Barclays Plc and Abn Amro Case Study

pic capital of the United Kingdom School of avocation MBA E BARCLAYS PLC AND ABN AMRO CASE STUDY ASSIGNMENT London UK As ace of the innovations guide marges, with 135,000 employees in more than 50 countries, Barclays plays a authoritative character reference, from working with g all overnments on major infrastructure projects to saving argoting to customers in emerging merchandises. Barclays is made up of dickens major line of businesses Global Retail and moneymaking(prenominal)ised tilling (GRCB) and enthronization funds funds Banking and Investment Management (IBIM). There outline is to hand weakening through time by diversifying their net cyberspace home making their branch relevant to their customers at all times.This case study get out look to examine the scream and in black marketplaceed erudition of ABN AMRO, and the primal acquisition of Banco Zaragozano by Barclays, the differences in effect of these two asserts found upon the st localiseg ic a economic motives, guidance on the merger acquisition, and schema implemented to declaration improvements to reflect the issues from 2002- 2006. 1. Evaluate Barclays dodging over the period of time of the case and preliminary to the ABN bid, salaried particular economic aid to the ball-shaped perseverance drivers and the group? s cognitive process from 2002-2006.In revision to understand the context that helps to develop the strategical performance exchanges at Barclays PLC over and prior bid for ABN AMOR. Barclay? s origins can be set up back in 1690 to John Freame and Thomas Gould. The stird changed to its baffle form when James Barclay became a checkmate in 1736. Presently, Barclays is the third largest edge in the United Kingdom. The c formerlyptions direct steering is in sell banking, investment banking as intumesce as investment management. Barclays operates in 60 countries with major point of hobby in Europe, the United States, Asia, and Africa .Barclays is one of the ten largest banks globose when measured by market capitalization (Barclays PLC, 2004). The foundations core business revolves around sell and investment banking, and it is the later that is world impacted by forces acting upon liberal market economies in varied European Union member states as a result of the aforementioned introduction of the Euro as considerably as globularization. As a result of the preceding, Barclays run the United Kingdom market as become as providing run to multinational companies located in differing market shams. Barclays strategy.The banks strategy is to stand a full portfolio of function world colossal, providing a wide range of cross- interchange opportunities, in order to obtain groovy harvest-time through time by diversifying its business base and increasing its front man in markets and segments that be growing rapidly. This is driven by the Groups ambition to become one of a handful of universal banks leading the global pecuniary run industry, serving customers and clients throughout the world strive their goals. Moreover, the strategy of the bank is establish on the principles of earn, invest and grow. aline business drivers with strategic options. The strategic options examined by Barclays were and direct investment or outsourcing to a partner bank and these were considered in the context of the banks cite business drivers. These wereimproving their operating model for business deal processing reducing the s gratuity tos of their trade business in relation to people, infrastructure and work improving their trade service capabilities and establishing a workable, non-competing, semipermanent partnership.After considering all of the options, including a control stick Venture partnership, Barclays determined to outsource the processing panorama of its trade services offering to ABN AMRO and to focus on releaseing enhanced client service. Performance Nowadays, the proliferation of banking integrating at bottom the industry is and has get tod a new era of international banking conglomerates in the global industry. The preceding is causing European based banks to appear small in ground of relative comparison. Barclays? peration in a liberal market economy means it competes with equity financing for corporations and as such, this does not re birth a strength concerning its overall performance base. According to group? s performance from 2002-2006 identifies that Barclays? performance underpinnings ar represented by its strategy of acquiring former(a) banking (such as ABN Amro and Banco Zaragozano) concerns to expand its sell as healthful as other banking services through representation in international markets as represented by the banks front in 60 countries.This provides Barclays with the means to sell its super profitable investment banking services as well up as be positioned to service the cadre of multinational companies that utilize its div erse banking monetary service packages. On the other hand, ABN AMRO bank has a presence in 76 countries and territories. Using its worldwide engagement the bank provides universal banking services consisting of commercial and investment banking products to incarnate nationally and internationally operating clients as well as personal and private banking customers.In 2007, Barclays announce the proposed acquisition of ABN AMRO bank, in order to expanded their statistical distribution base. The deal was take to bed at 67 billion. On October, the RFS pond led by proud Bank of Scotland, bidding for control of ABN AMRO, formally declared triumph after shareholders, representing 86 perpenny of the Dutch banks shares, accepted the RFS groups 70bn offer. Barclays is cognize a consistent performer expatriateing plastered lucrativeness results, 20% increase in profit forrader taxes in 2003, and again in 2004, and one of the terminal cost to income ratios with regard to banks in t he UK.The preceding indicates that Barclays is well managed. Barclays? focus on internal administrative consolidation as well as the acquisition of banking concerns represents its cognizance in order to maintain growth in revenues, return on equity, dividends and profits in chemical re deed to maintaining a high market capitalization that tends to coerce it a relatively unattractive organizeover pose as a result of the high indemnity required to acquire it Barclays? retail banking arm is pass supported by the huge supremacy of its Barclaycard discrepancy that has set industry standards in damage of innovations in customer utility-grade. Barclays? resence in 60 countries advertise strengthens the utility of this card providing business and retail customers with access to their monetary accounts globally (Barclays PLC, 2004). The aforementioned diversity in operations is a result of the economic strength of global industry market based economies that have in full recover ed from the global recession events of 2002. Barclays? banking acquisition strategy is a direct outgrowth of the foregoing in keeping with the consolidation mania initiated by U. S. based banks. According to ABN AMRO bank performance, financial results in 2006 added to concerns around the banks future.Operating expenses increased at a greater rate than operating revenue, and the efficiency ratio deteriorated further to 69. 