Module 13 Discussion

Module 13 Discussion

Student’s Names

Institution’s Names

Date

My choice of a Saudi Arabian business is the National Commercial Bank in Saudi Arabia. It is one of the biggest lenders in Saudi Arabia (Qudaiby & Khan, 2013). It recently announced its merging with Samba Financial Group leading to a new entity name, Saudi National Bank. They began trading as a single entity in the Saudi Stock Exchange.

The National Commercial Bank went forward to merge with Samba Financial Group because the it is the fifth largest bank with almost an asset of about 68$. Samba as well has 40 branches across 12 cities in Pakistan. This means that the merger is likely to capture most of Pakistanis’ population thus making is competitive in the market. The merging of the two companies is expected to bring forth a stronger competitive position and create a superior retail banking franchise as well as the Kingdom’s largest wholesale lender. With a robust balance sheet and capital base, improved liquidity and a universal balanced banking model, the bank will thus be positioned optimally to compete both locally and regionally.

The merger created a very good value for the bank as the combination of the two banks was meant to create total assets of over $220 billion and $46 billion market capitalization thus being the largest retail bank in the Gulf. It will hence control a quarter of all the banking in Saudi Arabia Kingdom.

One recommendation that I would make for this bank and other banks as well is to ensure consideration of the perception and impact of the customer. Apart from looking at the balance sheets which speak volumes about the two banks, there is the need to ensure consideration of how the customers will be affected by these mergers (Linder & Crane, 1993). Customers, in most cases, respond emotionally to the banks acquisitions hence the need to manage careful and regular communication. Once the merger has been effected, it is important to consider the impact of the customers at every stage. The changing technology platforms can affect the customers negatively and thus attention needs to be paid.

In conclusion, it is evident that mergers are inevitable. Most companies dive into merging and acquisitions for them to be able to increase their profitability, reach out to more clients and also have a greater competitive advantage in the market. When companies decide to merge, they need to assess if merging is necessary and the benefits that are likely to come because of the merger.

References

Linder, J. C., & Crane, D. B. (1993). Bank mergers: integration and profitability. Journal of Financial Services Research, 7(1), 35-55.

Qudaiby, B. A., & Khan, M. R. (2013). Financial Synergy in Mergers and Acquisitions in Saudi Arabia. Finance: Challenges of the Future, 15.