Access Kit Final

Mergers & Acquisitions in Nigeria
“How Not To Go Wrong”
An Access Kit
From the December 15 & 16, 2004 Workshop and Learning Café
Eko Hotels & Suites, Victoria Island, Lagos
Central Bank of Nigeria
Securities & Exchange Commission
Aina, Blankson & Co.
Roundtable International, Inc.
Compiled by: The Roundtable International, Inc.

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(Continued on page 39)
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The Access Kit, 2005
Table of Contents:
IINTRODUCTION TO THE ACCESS KIT..........................................................................1
STRATEGY........................................................................................................................3
Phase I: Strategy Due Diligence...................................................................................................... 3
Questions to Continuously Ask ..................................................................................................... 3
Best Practice to Apply ................................................................................................................... 3
Current ....................................................................................................................................... 3
What We Need Help With............................................................................................................. 3
Phase II: Business Integration of Strategy .................................................................................... 3
Best Practices to Apply.................................................................................................................. 3
Phase III: Business Building for Growth of Strategy................................................................... 3
Best Practices to Apply.................................................................................................................. 4
Current ....................................................................................................................................... 4
Emerging or Requested Practice................................................................................................ 4
EXECUTIVE LEADERSHIP...............................................................................................5
Phase I: Due Diligence of Leadership ............................................................................................ 5
Current ....................................................................................................................................... 5
Emerging or Requested Practice................................................................................................ 5
Phase II: Leadership During Integration ..................................................................................... 5
Current ....................................................................................................................................... 5
Phase III: Leadership During Business Building.......................................................................... 6
REGULATORY ..................................................................................................................7
Phase I: Due Diligence of Regulatory and Compliance................................................................ 7
Current ....................................................................................................................................... 7
Phase II: Regulatory and Compliance During Integration ......................................................... 8
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Current ....................................................................................................................................... 8
Phase III: Regulatory and Compliance During Business Building for Growth......................... 8
Current ....................................................................................................................................... 8
STOCK EXCHANGE REQUIREMENTS..........................................................................10
Phase I: NSE Requirements During Due Diligence.................................................................... 10
Questions to Continuously Ask ................................................................................................... 10
Best Practice to Apply ................................................................................................................. 10
Current ..................................................................................................................................... 10
Phase II: NSE Requirements During Integration....................................................................... 10
Phase III: NSE Requirements for Business Building for Growth............................................. 10
DOCUMENTATION .........................................................................................................11
Phase I: Documentation During Due Diligence........................................................................... 11
Questions to Continuously Consider ........................................................................................... 11
What We Need Help With........................................................................................................... 11
Phase II: Documentation During Integration ............................................................................. 11
Best Practices to Apply................................................................................................................ 11
Phase III: Documentation During Business Building for Growth ............................................ 12
NEGOTIATION AND DISPUTE MANAGEMENT ............................................................13
Phase I: Negotiation and Dispute Management During Due Diligence.................................... 13
Current ..................................................................................................................................... 13
Phase II: Negotiation and Dispute Management During Integration....................................... 13
Questions to Continuously Consider ........................................................................................... 13
Current ..................................................................................................................................... 14
© 2005 The Roundtable International, Inc • 56 Pine Street• Providence RI 02903 • mail@roundtableint.com ii

Phase III: Negotiation and Dispute Management During Business Building .......................... 14
Current ..................................................................................................................................... 14
Emerging/Requested Practice.................................................................................................. 14
CAPABILITIES AND CORE COMPETENCIES...............................................................15
Phase I: Capabilities, Core Competencies During Due Diligence............................................. 15
Phase II: Capabilities, Core Competencies During Integration................................................ 15
Current ..................................................................................................................................... 15
Emerging or Requested Practice.............................................................................................. 16
Phase III: Capabilities, Core Competencies During Business Building ................................... 16
SYSTEMS AND TECHNOLOGY .....................................................................................17
Phase I: Systems, Technology During Due Diligence ................................................................. 17
Current ..................................................................................................................................... 17
Phase II: Systems, Technology During Integration.................................................................... 17
Current ..................................................................................................................................... 17
Phase III: Systems, Technology During Business Building for Growth................................... 18
Current ..................................................................................................................................... 18
VALUATION ....................................................................................................................19
Phase I: Valuation During Due Diligence.................................................................................... 19
Current ..................................................................................................................................... 19
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Phase II: Valuation During Integration....................................................................................... 19
Current ..................................................................................................................................... 20
Phase III: Valuation During Business Building for Growth...................................................... 20
CORE VALUES ...............................................................................................................21
Phase I: Due Diligence of Core Values......................................................................................... 21
Current ..................................................................................................................................... 21
Phase II: Core Values During Integration................................................................................... 21
Current ..................................................................................................................................... 21
Phase III: Core Values During Business Building for Growth.................................................. 22
Current ..................................................................................................................................... 22
CULTURAL ALIGNMENT ...............................................................................................23
Phase I: Culture Alignment During Due Diligence .................................................................... 23
Current ..................................................................................................................................... 23
Phase II: Culture Alignment During Integration ....................................................................... 23
Phase III: Culture Alignment During Business Building for Growth ...................................... 24
HIDDEN MESSES............................................................................................................25
Phase I: Due Diligence of Hidden Messes.................................................................................... 25
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Phase II: Integration of Hidden Messes....................................................................................... 25
Phase III: Business Building with Hidden Messes...................................................................... 25
CONTINUOUS CHANGE PROCESS ..............................................................................26
Phase I: Due Diligence of the Continuous Change Process........................................................ 26
Phase II: Integration of the Continuous Change Process .......................................................... 26
THE MERGER ROLE PLAY............................................................................................27
Pre-Meeting Work – What to do Before a First Meeting ............................................................ 27
Issues Not Discussed in Role Play............................................................................................... 27
Advice from Audience................................................................................................................. 28
Next Challenges After the First Meeting..................................................................................... 28
Observation from Roundtable International ................................................................................ 28
Top Five Issues in order of Importance....................................................................................... 29
PARTICIPANT LEARNING PRIORITIES ........................................................................30
Formulating and Executing Strategy........................................................................................... 30
Leadership Process for Continuous Change ............................................................................... 31
Core Values, Agreements and Culture ........................................................................................ 31
Valuation and Financials............................................................................................................... 32
Regulatory and Documentation.................................................................................................... 33
Disputes and Mediation................................................................................................................. 33
Technology, Core Competence and Systems............................................................................... 34
Hidden Messes or yet to be Categorized...................................................................................... 35
THE TRUTH ABOUT MERGERS & ACQUISITIONS......................................................36
RECOMMENDATIONS FROM THE WORKSHOP CONSULTANT TEAM.....................37
Need for a Comprehensive Approach: Banking and Business Reform Together ................... 38
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Introduction to the Access Kit
This is a kit to guide the mergers and acquisitions (M&A) of Nigerian banks. The contents of this
kit come from the collective intelligence of 90 participants in a two-day workshop in Lagos
Nigeria, on December 15 and 16, 2004.
The 90 workshop participants were executives from thirty-five Nigerian banks. This group is a
representative sample (39%) of Nigeria’s banking industry, which has 89 banks in the country.
This kit is a by-product of their thoughts, issues and concerns – a realistic, up to the minute
environmental scan of Nigerian banks taken from the pulse of the primary stakeholders – bankers
charged with the daunting, and somewhat Herculean task, of complying with a twenty five billion
naira capitalization by December 31, 2005.
The focus of the access kit is less on content and more on context. It is not developed with a cookie
cutter “one size fits all” mentality but rather with the intention of developing a practical,
innovative and actionable approach to the current M&A climate in Nigeria.
Innovation is a continuous process of asking questions. Questions are more important than the
answers. To innovate and become profitable over the long term, the right questions need to be
asked about the critical elements and phases associated with mergers and acquisitions. This
approach serves two purposes:
1. It affords the banks the luxury of solving their own problems without subjecting themselves
to the push and pull of circumstances occasioned by the CBN mandate.
2. It provides the regulatory organizations with the data and feedback they need in order to
create an enabling environment consistent with the growth and development of a financial
sector, which will facilitate the economic development strategy of Nigeria.
A merger or acquisition has three phases. Each phase may vary in time and take years to complete
depending on the state of readiness, organizational know-how and the strategic orientation of the
parties involved. Phases I through III may even require ten to twelve years to complete, with each
phase setting the ground for the next phase.
Phase I: Due Diligence, given the timeframe set by the CBN will be accelerated rapidly over the
next 9 months.
Phase II: Integration, may require three to four years.
Phase III: Business Building, may take five to seven years.
© 2005 The Roundtable International, Inc • 56 Pine Street• Providence RI 02903 • mail@roundtableint.com 1

