Featured case: OCBC – Integrating Strategic Acquisitions

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The case

Who – the protagonist

Samuel Tsien, OCBC Group CEO.

What?

OCBC is Singapore’s oldest bank, after three of the country’s corporations merged in 1932.

OCBC has since gone on to become the second largest financial services group in Southeast Asia, expanding through various acquisitions over the years. 

Why?

In 2014 OCBC made its largest ever acquisition by purchasing Wing Hang Bank, one of the oldest local Chinese banks in Hong Kong.

The Pearl River Delta region, the world’s largest urban area in size and population, opened up for OCBC with their entry into the Hong Kong market. It also provided OCBC with greater wealth management opportunities and access to a larger funding base in renminbi and Hong Kong dollars.

In addition, OCBC made the important acquisitions of ING Asia Private Bank and NISP in Indonesia in the years leading up to Wing Hang.

When?

It was 2013 when competition to purchase Wing Hang was rife, with no less than eight suitors, including Singapore’s UOB and the Australia and New Zealand Banking Group, interested.

In January 2014 OCBC entered into exclusive talks with Wing Hang, but talks over price only came to a conclusion in April of that year, when OCBC acquired 97.5% ownership. On 1 October, Wing Hang was rebranded as OCBC Wing Hang.

Where?

Wing Hang’s head office is located in Hong Kong, with 70 branches based in the autonomous territory, as well as Macau and mainland China.

The OCBC Group boasts more than 600 branches and representative offices in 18 countries and regions, including Singapore, Malaysia and Indonesia.

Key quote

“Great CEOs are characterised by the people they surround themselves with…Samuel Tsien represents a personality that has brought together team players with a very strong sense of ownership.” – Emmanuel Daniel, founder of the Asian Banker CEO Leadership Achievement Award for Asia Pacific, which Samuel won in 2013.

What next?

While OCBC has made a success of their acquisitions of Wing Hang, ING and NISP, and other banks and financial services, how did they achieve this, and what was its approach to immersing acquisitions into the OCBC culture?

 
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OCBC – Integrating Strategic Acquisitions
Ref 317-0235-1
Teaching note
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The authors

author

Danielle Yew and Neo Boon Siong

Danielle and Neo discuss long term planning, field research, plus much more.

Looking beyond the short term

Danielle said: “The current CEO Samuel Tsien, in particular, emphasises value accretion, though the underlying premise had been very much in practice in OCBC’s history, without terming it in exactly the same words.

“Value accretion does not focus on short term earnings or short term share price performance, but how to derive synergistic benefits for the enlarged company for the long term, which each smaller part will not be able to achieve on its own. On that count, good relations all round – management; staff; suppliers and customers; all become very important. While many may echo that, few are able to carry that out consistently through the years, and through various changes in leadership.

“Through the case, students can learn how each acquisition, while challenging in its own right, can be successfully integrated as long as the focus is right. There is no cookie-cutter approach since each acquisition is different: three different geographical locations, different regulatory approaches, even different businesses, yet successful. Why? The focus on value accretion.” 

In the field

angry birds

Neo added: “Taking the field research option was key to accessing so much key information. We visited the offices of all three acquisitions, which spanned four countries since the Hong Kong acquisition involved a very complex integration of its China operations, which had easily 170 licences over many different provincial jurisdictions.

“Speaking with the local staff of the acquirees also gave us a first-hand assessment of whether the views espoused by HQ were indeed shared with those on the ground, miles away. Interestingly, for another case conducted around the same time on a different company, the views of the rank and file differed quite significantly from the management’s.”

Respect

Danielle continued: “We approached OCBC’s top executives with the utmost respect, which is of course key.

“The theme of the case was discussed with the CEO, who gave his blessing and thus facilitated the scheduling of all the meetings with top management of all three acquirees, all within a six-month time frame.

“Adherence to the theme plus the anchor author’s (Neo) earlier dealings with OCBC at board level, paved the common understanding of mutual respect and a shared goal.”

Neo added: “It was also interesting how OCBC’s acquisitions of the three companies all involved finding common ground such as speaking the local language and seeing through the locals’ eyes, retaining local management to facilitate the transition, culminating in a very basic factor in not only business but human relationships: respect. And thus the purpose-crafted ending paragraph in the case:

Tsien closed the covers of the report before him, and decided to let time be the judge. At the end of the day, as long as he knows he had been true to himself and the people he had dealt with, he can say with sincerity: “When we approached the target, we approached truly with respect. We looked at it not only as a business proposition. We also looked at it as bringing the entity in, as part of the newly formed family, of which they play a part”. And that, is truly what business is about. 

Better integration

Neo concluded: “We are grateful for the co-operation of the company, who were open and generous enough to share the “secrets of their success” with students, especially at the executive levels, the target audience we had in mind when this case was first conceived.

“Through such sharing of best practices, it is the hope of both Nanyang Technological University (NTU) and OCBC that more companies will enjoy success in integrating their acquisitions, as the pattern worldwide to date appears to be that poor integration is leading to the breakup of many acquisitions or mergers, which had seemed so logical in the first instance.”

About the authors

Danielle Yew is Senior Research Scientist at NTU Asian Business Case Centre

danielleyew@ntu.edu.sg

Neo Boon Siong is Director at NTU Asian Business Case Centre
absneo@ntu.edu.sg

 

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