9%. Non-performing loans increased considerably year on year by 192%. Net profits were except boosted by sustained asset sales. From 2002 to 2006, the further draw close being made as a result of understanding the corrective measures that were and are needed to be taken. Barclays ? performance throughout this period has remained consistent and steady as the bank has not lost atomic reactor of the competencies that helped it action acceptable historical performance. . Compare and severalize the intended acquisition of ABN with that of the earlier acquisition of Banco Zaragozano, paying particular attention to the merger rationale and the motives in each case and the likely synergy gains resulting from the integration of ABN. According to the drivers of the bidding war that preceded the intended acquisition of ABN AMRO bank and the acquisition of Banco Zaragozano by Barclays in 2003, it is strategic to understand why merger and acquisition (M) take place and the potential gains of doing so. But first intimately definitions.Mergers and acquisitions. Mergers and acquisitions (M) are considered as consolidation strategies where a change of control takes place through a take out of ownership. A merger is the combining of two or more companies into a single corporation. This is achieved when one partnership or business purchases the property or any(prenominal) other form of assets from some other familiarity. The result of this action is the formation of one in incarnated structure. This new corporate structure retains it is origina l identity. An acquisition is a littler different from a merger n that it involves some(prenominal) problems being dissolved, and an entirely new company being formed. The main theory of merger and acquisition is synergy, that is, one and one confounds three. Through synergy, managers create greater value with the integration of two companies, rather than that of their individual parts. strategic and economic motives. The strategic of Barclays with the intended acquisition of ABN AMRO bank was to created a big opportunity with the purpose to deliver a new period of faster growth for shareholders in general.Moreover the intended investment would be implemented at a causalityable price slightly below the recent market concern price. The merger for Barclays was focused in a untroubled financial performance provides clear strategic goods as well as stature on the world business state. The proposed merger with ABN AMRO, offered a unique opportunity to become a leading force in g lobal retail and commercial banking with an stimate 47 millions customers, in order to increase financial returns to their owners beyond the rate of the stand-alone entities.And the fact that this merger, combining the strengths and values of both businesses, gives them confidence in delivery, both in terms of synergies, and determined in considerable detail by ABN AMRO bank and Barclays, in terms of a clear defined and transparent management structure that we are putting in place. In terms of growth for shareholders, the combined entity would offers a diversified portfolio, both by geography and by business. Exposure to high-growth developing markets represents roughly a quarter of the enlarged pro forma profit base.Business segments such as investment banking and investment management, which have as we know dependable growth opportunities driven by demographic trendS represent roughly half of profits For Global Retail and Commercial Banking, the merger would create the fourth largest retail and commercial bank worldwide by market share, and in a world where the needs and buying behaviours of retail and commercial customers are growing more similar, this will create economies of scale.Furthermore, the benefits generate by the merger betwixt both banks would be complementary networks, a loyal presence in attractive European markets importantly enhanced positions in high-growth developing markets a practically larger distribution network and the opportunity to deliver considerable economies of scale. The main reason behind magnificent Bank of Scotland (RBS), has trumped Barclays? offer for ABN Amro. The for each ABN AMRO share, 79 per cent of which will be in cash, with the remainder in RBS shares. The cash element was higher than expected and the bid, valuing ABN at E71bn (? 8bn), beats Barclays? agreed all-share offer, worth E64. 5bn. The deal offers correct value for ABN AMRO bank shareholders. And price is not the solely factor, Royal Bank of Sco tland (RBS) as well as combined cost savings would reach E4. 23bn by the end of 2010, good beating Barclays? estimated savings of around E2. 8bn. In vegetable marrow the driving force behind the advantage of the Royal Bank of Scotland (RBS) bid over Barclays was in fact the higher share price views offering the sinless icing. That partly reflects the radically difierent strategic visions of the two banks.Barclays is feeling to build a huge universal bank where cross-border synergies could be special(a). But the Royal Bank of Scotland (RBS) consortium wants to generate a type of in-market synergies, by breaking-up ABN AMRO. On the other hand, in 2003, Barclays announces the completion of its acquisition of Banco Zaragozano, at a cost of ? 788 million which fit nicely into Barclays strategy to grow its business in Europe. Barclays has been present in the Spanish market for 25 historic period and it the most profitable foreign-owned bank in the country.The acquisition of Banco Zaragozano to its arsenal makes Barclays the sixth largest private bank in Spain (much of the market is dominated by publicly-owned banks) and triples Barclays customer base and branch network. Barclays aimed to be one of the top five banks in the world and for that it would consider acquisition to achieve the goal. Further, Barclays imagines that a physical retail and commercial banking presence is a significant enabler of investment banking growth. The acquisition of Banco Zaragozano, shows that strong retail presence generates ood new business opportunities for global businesses such as investment banking and credit cards. The success or failure of a deal also depends on the time horizon over which paygrade is done. Normally, in the short term, stock reactions to merger announcements tend to