Each group of banks will need a multi-year, action and learning plan, to guide the evolution of the
merged entity through three lengthy and intense phases.
This kit is an access tool for you to extract the questions, practices and needs that will form your
customized plan for action and learning. You can engage a professional services firm to get the
specific practices you will require to complete your action and learning plan.
This kit does not include every complete tool required and ready to apply. Rather, it provokes you
to think about all the complex activities and issues to confront in a merger or acquisition process.
There are thirteen elements to address in a complete merger and acquisition process. Some are
hard, but most are softer issues. Each element has to be addressed in each of the four processes
(search; screen; critical evaluation; and integration of strategy, culture and processes) and three
phases of mergers and acquisitions.
Each phase has three components relative to each of the thirteen elements:
1. Questions to Continuously Ask: Question and quest have the same root. The right
questions that fit your circumstances will go a long way to a more successful merger or
acquisition.
2. Best Practice to Apply: Practice is what you are able to consistently do with knowledge.
Best means without equal or at least a limited number of equals. The practice section has
current practices, which are known to participants, and emerging or requested practices,
which are yet to evolve to be best, but there is some knowledge and evolving practice.
Requested usually means an authority, e.g., CBN, has to act on it.
3. What We Need Help With includes the declarations of need where there is little
knowledge in the room of 90 bankers or the issue presents an arduous, complex task.
Please note: Before the participants brainstormed on each element of the toolkit, there was a
presentation of best practice of that particular tool kit element by an expert. Some sections in this
kit are blank as there was no discussion on it in the workshop. In some cases, café tablecloths
were left blank.

Strategy
Phase I: Strategy Due Diligence
Questions to Continuously Ask
1. Is increasing market share the reason for the acquisition/merger?
2. Is expanding the business the reason for the acquisition/merger?
3. Is expanding the customer base the reason for the acquisition or merger?
4. Hold a vision of where you want to go as the result of a merger or acquisition: What kind
of bank do you want after the merger? Hence, you need to answer the basic questions of
SWOT, mission statement, vision, goals/ objectives, resources, consultant expertise
required (internal or external), time-frame, culture (who do you want to stay and go),
values, merger of equals or acquisition, and compliance with regulatory requirements
(SEC, BV, CAC, FIIR etc.)
Best Practice to Apply
Current
Appoint consultant (s) with regard to expertise and skills and use a consultant and client
collaboration
Work with team from banks
Identify and work with resistance to change
Prepare a structured terms of reference for assignment
Determine outcomes required in the report
What We Need Help With
Phase II: Business Integration of Strategy
Best Practices to Apply
Rationalise products and services in line with strategy
Products/niche – Corporate, retail, HNI, Commercial
Phase III: Business Building for Growth of Strategy
1. What is the effect on the financial system?
2. In the case of failure of mergers, what happens?
3. The social cost: how are the costs cushioned?
4. The danger of forced marriages is clear and present: How do we prevent false marriages?

5. How do we properly identify where the business stands today, and where it intends to be in
future?
6. There is difficulty in achieving a change of mindset?
7. Continuity of the business is a thought to keep bringing to the table.
8. Who decides best practice/culture, in terms of organization yet to be defined?
Current
Concentrate on the core business.
Employ consultants to create the environment for efficiency with objectivity as key.
External consultants and facilitators add value to a cohesive team that desires to become
cohesive.
Best practices mean different things to different people -- leaders and organisations.
Therefore, institutionally agreed and harmonized practices are more relevant than “best”
practices at the integration stage. Who decides what is a best practice, the acquirer or a
consultant?
Institutionalize corporate governance by defining roles for board and management. Install
checks and balances for management and the board. Need for strategies to handle
boardroom squabbles (Dispute Resolution).
Change mindset so the combined interests of the organisation to be created, outweigh the
interests of the individual promoters/shareholders. New organization with independence
and adaptability.
Use a hybrid of corporate and entrepreneurial mindset. Healthy banks need the best of both
skills.
Best practices in leadership tend to incorporate consultation at al levels in decision-making
process.
Businesses are more consumer-oriented and banks must adapt this practice
Outsourcing, but only when it is prudent relative to cost and control.
Emerging or Requested Practice
Definition of the vision/mission of businesses
Identifying strategies to accomplish them
Implementing identified and formulated strategies
Notes:

