO IMPLEMENT THE MERGING PROCESS
The merger and acquisition process is composed of five phases; pre-acquisition review, search and screen targets, investigate and value the target, negotiation acquisition, and post-merger integration. The pre-acquisition review is the first step in the merger and acquisition process. In this step, the merger and acquisition strategy is assessed whether it is implementable. A merger and acquisition initiative is a necessity in the period that there is a probability that the firm might anticipate problems in the future. The primary objective of the pre-acquisition review will assess if the growth targets can be attained internally. On the contrary, if the aims and objectives of the growth cannot be achieved, the M & A team is bound to launch a set of principles where the organization can develop via acquisition (Evans, 2005, p.4).
The second step in the M& A process is to headhunt and identify the potential persons. Additionally, it the duty for the target companies to coincide with the set standards so as to be a good deliberate fit with the acquiring firm (Evans, 2005, p.4). The level of compatibility between the two organizations can be viewed in relation to the relative size, kind of business entity, capital raising structure, marketing and advertising modes and organizational area of specialization. The acquiring company is bestowed with the obligation of performing the search and screening practice internally. Most M&A processes prefer the internal due diligence to external due diligence because the introductory phases are viewed as highly safeguarded and sovereign (ibid).
The next procedure in the M&A process is to conduct a thoroughly detailed research on the target firm. In this period, the stakeholders want to approve that the target company is a better fit with the acquiring company. A sound due diligence based on the business operations, tactics, financial statements and other elements useful in understanding the working of these firms is essential. A due diligence is appropriate when a target firm has been chosen. Investments banks are the main player in this stage to ensure proper evaluation of the parties involved. Proper valuation of the target company is a significant aspect of a sound due diligence. Moreover, the total value of the merger company will involve the sum of the value of the acquiring and tar...