raise the targets stock price, while the stock of the merchant bank stays about the same. This is normally attributable to the expectation that there will be a bid that is successful and involves a premium above the period market price of the stock.Acquirer prices stay the same, in general, as the market reacts conservatively, depending on the specifics of the deal. 3. Identify what you believe to the key success factors necessary to sustain rivalrous adavantage in the global financial services industry and briefly discuss the implications for the loaded? s competencies, structure, and ehical/corporate administration. Critical success factors (CSFs) have been used importantly to present or identify a hardly a(prenominal) key factors that memorial tablets should focus on to be successful.As a definition, Critical success factors refer to the limited number of areas in which satisfactory results will determine successful competitive performance for the individual, department, or organisation (Rockart and Bullen, 1981). Identifying CSFs is important as it allows firms to focus their efforts on make their capabilities to resonate the CSFs, or even allow firms to decide if they have the cap mogul to build the requirements necessary to meet Critical success factors (CSFs).The main keys success factors for Barclays in the case study are, with over three hundred years of history and expertise in banking Barclays has seen and has gained a record for being a trustworthy and a reliable institution to bank and invest with. This reputation has seen it grow into over 50 countries and become truly universal bank providing loans, investments and protecting the money of over 42 million customers and client worldwide. Another reason for the success of Barclays would be that it follows a simple strategic premise anticipates the needs of customers and clients and serve them by helping them achieve their goals. Part of Barclays recent success has been their ability to target and identify upcoming emerging markets for role model India, parts of Asia and Africa, namely South Africa, expanding its retail network and cash machine availability. Despite be ing a truly global corporation from a elementary bank account to funding Governmental projects, Barclays focus has al centerings been to meet the needs of the individual customer. Furthermore, competitive advantages are thorny to create. It is even more difficult to sustain. Community banks usually can not achieve a cost advantages, especially in private competition with larger, high-volume institutions.That leaves differentiation as their primary regularity for creating free-enterprise(a) advantages. But that approach is also problematic. It is clear that technology is playing a big and bigger role in banking. But today most banks are using functionally identical formations to develop and deliver products and services. This uniformity of technology has resulted in commoditized banking the antithesis of differentiation. So while emerging technology can create a temporary advantage, sustainable differentiation based solely on technology is virtually im manageable.To make matt ers worse, technology has actually eliminated some of the historical advantages enjoyed by community banks. Thanks to CRM, personalized service once the sole province of community banks is now possible for even the largest institutions. Sustainable Competitive advantages is created by leverage organizations unique blend of attributes grease equity, reputation, geographic footprint, specialized knowledge and articulating it cl proterozoic and consistently to your market. Barclays is an excellent example of a bank that has achieved Competitive advantages through specialized knowledge.On the other hand, on the global financial services industry corporate brass section is essential to the wellbeing of an individual company and its stakeholders, particularly its shareholders and creditors. But sound corporate governance is not just a vital factor at the level of the individual corporation. It is also a critical ingredient in maintaining a sound financial system and a robust economy. And that is why governments have taken such an interest in recent examples of corporate governance failures.It is also why banking supervisors are placing greater emphasis on the role that corporate governance can play in promoting financial stability. In the financial system, corporate governance is one of the key factors that determine the health of the system and its ability to survive economic shocks. The health of the financial system much depends on the underlying wisdom of its individual components and the connections between them such as the banks, the non-bank financial institutions and the payment systems.In turn, their soundness largely depends on their capacity to identify, measure, monitor and control their risks. Barclays have designed good corporate governance policies and practices in order to ensure that they are focused on their responsibilities to shareholders and on creating long term shareholder value, and ensuring that behaviour is ethical, statutory and tr ansparent. In firms, structure is basically the best way to organize it, in order to accomplish it is objectives. It acts as the medium that facilitates the accomplishments of the organizational goals.It also helps to identify the key activities of the organizational processes and how they are coordinated. Moreover, successful strategy capital punishment depends to a large extent on the firms primary organizational structure. A primary organizational structure comprises the firms major elements, components, or differentiated units. Other means of acquiring organized are through reward systems, coordination terms, intend procedures, alliances, information, and budgetary systems. Geographical structure It is common in firms that have grown by expanding the sale of their products of services to new geographical areas.In these areas, they frequently fulfil differences that necessitate different approaches in producing, providing or selling services or products. The key strategic adva ntage of this structure is responsiveness to local market conditions, a clear example of that is the intended acquisition of ABN AMRO and the early acquisition of Banco Zaragozano. To conclude, after being satisfied with its progress in the United Kingdom, Barclays decided to make its name international by going abroad which was another great move.In the United Kingdom, Barclays had acquired many other small banks, such a Banco Zaragozano, gained large market and profits with each acquisition. As a result of this growth, this company had reached its maturity stage within UK itself it has reached its peak of growth. 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