Executive Leadership
Phase I: Due Diligence of Leadership
1. Corporate Governance Issue: Status of compliance with governance policies.
Current
Practice-based guides to assess hidden messes, average age of staff, educational levels,
dispute-resolution systems, customer complaint, staff disciplinary system, performance
evaluation.
Define the policy positions on each item listed above that will be applicable to the new
organizations: MRM Policy, staff welfare, career planning, performance evaluation, exit
strategy for staff.
Phase II: Leadership During Integration
1. Who is this leader? On the other hand, is he a micro-manager?
2. What are his strengths and weaknesses?
3. What are the basics: emotional intelligence, passion for risk, self-regulating?
4. What kind of leader do we need? What is the model of leadership? Does it include:
alignment with mission, values, core business strategy, focused niche?
5. What is the vision of the merged bank? What is the strategy of the new bank?
6. How do we manage differences (diversity in the emerging entity)? How do we manage
differences in the emerging entity? How do you lead contending forces?
Current
Define corporate vision, mission and values of the entity.
Define organizational structure for the new entity.
Identify leadership competencies required in the new entity: What kind of leadership is
needed? Is it an., extroverted, entrepreneurial leader, visionary leader, participative,
technical competence, or emotional intelligence? Concerning a model (criteria), what are
the variables; self – awareness, self-regulating / control, social skill – managing people,
motivation –self-driven, inner core, empathy? Does it involve a model of leadership for the
emerging bank, highly experienced (apply regulatory policies.) or versatile – have the most

functional experience in at least three major areas of banking, and can tell the bank’s story,
articulate core competence and has experience in the proposed area of focus?
Role of executive in business integration: Define vision and mission, define operational
structure, define new corporate culture, manage acculturation, manage internal
communication, and provide direction for selection criteria of partners.
Helping leadership address cultural clashes
Dealing with employees of perceived weaker institutions
Phase III: Leadership During Business Building
No discussion at workshop.
Notes:

Regulatory
Phase I: Due Diligence of Regulatory and Compliance
1. Should the CBN subsidize the cost of M&A related consultants?
2. How do you deal with unhealthy competition among banks?
3. The role of bank auditors – How do we make them more functional?
4. The external auditors should be more accountable. Whom should we appoint as our
external auditors? What should be the criteria for appointment?
5. What criteria should guide the appointment of an audit committee? What is its process?
6. Review of the audit committee process: Should the CBN hold external auditors more
accountable
7. What can prevent banks from having multiple books of accounts (N & H)? What should be
the date of the financial year-end?
Current
External credit rating agency’s report, for the individual parties, is necessary.
CBN agrees to wave irregularities discovered in financial accounts of banks.
Approve the financial year-end of the new entity and the role of auditors. CBN to do closer
monitoring in terms of their oversight functions online real time reporting
Standardisation of process by the CBN. The appointment and removal of external auditors
with the approval of the CBN (Q, EP, & H)
Get approval of banking products and subsidiary companies by the CBN.
Compliance with post-merger plans as approved by the CBN. There is evidence of
implementation for a post-merger plan as approved by CBN.
CAC wants statutory returns.
Guidelines should include: Number of customers and number of branches, etc.
CBN to set out general guidelines on what to look out for in view of the urgency and the
fact that merger is basically, driven by regulations.
CBN should set up a dedicated help desk manned by skilled personnel to work with banks /
consultants conducting due diligence.
Adequate information required for any proper due diligence.
Guidelines to spell-out issues such as: technical experts, depth of due diligence and issues
to be covered, e.g., cost of engaging experts and the burden of defraying such in its
advancement of regulatory examination reports.
The report of CBN routine examination of banks made available to banks that have signed
MOU’S or confidentiality agreements and ditto for NDIC routine examination reports.

NDIC/ CBN: Rather than a yearly audit, CBN should have inspections every other year,
closer monitoring, online real-time reporting, standardization of processes, and the right
legal processes for qualification of audit committee membership.
Phase II: Regulatory and Compliance During Integration
1. How do banks move from CBN regulations to self-regulation?
2. Overall how will the banks move to self-regulation?
3. What are the mechanics of the proposed asset management company, owned by
government or private sector?
Current
There should be no duplication of functions.
The merged entities should pay the cost of staff to be let go.
CBN will be interested in the integration of the consolidation of the bank’s records.
CBN will need to ensure healthy competition among banks in the post merger phase.
Approved business plan as contained in your scheme documents becomes a benchmark for
business integrations and business building.
CBN to ensure proper corporate governance.
Banks would like to if they can close down any branches as a result of the merger.
Will CBN still continue to interfere with branch network (expansion and rationalization).
Business building will require assistance in business development skills by various experts.
Phase III: Regulatory and Compliance During Business Building for
Growth
1. What are the guidelines on dispute resolution?
Current
Apply an exit strategy for staff that will leave.
How to avoid the stripping of assets.
Corporate governance.
Core values.
Full disclosure- transparency (information must be made available). All information is
gathered and screened to the test of transparency.
Monitoring that involves proper authentication of regulatory documentations.

Inspection that is both inside and outside.
Timeframe for due diligence should be extended to enable all parties to comply with the
relevant statutes.
Compliance Issues: Reviews of SEC, CBN, NSE, CAC (BP).
Guidelines on the resolution of people issues, e.g., severance benefits and exit packages.
Dispute resolution.
SEC should ordinarily clear registration, which provides for detailed background
information on merging parties.
Systems, process and dispute resolution.
Notes:

Stock Exchange Requirements
Phase I: NSE Requirements During Due Diligence
1. Has the merging partner met listing requirements?
2. How to meet SEC and CBN requirements for merger?
Current
Post-listing requirements to date.
List of shareholders holding more than 5% in a merger.
Account submission quarterly.
Inform the Exchange of change in board management.
Inform the Exchange of board meeting.
Inform the AGM and EGM.
NSE wants: listing requirements for floatation.
Compliance with SEC Rules for listed companies.
Register.
Phase II: NSE Requirements During Integration
1. How do you value the shares of unquoted companies that are merging with quoted ones and
how do you ensure that both partners have a fair value?
2. What are the appropriate methods of determining share values for two merging
institutions?
De-listing of one or both companies merging and listing of the emerging company where
applicable.
Consolidation of accounts of the merged companies.
Share pricing as it has to do with the Stock Exchange.
The Stock Exchange provides the platform where the Securities of merged companies is
stated.
Formally, list the stock of the new company.
Seek approval for the new company and get it licensed.
Phase III: NSE Requirements for Business Building for Growth

Documentation
Phase I: Documentation During Due Diligence
Questions to Continuously Consider
List of pending litigations, list of collaterals, software verification, and management.
Accounts of the merging companies, verification and searches (land and properties); get
external consultants to do the verifications and searches, details of tangible properties.
(Assets), certificate of incorporation – pre- merger, articles and memorandum- post-merger; 5-
year financial reports of the merging companies; 2-3 years projection of the companies and
scheme documents.
Certified true copy of court ordered meetings, list of directors and top management of merging
groups list of shareholders, list of staff (staff strength), verification of shareholders fund,
minutes of board meetings, and minutes of management meetings / committees.
Lists of contracts/agreements (audit committees), list of creditors’ obligations, contingencies,
risk assets, portfolios.
List of intellectual properties.
Phase II: Documentation During Integration
FHC Rules
SEC Regulations - Nigerian Stock exchange - CAMA
CBN rules and regulations
Federal Ministry of Commerce & Industries, e.g., registration of Logo’s for new identity.
Due diligence check
Transparency
Accountability: Implementation of corporate governance principles
Harmonization of products
Training and retraining of employees
Technology integration
Manual of operating procedures
Procedure for integrating various units of the organization
Manual of training
Diagram/organizational chart of the organization
Harmonization of operational manual

