Merger: Three Major Obstacles

Rajesh Sharma

Merger: Three Major Obstacles
1. Human resource harmonization - This is crucial. From CEO to Junior Assistants or even below need harmonization. A few days ago, people were spreading rumors about X company merging with Y or Z company. This is too difficult to get human resources of two or more different brand value companies at par. Hence, that harmonization could be possible with same or closer brand value companies. For example, EBL, SCB and Nabil may be closer candidates for harmonizing human resources. But, their identity factor is too strong to submerge. If they agree to merge, there would an excellent new bank, perhaps. However, for banks like Janata, Mega and Civil, it could be possible to harmonize barring the CEOs/Chairpersons/board members etc. The persons in these dominating and high profile positions are another major obstacles.
Therefore, talking merger is simple and attaining merger is too difficult. That also has already been seen in several merger cancellations.
2. Harmonizing capital through mutually agreed upon swap ratio - This is another road block. The share holders want a larger pie and show different parameters, not only sticking to net worth. The picture captured during signing "Letter of Intent" for merger becomes unrecognizable when the actual merger decision need to operationalize. In the past also a few mergers have been cancelled due to this factor.
3. The national disease, the power politics - We have banks influenced by different political parties, their leading cadres/membership card holders and their stooges. Rather than taking decisions on merit of merger, they start tricks, tactic and strategies to controlling the new entity. By extension of dominance of power politics, we have also certain communities such as Newars dominating one bank, Marwadis the other and another in other one. This is another hindering factor that blocks merger. Here, one option is that the birds of same feather fly together. The AMALE banks be one AMALE bank, The Marwadi promoted banks be one Mawadi promoted bank ,etc. This picture sounds bizarre and some friend may blame me for projection of illusory division, but in practice, we have been seeing such divisions. Hence, we have banks of different feathers. One good thing is that we have majority of BFIs, which are politically independent. They could go for merger provided that the other obstacles have been removed.
Note: This is just my opinion not substantiated with data - qualitative or qualitative. Also, I invite friends to contribute their opinions.