April 24, 2007

Will the Barclays - ABN Amro deal be successful?

British bank Barclays is buying ABN Amro for 67 billion euros (see more details here). It is said to be the largest financial merger ever. Barclays / ABN Amro plan to cut around 23,000 jobs. That is roughly one in ten jobs. They hope to achieve 3.5 billion euros of cost savings and additional revenue by 2010, largely from axing or migrating 23,600 jobs (see here). The bank will be the world's fifth-largest bank. Many people wonder: will this take-over (or 'merger' if you find that term more appropriate) be successful? Will the new bank be able to realize lasting improvement of its financial situation and the improvement of its share price? Often, mergers and takeovers turn out less succesfull than expected. But they don't always fail. What causes them to succeed? Wayne Cascio is one of the researchers who studied this systematically and longitudinally and found some interesting answers. Here is a review I wrote of his book Responsible restructuring. Rereading it, I am not too confident about this restructuring. Will there be enough structural improvement of the organization? Are costs of the downsizing being accounted for realistically? And most importantly, from which mindset is the downsizing done? How will it affect loyalty and commitment of personnel?

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