Management succession plan
Harmonization of succession plan at all levels
Building of the human resource manual
Harmonization of human resource policy
Phase III: Documentation During Business Building for Growth
Notes:

Negotiation and Dispute Management
Phase I: Negotiation and Dispute Management During Due Diligence
1. What are the areas we expect to have disputes?
2. Do we have a structure to address the listed disputes?
3. What do we do about disclosure issues, e.g., wrong valuation?
4. What do we do about dissenting shareholders (SEC position on dissent)?
5. Is there culture compatibility, internally?
6. In the negotiations, what are the things you do not want to let go of: Branches, leadership?
7. In the negotiations what are the things you can compromise: Culture, people, physical
assets, align the financials, decide the IT platform and software, and synchronize
accounting records.
Current
Include arbitration clause in all legal agreements (Mediation), (MADREP)
Systems compatibility for IT and process
Placement of staff and management in the merged organization
There is an emerging trend towards mediation: All disputes can be resolved by mediation.
There is a cultural inhibition to mediation in modern commercial transactions.
Assets/liabilities: Age analysis; near cash
Analysis of positions and people fit
Branch locations determined by market forces
One accounting system
Human capital: External consultants required to determine who should go from the merged
banks after establishing bench mark for skills, character, etc.
Human capital – Skills, performance evaluation, redundancy.
Phase II: Negotiation and Dispute Management During Integration
Questions to Continuously Consider
1. How do you choose a mediator?
2. How to choose the type of mediation: MADREP, Multi-Door, ICC?
3. How do you integrate mediation and dispute resolution?

Current
Insert a clause in the MOU or confidentiality agreement, on how to resolve disputes that
may arise (negotiation-mediation-arbitration-litigation)
Timeframe for any of the tools chosen
Draw up a timetable for dispute resolution
When to choose a mediator: Ahead of or at dispute
Phase III: Negotiation and Dispute Management During Business
Building
1. Should the meditative role of the Ethics & Professional Sub Committee of the Banker’s
Committee be made mandatory?
Current
Define clear conflict resolution procedures/mechanisms
Set up internal conflict resolution team in advance, so it is ready to go when needed
Dispute resolution clauses (ADR) should be inserted in all agreements between the
organisation or third parties, whether formal or informal agreements, offer letter, loan
agreements, account opening, documents, LPO’s, service agreements
Emerging/Requested Practice
There must/should be legal sector/judicial reform
Commercial courts be established nationwide
Establish multi-door courthouses nationwide
Establish specialized courts
Notes:

Capabilities and Core Competencies
Phase I: Capabilities, Core Competencies During Due Diligence
1. Can the gap in skill, knowledge, know-how be easily bridged?
2. What are the types of technology that exist?
3. What knowledge is required to drive the new organization?
4. What type of competitive compensation structure should be in place to attract and retain
best hands in the industry?
Establish goals and objectives for added capacity in IT, skills and rules
Identify gaps – what is vs. what is required
Carry out capacity/resources audit; identify resource persons
Identification and evaluation of current recruitment trends/process, e.g., key capabilities to
be developed by external recruiters, and bank recruitment and training.
Phase II: Capabilities, Core Competencies During Integration
1. How do we learn to always be asking the right question, at the right time?
2. Could the various IT infrastructures co-exist or harmonize?
3. Do the people have required competence?
4. How could the various culture be harmonized or develop a new culture entirely?
5. How do we learn to harmonize coalitions within branches?
Current
Analyzing the strength and weaknesses of the branches
Product harmonization and re-branding
New product development process
Staff-audit to identify areas of need
Re- orientation and training of staff
Effective communication
Harmonizing policies and procedures
Competitive remuneration
Structure for staff retention
Harmonization of IT infrastructures

Capacity development areas to consider: IT skills and technology, HR/ people, branch
development, product development
Formulating integrated strategies and structures
Continuous hands-on training
Phase III: Capabilities, Core Competencies During Business Building
Notes:

Systems and Technology
Phase I: Systems, Technology During Due Diligence
1. How would we assess the effectiveness of the technology system and capabilities?
2. What capabilities do the various systems possess?
Current
Conduct a system review of the merging entities vis-à-vis the objectives and strategies of
each entity
Do an inventory of technology systems for both core and non-core business areas. Appoint
consultants to determine the level of compatibility
Review current legal agreement of the various institutions with vendors
Phase II: Systems, Technology During Integration
1. How long is the transition period between when the merger takes place and when a new
system has been agreed and deployed?
2. How do we best assess capacity of IT infrastructure to serve merged banks?
3. Which one can support operational efficiency?
Current
Acquire middleware that will enable the disparate system to shake hands.
Software – banking application.
Operation system, other applications, networking system.
Hardware-PC brand, server HR capabilities – To drive IT functions
Use HR capabilities to drive IT functions.
How do you bridge gaps: Outsourcing or Lease?
Identify IT gaps

Phase III: Systems, Technology During Business Building for Growth
1. Are there any conflicts that will come up in the merging technologies?
2. Will regulators have an input into the industry?
3. Wide technology in use, e.g., Globus, Flex Cube?
4. Will there be major benefits from outsourcing?
Current
Adjust new technology to accommodate merging systems with minimal stress
Identify ideal post-merger entity desired in order to determine technological system
needed; ensure capabilities meet possible future requirements; keep in mind the possibility
of acquiring new software and starting again.
Evaluate existing capabilities that can be adapted to meet ideal merged entities needs.
Assess existing universal competitor trends.
Identify and remove any form of stress to the integration of systems.
Identify preferred systems/universal.
Assess whether developing systems will meet our objectives, benefits, problems, costs,
implementation, and requirements for utilization.
Human capital is required to drive the “new” post-merger technology system.
Training that is hands on and practice-based.
Number of people (more of less) will change: How do we do it with the least disruption.
Notes:

Valuation
Phase I: Valuation During Due Diligence
1. What methods should be used in valuing the companies?
2. What are the current practice tools: Collect all financial statements of the companies,
understand the internal process of the companies, and verify the financial statements?
Current
Use discounted cash flow method (There is a data gathering constraint)
Net asset basis
Comparable model
Liquidation model
Due diligence: full disclosure, transparency, integration of financials, registration of
process, status of professional advisers/consultants, guided by business norm, use of
consultants to carry out due diligence, consultants must be registered and the registration
must be valid throughout the duration of the process; consultants must be familiar with all
regulatory requirements must also be familiar with the judicial process.
Appoint competent consultant to advice the companies.
Phase II: Valuation During Integration
1. What are the key points for growth?
2. What do we consider feasible?
3. How to attract foreign funding/strategic alliances?
4. How to identify the core business focus of the intending merging partners?
5. What are the best practices identified with the areas of comparative advantages of each?
6. Think out of the box: What will the market need?
7. How do we integrate key business building issues of: Business culture, business model and
business process system?
8. Think of how best to ensure a business strategy?
9. What are the areas of strength of each bank?

