The largest banking merger in the Middle East
Introduction
Mergers and acquisitions represent a type of change that is able to provoke different types of resistance. On the one hand, the resistance can stem from stakeholders, who may suffer from the formation of stronger business entities due to mergers and acquisitions. On the other hand, resistance frequently remains a domain of employees, who feel it challenging to adapt to changing working environment (Kansal and Chandani, 2014, p.209).
Attitudes of shareholders and competitors
The merger of the Emirates Bank National and the NRBD was free from resistance, coming from stakeholders, different from employees. Firstly, the government approved of the merger, perceiving it as an important step to the further improvement of the investment climate in the region. The economic recession that has significantly influenced the world in 2008 led to the fact that many financial institutions and investment banks started to invest into the banking sector of Gulf countries. Offering the world’s best standards in the field of investment, the Emirates National Bank was considered the best basis for creating Dubai’s International Hub and attracting finances to the state.
The merger was fully approved by shareholders due to the fact that it delivered a range of important benefits for them, such as the development of a leading regional Investment Franchise, improved opportunities for regional and international expansion, as well as the value creation through synergies, associated with revenues and costs (Emirates NBD, 2007).
Industry stakeholders (e.g., other banks) did not perceive the merger as a threat to their business. While the size of the newly formed bank is justified by the scale of its operations with oil, the merger shall not be viewed as a concentration threat (The Banker, 2007). The reason for that is that the Emirates Bank International has been initially branded as over-banked, containing more than fifty local and international banks, operating in a country (Emirates NBD, 2007). The issues, concerned with the scarcity of qualified manpower and related prohibitive costs, make cross-border mergers of bigger banks even desirable for smaller ones to continue competing within the industry.
Employee resistance
Overcoming employee resistance is one of the most important aspects of conducting successful change. However, as it can be proved by the official releases regarding the merger, employee resistance was not a key issue at stake in case of Emirates Bank National and the NBD. The reason for that deals with the fact that the merger at hand is concerned with significant benefits for all stakeholders, including the employees of a merged bank, as well as the development of an effective post-merger organizational structure.
The major benefits that became available to employees following the merger included e enhanced career opportunities (arising from the growth, diversification and expansion of an organization); improved human resource development capacity of a newly formed bank and, finally, the new entity’s improved ability to attract and retain top talents. Moreover, as the merger created new chances for the bank to expand in the UAE and overseas, the employees enjoyed a broad pool of career opportunities, emerging from the post-merger organizational structure (Emirates NBD, 2007) (Gulf News, 2009).
The resistance-related situation, accompanying the largest merger in the history of banking in the Middle East was highly atypical, if compared with usual employee attitudes to changes, stemming from mergers and acquisitions. Both Kansal and Chandani (2014) and Van Dijk and Von Dick (2009) consider employee resistance as a crucial factor that can prevent success of a chance. In this view, any merger or acquisition is to be accompanied with a communication process, involving the deliberation of strategies concerning Employee Involvement Customer Focus and HR Structuring (Kansal and Chandani, 2014). While no information about the employee involvement into the change process is available, it is suggested that the added value of the merger for employees was communicated to them, when the merger was first announced in 2007.
Executive summary
The following part of the team project deals with the issue of resistance to the merger of the Emirates Bank International with NBD. The merger was not associated with resistance from the government and any shareholders. This phenomenon stems from the fact that both the government and shareholders received significant added value following the merger, allowing attracting large-scale investments from other regions of the world and facilitating the development of Dubai Financial Hub. The investment-related opportunities also prevented smaller banks from actively resisting the merger.
Employee resistance is usually one of the crucial factors, hindering successful mergers. The merger between EBI and NBD was not accompanied by employee resistance, because it represented a source of significant benefits for employees. These benefits included enhanced career opportunities due to the diversification and growth of the organization following the merger, improved capacity for human resource development, as well as better capacities for attracting and retaining staff. Despite the fact that there is no available information about the peculiarities of communication process, accompanying the merger, it can be suggested that employees were informed about the benefits they will receive as a result of the merger in advance.
References
Emirates NBD (2007), EBI and NBD merge to form Emirates NBD. Creation of a UAE champion [online]. Available at: http://www.emiratesnbd.com/assets/cms/docs/presentations/2007/EBI%20NBD%20Merger%20Presentation%2012%20July%202007%20-%20English_24.pdf
Gulf News (2009). Reactions on the EBI-NBD merger. [online]. Available at: http://gulfnews.com/business/sectors/banking/reactions-on-the-ebi-nbd-merger-1.165689
Kansal, S., Chandani, A. (2014). Effective management of change during merger and acquisition. Procedia Economics and Finance, 11, pp.208-217
Van Dijk, R., Van Dick, R. (2009). Navigating organizational change: change leaders, employee resistance and work-based identities. Journal of Change Management, 9(2), pp.143-163
The Banker (2007). Birth of a UAE Champion [online]. Available at: http://www.thebanker.com/news/fullstory.php/aid/5155/Birth_of_a_UAE_champion.html