Current
From the core business focus, establish the competencies of each comparative advantage
Will the N25 billion focus on the un-served markets (e.g., consumers business) and retail
management and capture at least 2 new Nigerian markets?
Evolution of a distinct culture for merged entity
300 branches to have a presence in each local government in Nigeria
Deposits and total assets
Alternative changes
ROA – achieve
10% ROA in 2 years
Local banks to manage foreign resources of Nigeria
Get foreign banks to buy into the (mega) new banks
Skill acquisition with respect to project finance and structured trade
Consumer findings
Retail finding on population size
Phase III: Valuation During Business Building for Growth
No discussion at the workshop.

Core Values
Phase I: Due Diligence of Core Values
1. What is? Or what should be the core values? Obtain in-house documents of values. Verify
core values – survey, discussions, observations, actual practice, watch out for conflict
situations.
2. Core values are the base from which agreements are crafted. How do we evolve core
agreements as agreed to practices in action from values?
Current
Creative problem solving has to be a core value.
Before integration, parties must agree on core values of enlarged entity during negotiations.
This means that once you join the company, you abide by terms of the relationship, i.e.,
core values and non-compliance sanctions. Watch out for areas of conflicts that will block
integration.
Phase II: Core Values During Integration
1. Which values do we hold as core?
2. Should our core values be subject to change or realignment?
3. Should core values be allowed to evolve or be crafted from onset?
4. How do you deal with dominant culture during integration of equals?
Current
Identify and agree on core values from new vision and mission.
Communicate core values internally to work force.
Define behaviors expected from values, in detail.
Appoint culture champions to jump-start an enterprise wide acculturation process.
Build culture toolkits for individual value assessment to measure culture gaps.
Conduct training and re-orientation on core values and business processes.
Complete staff re-alignment for purposes of retention and or elimination.
Deploy post-integration feedback mechanisms.
Install performance measurement and appraisal system.
Define organizational structure to support overall strategy.
Identify manning levels, jobs description and specific staff skills assessment to identify best
fit.

There are many new things to learn.
Negative reactions and how to deal with them.
Establishment of post-integration feedback mechanisms.
Cultural misfits, culture shock: How do we deal with it?
Articulate policies to address redundancies by using attractive severance benefits, and
entrepreneurial skills training, etc.
Develop HR policies for merged entities: HR manual, recruitment policies, performance
management, career progression.
Phase III: Core Values During Business Building for Growth
1. What will guide the selection of our technology?
2. What is the best practice and professionalism in excellent corporate governance? How do
we actualize professionalism that is proactive, creative and innovative in developing highly
skilled and trained staff?
3. How do we build capacity in the brand new organization for a culture of excellence? What
do we do about technology with bad capability in a performance-driven organization?
4. What values should guide us in: Human resources, society, resources, people, service, and
culture?
Current
Core values: Excellence in human resources, technology, customer service, presence-
national and regional
Need to invest in the training of staff and capacity building must be central to the essence
of the organization
Take banking to the locals with professional banking business, e.g., to combat money
laundering: Issues to agree upon are integrity, core values that will build a lasting growth
organization, and ethical corporate governance; leadership by example that is highly
ethical; compliance that is well defined process and policies for the business, people, and
technology
Notes:

Cultural Alignment
Phase I: Culture Alignment During Due Diligence
1. How to investigate culture from multiple perspectives: Human resources, performance
management, customer relations, core values, products/services management, styles and
effective communication strategy?
2. How do you capture the culture of different organizations?
Current
Carry out surveys with questions that will assess culture.
1. Engage and retain consultants to capture and investigate the individual culture of the
merging entities.
2. Investing in seminars and workshops aimed at imparting the defined culture of the new
entity to the workforce as opposed to current practice of the individual institutions doing it
their own way based on subjective need.
Phase II: Culture Alignment During Integration
Avoid the use of legal names during the post merger period to help staff consciously let go
of their old cultures.
Focus on efficiency of cost.
Conduct one-on-one sessions with key staff.
Conduct a culture audit.
HR Practices: Performance management recruitment, retention policies, appointment of
culture integrators/champions, and communicate, communicate, communicate.
Hold a retreat for key department heads to understand the culture of merging companies.
Conducting a culture audit to understand the practices of merging companies and identify
culture misfits and exit them.
Setting standards for the emerging institutions.

Phase III: Culture Alignment During Business Building for Growth
1. How do we establish a culture of quick and efficient service delivery, customer
satisfaction?
2. How to target goals setting?
3. How to reaffirm champions at all levels?
Conduct continuous staff re-orientation and training of core values and culture policies that
are clearly articulated.
Develop HR policies and operations manuals that include disciplinary measures.
Create a caring environment that encourages healthy competitiveness and recognizes
excellence.
Continually communicate vision, core values mission – through newsletters, weekly info
and staff retreats.
Performance driven compensation packages, competitive salary, 5 top best paying banks,
annual customer survey and feed back, employee surveys.
Notes:

Hidden Messes
Phase I: Due Diligence of Hidden Messes
1. What is the psychology of investors when there is no alternative or loss of confidence of
customers?
2. Is it possible for merging companies to understand each other?
3. Can most psychological problems be identified at the negotiation stage?
4. Breakdown in communications, dialogue around current regulations – ISA & SEC rules,
inconsistencies & confusing regulations and law reform review; ADR mechanism; due
diligence transparency; structural re-alignment; frank discussions amongst parties; business
re-focusing and repositioning of client; being alive to sensitivities of egos, cultures, power
change and position; relationship issues like loss of client confidences; investors interests --
what is the possibility of finding these issues within the time frame.
Phase II: Integration of Hidden Messes
Phase III: Business Building with Hidden Messes
Notes:

Continuous Change Process
Phase I: Due Diligence of the Continuous Change Process
1. Changes required/not required?
2. Is there any past resentment?
3. How to live with past resentments and solve them?
4. Are all members fully in on this?
5. People to let go?
6. Is there any duplication of efforts?
7. Who does each of the past functions?
8. Is the reward system adequate?
9. Are there conflicts in corporate vision/mission?
10. Are there personality conflicts –egocentric problems?
11. Are there issues of culture, IT, people, risks, business development, risk management,
admin/logistics and corporate affairs?
Culture shock and managing it
New things to do and get
Cultural integration
Change processes
System integration
Local environment sensitivities
Collaboration
Phase II: Integration of the Continuous Change Process
Develop strengths and business opportunity profile of the merged entity.
Identify best industry practices for business growth.
Develop core competences based on strategy focus and identified business opportunities.
Do training and re-training.
Do continuous staff development.
Co-ordination of regulatory framework to enhances business growth.
Know the organization’s structural imperatives for business capacity building.
Co-ordination of capacity building service providers in the financial services industry.
Provision for additional terms in the main contract.
Phase III: Business Building with Continuous Change

The Merger Role Play
Three workshop participants sat as a group representing the experience of a real first meeting about
a merger. The three had met at a party and liking each other, decided to meet ASAP. This role-
play is their first meeting.
After the role-play, we extracted answers to these questions for all participants to digest:
1. What would have been your pre-meeting work? Who was in on the discussion: Top
management, beyond the managing director, etc? Consultants engaged?
2. What issues were not discussed that should have been discussed based on what you have
learned from this workshop?
3. What advice does the audience have?
4. What are your next challenges: What would you have done post-meeting?
5. Your top five merger issues to address, in order of most-to-least in importance?
Pre-Meeting Work – What to do Before a First Meeting
“I want to know the shareholder structure; the major decision makers regarding a merger,
especially if one or two people will dominate the process; and who has the authority to take on the
merger process.”
“I would determine if the balance sheets added up equal 25 billion; is there synergy and can I cope
with it; and chemistry among shareholders.”
“I want to know the critical drivers; can we work together; a complete background check on all
management regarding culture and values; come in with some idea of the entity you most want to
be part of – in effect, what do we want it to be?”
Issues Not Discussed in Role Play
Confidentiality.
Come with a win-win mind. The current process must be exclusive with no additional talks
going on.
As a forced merger, I want people I can really think and work with. How do we use an
effective third eye in the process because it is forced and not by our wills?
Use a non-binding agreement with principles and not a MOU – keep the lawyers out of the
discussion for as long as you can. We have to learn to do things right without lawyers.
Disputes are a real part of the process as opportunities to strengthen partnership.

Advice from Audience
What are the ground rules for the process and for meetings?
Too much focus on who should get what, how and when. Avoid bringing up intentions
until we identify specific interests. Get beyond the 25 billion -- too focused on it.
Ensure you have thought through how to get control over your survival.
There was no focus on clients and there must be.
Understand the different customer bases before the first meeting.
Continually brush up on negotiation skills. Or use a MOU, it is a best practice.
Remember all directors have to be on board with no owner left out.
Identify issues we can agree on and who can help us through what muddy water. Leave the
rest for lawyers. We need something to bring to our boards to demonstrate progress.
By June 2005, we must be able to tell a new story about our new bank or a new story will
be told for us.
Next Challenges After the First Meeting
How do I determine competence and trust of others?
Who is going to help me since no one in Nigeria has done this before?
At what points in time do you bring in a consultant?
Collect the financials.
Meet with management to establish more details and identify more banks.
Form a committee based on what has to get done and who is best at what. The committee is
charged with coming up with a statement of interests and a value proposition.
Do a background check.
Identify the conflict points going forward.
Determine the decision-making capacity of the potential partners.
Establish the regulatory road map and where we are at on the map.
Observation from Roundtable International
Six process steps to consider:
1. Determine the strategic alignment and reciprocal synergy you are looking for.
2. Do a scan of the environment and industry in order to identify candidates that fit your
strategic alignment and reciprocal synergy profile.
3. Conduct initial evaluation of candidates fitting your profile
4. If candidates pass initial evaluation, seek your board approval to initiate discussion with
candidate
5. Initiate discussion with candidate following board approval.
6. Conduct a more critical evaluation with primary focus on : synergies, open issues and
prohibitions.

Top Five Issues in order of Importance
From our three role players:
Role Player 1 Role Player 1 Role Player 1
1 Shareholder structure and
governance
25 million Strategy
2 The business focus Synergy of the business Get the financials to 25
billion
3 Make sure 25 billion is not an issue The fate of my people
to be part of the merged
entity
Shareholders, staff and
customers are taken care of
4 Time constraints and ensure process
will last
My customers and the
benefits of a bigger
organization
5 Who gets what: The snake swallows
the frog
Investors protected

Participant Learning Priorities
The topics of the priorities correspond to the elements in the access kit. Each participant wrote
three needs or questions on “post-its” that he or she most want help with going forward. A need
was a skill, practice, or tool. The needs were clustered as 41 groupings then each person had five
priorities to pick among the 41 options.
Formulating and Executing Strategy
Building Synergy 13
We need help on how to manage the change arising from coming together. How to achieve the
optimal synergy? What is the best way to go forward? How do we go about achieving a
successful merger? How do I get banks that will meet my defined criteria, considering time
limitation and a forced merger condition?
Design of Strategy 12
It is clear a merger or acquisition should be for market advantage or cost reduction. What should
be the way forward for a holding company that has market presence in the same location? Needs:
Strategic future possible scenario that positions us for a better market. How does one develop and
adopt a differentiation strategy? How can we create or design a strategy for business growth at the
business-building phase? What do we want to become? How do we get there? How do you
handle post acquisition products integration? How can we harmonize the strategic intent amongst
more than two banks in a takeover or merger? What business model do we want to adopt? How
can I make sure we have the best strategy? Post merger strategy/business model. Most effective
strategy to achieve the picture of the future: high performing, creative, customer-delighting bank.
Post Merger – Return to Shareholders 10
What new opportunities are available that can justify the investment of 25 billion? 25 billion is the
driver of the present merger: What business opportunities will be available to ensure good returns
to shareholders if the 25 billion is successfully achieved?
People as a Strategic fit 5
Strategic change as it effects the human aspect of the organization. How would you deal with
culture shock between the merging parties and eradicate a superiority complex?
Professional/Advisory Consulting Support on Strategy 3
We need help with how to pick professionals/consultants to develop appropriate strategy in an M
& A process. We need to evaluate consultants to use to drive the strategy process of the merger.
We need professional help to get the relevant manpower to facilitate a successful merger process;
prepare a workable strategy; identify a capable leader to pilot the process; assistance of
professional values; CBN/regulators to assist in funding the cost of documentation: How to
identify the core values; how to deploy appropriate technology; and ensure appropriate dispute
resolution. The choice of a consultant that is acceptable to all merging partners.

Leadership Process for Continuous Change
Putting in Place a Code of Conduct for Leadership 21
Need to adopt a proper code of corporate governance. How can we ensure the right blend of
leadership? What checks should be in place to monitor and guide the merger?
Determining Leadership Qualities Required for the Merged Institutions 10
Leadership to be charismatic with integrity: how do we find it? How do we determine who
becomes what in the new organization when the fact is we are all executives in our different
organizations and markets and this is a forced merger? What criteria determine who leads the
merged entity and what drives the change process? What are the right qualities required to lead the
type of merge bank we contemplate? How do I get competent leaders at all levels in the bank’s
structure to take the new entity to the envisioned heights? How can we get agreement on the
leadership style to put in place?
How to Negotiate Your Ideas in the Merger Process 6
Leadership is a strategic core value to the institution, but suppose the other side does not see it that
way. Needs of merger/acquisition are negotiation skills. Power and influence in a merger and
acquisition: How to control it?
Strategy to Retain key Employees 5
As a leader, what strategy could one deploy to ensure that your best employees do not leave in the
process of the merger? As a leader, how to effectively re-orientate the staff to focus on the vision
of the new entity.
Core Values, Agreements and Culture
Define and Harmonize Culture 18
How do we select the most relevant value that will lead to our picture of the future? How do we
marry the different cultures of the merging organizations to come up with a common and
acceptable culture? How do I merge conflicting cultures with four banks to produce and then
evolve one that supports high performance in the new entity? How do I go about the integration
and harmonization of the different cultures of the merging parties? How to mange the need to
merge divergent cultures and core values to become the shared values and culture of the new
entity?
Manage Culture Shock 8
What is the best strategy to address culture shock in post-merger integration? How do you ensure
culture shock is properly addressed? How should cultural integration be done seamlessly?
Culture Assessment 5
How to actually have the true understandings of the prospective parties? How can we conduct a
culture audit for all merging parties to assess the culture gap? How to get to the heart of the matter:
Core values and agreements? How do you assess values when most bank staff has only practical
experience in the banks?

Culture Alignment of Values 5
What will form the core values in the merged entity? How do you mange the diversity in culture
and values? How do we align cultures or creating cultures at the business integration stage?
Aligning core values agreements and culture following post-integration. How do you get common
institutional acceptance of diverse cultures and values? We need help to ensure, at the end of the
merger process, the people and the process are streamlined for greater return to shareholders.
Values – Trust 1
Core Value is trust: Very challenging to fully know deeply enough to say, it is present and
measurable!
Valuation and Financials
Full Disclosure 18
Need for full disclosure by all partners. Determine the true state of affairs of the merging banks in
view of this tendency for creative accounting. I would need help in this regard so that my
organization gets its due worth and also to ensure that the party/entity it wants to merge with or
acquire is actually, worth what it claims it is. How do we ensure that all financials are put within
the same parameters and ensure fair basis of valuation. How can you deal with off balance sheet
transactions, i.e., hidden liabilities?
How to Determine the Share Price 10
How do we set the price for respective shares of the merging banks where they are up to four
banks? What is the equilibration of the shares/values of the merging entities?
How to Determine Strengths 4
Learn to fully understand the valuation/financials to enable me to know the strengths that I am
bringing to the negotiation table.
Method of Valuation 3
What basis or method is best to use? I need negotiation and dispute management to ensure uniform
valuation. I need further explanation on the comparable and liquidation models of company
valuation. Help me understand analysis and valuation of individual assets. How do I determine
the most appropriate valuation method/principle that will give my bank the best position in the
merger? Valuation of the merging outfits net worth. Which is the best method of valuation that
would be effective in about four to five merging parties?
Who should do the Valuation? 4
A mutual, third party should do this.

Regulatory and Documentation
Concessions 9
What monetary concessions will the regulators grant to ensure an effective M&A process?
Regulatory Framework 4
The laws may need review. It takes time to do this right.
Documentation in Process 4
There is a need for the regulating authorities to monitor appropriately and ensure due compliance.
Will the regulatory authorities give waivers in the end in the face of false, but undocumented
identification? Need to know the required documents for an M and A with the SEC.
Criteria for Audit Committee 4
Define criteria for qualification into the audit committee.
Monitoring 4
What is the detailed monitoring procedure for mergers and acquisition?
Regulatory Issues 3
How do we limit the regulations particularly with regard to fees payable so that we do not destroy
the banks before the end of the process? CBN must give guidance on the minimum requirements
of information or areas to be covered at the due diligence stage and contents of an MOU.
Too Much Paper 2
Regulation documentation is just too much.
Disputes and Mediation
Trust 6
There is a need to build trust as part of the alternative-dispute-resolution mechanism amongst
consolidating parties and stakeholders (staff and shareholders). Need a grievance-settling
infrastructure for the integration stage to address dispute emanating from cultural clashes. How do
you handle issues that will arise in management integration?
Mediation 6
If the court of arbitration fails to offer a solution to a dispute, what then is next? We need help in
using mediation in dispute resolution to be effective.
Transformation in Process 3
The present dispute resolution system needs transformation of objectives regarding the policy on
disputes. Need to adopt an efficient flexible quick means/mode of dispute resolution.
Legal and Teamwork 2
We need to evolve an effective dispute resolution process outside the court, e.g., an M&A dispute
tribunal. Need to ensure an effective legal process that unites and supports dispute resolution.

Negotiation System 1
What is the right size and composition of each party’s negotiation team that would allow for
effective negotiation? We need strong and reliable negotiation and dispute management systems.
Non-Disclosure 1
How do we deal with disclosure issues that come up only after the merger?
Timelines 0
This would present an attraction so we know where we want to be included.
Mutual Agreements 0
How can we use bilateral agreements to resolve disputes during and after the merger process? The
parties must know the modalities and mindfulness for the dispute resolution process.
Preventing the Process from Stalling 0
How to resolve differences amicably? How do we resolve issues without stalling? Dispute
resolution tools to ensure the process is not held up, unduly.
Technology, Core Competence and Systems
Technology Platform 9
How do we achieve a seamless system among the various IT platforms? How do we interface our
IT systems and ensure minimum cost utilization in the process? Information technology is highly
technical: We need capability in information technology infrastructure. When we name and verify
technical platforms, we will need to align all the platforms to assume the integrity of financial
records and related reports based on use.
Inventory the Know How of People and Best Practice 4
How to assess the people competence in all companies and deploy them appropriately? How do
we do business integration to bring together the bodies of knowledge and best practices?
Capabilities and core competence: What to do to realize our combined potential?
Accounting Software 3
Getting the right software to make interface of accounting system smooth. There is a need to
integrate the various systems that each bank would bring to the M & A.
Business Process 2
Challenges associated with integrating business process/systems.
Technology Training and Development 1
We need to do M/A implementation of competency development/training. Training is needed on
technology to ensure compatibility of systems of merging companies.
Current Vendors/Contracts 0
How do we deal with existing service/vending agreements with IT consultants if the merger will
entail doing away with each system/agreement?

Hidden Messes or yet to be Categorized
Financial Validation/Disclosure Issues 10
We need a sound M/A consultant to handle all cases of hidden psychological messes. How can we
get at the true and full picture of the bank financials and claims? We need to learn how to align the
workforces of the separate entities to the structure of the merged one. We need to get at true
valuation of the worth of shares in the merged organization. What is the regulatory framework that
will give us full disclosure of all material facts? How can we avoid the use of just any financial
tool, rather than best practice? Need for financial advisors to value the assets of the organization.
Unknown People Related Issues 5
What is likely to facilitate the cultural integration for best performance? Among the merging
partners is a formerly government owned bank with a culture that is completely different from that
of the dominant parties. How do you resolve the people issues? One of the most hidden
psychological messes is compensation for employees that lose out in the M & A arrangement.
Help is needed in handling people or relationship issues. What level of disclosure is appropriate to
all parties? We need to learn how to work with people in multi-ethnic merger/acquisition
situation.
Ownership/Liability Issues 4
How to take care of issues not disclosed at the negotiation stage. Can the director’s be required to
execute personal guarantees (as a liability) of any non-full disclosure items?
Unidentified Fears 5
Hidden messes: What can possibly happen? There is so much uncertainty? What do we do when
we find hidden liabilities after the merger? How do I deal with hidden messes if discovered after
merger process has been concluded? How do we handle them when they eventually manifest?
Legal Regulatory Issue 4
There must be a Legal framework to support CBN amnesty. Need for CBN to have a contingency
plan if more time is evidently required.
Valuation/Financials 2
We need to know how to repackage the bank for merger or acquisition in view of bad financials.
Choice of the Right Consultants 0
How to figure out which consultant is best at: People issues, cultural alignment, shareholder value,
equity of financials, and business growth?

The Truth about Mergers & Acquisitions
Companies have placed their faith in mergers and acquisitions in order to increase revenue, profits
and stock price.
In the United States, 90,180 mergers and acquisitions were announced from 1996 to 2003.
However, most mergers and acquisitions fail, be it in South Africa, The Pacific Rim, Europe or
America.
A few may succeed, but most on the average either destroy or do not add to shareholder value.
Companies share prices fell by between 0.34% and 1% in the ten days after they announce mergers
and acquisitions according to three recent studies in the Strategic Management Journal.
Acquiring firms experience a wealth loss of 10% over five years after the merger completion
according to a study in the Journal of Finance.
Some of the reasons for the failure of banking sector M&A include:
Very few commercial banks have a real competitive advantage outside their home market
against well-managed local banks.
Acquirers usually overestimate the value they can add and the longer time frame and
investment it takes.
Failure to win the game at the execution level.
Failure to understand the longer time frame needed to effect change.
Banks continue to overestimate their real value added and underestimate the timeframe and
difficulty of achieving synergies.
The Roundtable International congratulates CBN for its foresight and fortitude in initiating a
strategic and globally aligned banking sector reform.
Given the challenges and rather bleak prospect of M&A, how can the Nigerian banking sector
hedge its bet relative to the move towards a M& A culture.

Recommendations From the Workshop Consultant Team
1. Mechanisms must be created within which the questions asked and the learning priorities
articulated by the participants in this workshop of “facilitated conversations” can be
addressed and resolved. On a micro level, each bank will use such mechanisms to begin to
articulate, develop, implement and sustain its strategic positioning relative to the current
banking reform articulated by CBN. A bank that approaches a merger or acquisition as a
facilitated process will have a foundational orientation which promises longevity based on
the ability to continually add value and develop an agile response to the changing dynamics
of its environment. On a macro level, these mechanisms will provide the regulatory
authorities with the realistic and outcome-based strategies crucial to the creation of an
effective banking environment.
2. There is an urgent need to develop a comprehensive, widespread, unrelenting and
consistent marketing campaign designed to prevent a “bank run” (a panic response which
occurs when a large number of people rush to take their money out of banks because of
fear, in this case, that the banks will be unable to satisfy the new capitalization
requirement).
3. The regulatory authorities must come to terms with the fact that there will be casualties in
the banking sector. A plan needs to be developed to handle: assets and liabilities of banks
that will collapse and displace workers.
4. When the dust settles, there will be a few mega banks left with a traditional propensity to
focus on “big deals.” The regulatory authorities must ensure that each bank’s portfolio will
be consistent with the nature, scope and depth of the Nigerian economy. Nigeria’s economy
is dominated by micro and small businesses and therefore the banks’ portfolios must be
indicative of this.
5. It is hoped that the mega banks will no longer lose the “big deals’” to foreign financial
institutions. However, the current reality is that Nigerian banks cannot compete with their
Asian, European and American counterparts relative to the interest rates charged for these
“big deals.” Hence the fundamentals affecting interest rate needs to be examined with the
ultimate objective of making Nigerian banks globally competitive relative to interest rates
charged for “mega deals” in Nigeria.
6. The emergence of large, complex banking organizations raises questions about the
adequacy of banking regulations. Jerry Jordan argues that regulatory reform must proceed
from three principles: (1) a level playing field, (2) functional regulation and (3) value-
added supervision. A level playing field means that all types of financial service providers
ought to be subjected to the same regulatory regime and rules. Functional regulation means
that regulation must focus more on functions and less on institutions. Value-added
supervision suggests that regulators should be less concerned about playing “financial
cop,” and more concerned with helping banks work safely and efficiently.

7. Is the current regulatory apparatus now in place adequate to oversee and supervise the
emerging Nigerian banks post M&A? Nigeria’s present system of supervision and
regulation is the product of historical development, past legislation and evolutionary
change. However, the structure of the banking industry emerging due to the current
mandate has been anything but evolutionary. Perhaps a lesson could be learned from the
United States Federal Reserve (led by Chairman Greenspan) that established teams of
examiners and other experts to oversee each of the thirty largest banks in the U.S, with a
senior Federal Reserve official heading up each of these teams.
8. The current consolidation mandate makes Nigerian banks answerable to a host of
regulatory organizations with different structures, compliance requirements, paperwork and
legalities. The process is complex, cumbersome and time consuming. The requirements of
these authorities could be streamlined and automated in order to create an integrated “one-
stop” shop with each regulatory organization’s requirement incorporated in a single process
flow. This does not require the creation of a new organization but rather the consolidation
and systemization of all the regulatory requirements occasioned by M&A.
Need for a Comprehensive Approach: Banking and Business Reform
Together
Resolving corporate sector, financial sector and external debt problems require a comprehensive
and integrated approach.
Since successful companies are necessary if an economy is to have good banks, corporate
restructuring must be linked to bank restructuring, which in turn must be linked to settlement of
external debt problems.
The costs to government of bank recapitalization are high. Financing these costs is likely to
increase government borrowing, thus increasing interest rates and further slow the recovery of the
corporate sector.

(Continued from front)
Mergers and Acquisitions: The business impact of a merger or acquisition is a critical
consideration in any kind of M&A decision. Our M&A practice goes beyond the preliminary due
diligence to include: a long term process of increasing profitability, cultural integration, process
integration of the merged entities and business building for growth.
SME’S – Small and Medium Enterprises: constitute a critical economic engine for building a
local economy. Our SME services focus on establishing enabling local SME policies and the
development and growth of businesses that contribute to local wealth creation and community
empowerment.
Technology: Our information technology mining, delivery, evaluation, process mapping practice
allows our clients to integrate disparate systems and lead the industry.
For more information on our approach, clients and our management team visit our website or send in
your correspondence to:
Robert J. Leaver, Chairman
The Roundtable International, Inc.
56 Pine Street, 2B
Providence, RI 02903
USA
tel: 401.274.5069
fax: 401.351.7158
www.Roundtableint.com
mail@roundtableint.com
The Roundtable International, Inc
“Developing World Class Performance in People,
Teams, Communities and Organizations”
56 Pine Street • Providence RI 02903• USA • tel: 401.274.5069 fax: 401.351.7110•

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