Why do you think bank of america''s and mbna''s cultures

Assignment Help Case Study
Reference no: EM133010440 , Length: word count:2400

Case study - MERGERS DON'T ALWAYS LEAD TO CULTURE CLASHES

A lot of mergers lead to culture clashes and, ultimately. failure. So. in 2005. when banking giant Bank of America (BOA) announced Its US$35 billion acquisition of credit-card giant MBNA, many thought that in a few years this merger would loin the heap of those done in by cultural differences.

MBNA's culture was characterised by a free•heeling, entrepreneurial spirit that was also quite secretive. MBNA employees also were accustomed to the high life. Their corporate headquarters in Wilmington. Delaware. could be described as lavish, and employees throughout the company enjoyed high salaries and generous perks-from the private golf course at its headquarters to its fleet of corporate jets and private yachts.

Bank of America, in contrast. grew by thrift. It was a km-cost, no-nonsense operation. Unlike MBNA, it believed that size and smarts were more important than speed_ It was an acquisition machine that some likened to Star Trek's relentless Borg collective. In short the cultures in the two companies were very, very different Although these cultural differences seemed a recipe for disaster, it appears, judging from the reactions of BOA and MBNA employees. that the merger has worked. How can this be?

BOA had the foresight to know which MBNA practices to attempt to change and which to keep in place. Especially critical was BOA's appreciation of and respect for MBNA's culture. 'On Day 1,1 was directed that this was not like the ones you are used to; said Clifford Skelton, who had helped manage BOA's acquisition of FleetBoston Financial before moving on to MBNA.

To try to manage the cultural transition, executives of both companies began by comparing thousands of practices covenng everything from hiring to call centre operations In many cases, BOA chose to keep MBNA's cultural practices in place. In other cases. BOA did impose its will on MBNA. For example, because MBNA's pay rates were well above market, many MBNA managers were forced to swallow a steep pay cut. Sorra. MBNA employees left. but most remained. In other cases, the cultures co-adapted. For example, MBNA's dress code was much more formal than BOA's business-casual approach. In the end, a hybrid code was adopted, where business suits were expected in the credit-card division's corporate offices and in front of clients, but business casual was the norm otherwise.

While most believe the merger has been successful. there are tensions. Some BOA managers see MBNA managers as arrogant and autocratic. Some MBNA managers see their BOA counterparts as bureaucratic. Of course, BOA made another, more recent and much larger acquisition: Merrill Lynch. After a rough start, most evidence suggests this mega-merger saved Merrill from bankruptcy and appears to be working well, including January-March 2013 earnings gains that put it among the top three Investment banks. according to a recent study. BOA may have found the secret to successful mega-mergers.

Question 1. Why do you think Bank of America's and MBNA's cultures appeared to mesh, rather than clash?

Question 2. Do you think culture is important to the success of a merger/acquisition? Why or why not?

Question 3. How much Of the smooth transition, if any, do you think comes from both companies glossing over real differences in an effort to make the merger work?

Reference no: EM133010440

Questions Cloud

Which is consistent with this trade credit : Which is consistent with this trade credit? Don Baker, Inc., is a precision tool manufacturer. The company recently began selling its tools to customers outside
Which is not true regarding bonds : When calculating free cash flows, which of the statements is NOT true regarding the depreciation? Which is NOT true regarding bonds?
Compute what is the average inventory held during the year : What is the average inventory held during the year including safety stock if the store insists on a 6 days safety stock (assume 365 days a year)?
What is the adjusting entry on december for swifty cruises : Swifty Cruises purchased a five-year insurance policy. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2020 is?
Why do you think bank of america''s and mbna''s cultures : Why do you think Bank of America's and MBNA's cultures appeared to mesh, rather than clash - Do you think culture is important to the success of a merger
How much willing to pay for share of stock for kensey inc : Kensey, Inc. will pay an annual dividend of 1.85 next year. How much are you willing to pay for one share of this stock if you require a 14 percent return?
What would be the intrinsic value of the stock : The industry average P/E ratio is 15.87. What would be the intrinsic value of the stock and is the stock overpriced or underpriced in the market right now
What is project free cash flows for years zero through five : What is this project's Free Cash Flows (FCF) for years 0 through 5? Automaton, Incorporated (Automaton) is a small, U.S. publicly-traded software company.
MGF3681 International management Assignment : MGF3681 International management Assignment Help and Solution, Monash University - Assessment Writing Service

Reviews

Write a Review

Case Study Questions & Answers

  From the scenario, prioritize the attributes of golds reling

From the scenario, prioritize the attributes of Golds Reling's brand from the brand map presented in the scenario according to the attributes that you believe would be most important to the new tablet's target market. Provide support for your respons..

  Discuss critically infosys current and future strategy

Discuss critically Infosys current and future strategy. What advice would you give Kris Gopalakrishnan and KShop has resulted in information overload among staff. What operational measures would you suggest to overcome such challenges?

  Review tarmac business case for diversity

Review Tarmac's Business Case for Diversity and the Learning Resources. Think about Tarmac's approach to managing diversity and how it relates to organisational behaviour concepts and human resource processes.

  Enron case shared activity

Enron was the first nationwide natural gas pipeline network in the United States. As the company grew, executives shifted the company's primary focus from energy delivery and infrastructure to investing in the stock market.

  Ebay inc internet success or fairy tale

Read the case study "eBay Inc.: Internet Success or Fairy Tale? "and answer the question below,   Use the 2002 financial statement data to replicate the Meyer's report calculations that illustrate the conclusion based on the 2001 data reached in the ..

  Mintendo game girl case study

Which option delivers the maximum profit for the supply chain: Sandra's plan, Bill's plan, or no promotion plan at all? How does the answer change if a discount of $10 must be given to reach the same level of impact that the $5 discount received?

  Splash soft drinks case study

Splash Soft Drinks Inc. (SSD) has recently achieved sales that exceeded its expectations after it introduced a new beverage that was greatly welcomed by their customers. The company is currently considering opening a new plant to which some of the pr..

  Details of the task using tesco plc

Details of the task Using Tesco plc (www.tesco.com) as a case study, prepare a report of no more than 2,500 words that:

  What are the common manifestations of alcoholic cirrhosis

What are the common manifestations of alcoholic cirrhosis? Which of these are secondary to hepatocellular failure? Which are secondary to portal hypertension?

  Judge the extent to which the marketing plan at just us

From the case study, judge the extent to which the marketing plan at Just Us! is outdated. Propose two (2) ways that Just Us! could improve the customer experience and thus sustain future growth.

  Read natasha kingery case and answer the questions

Read the DATA CASE on pages 126-127 about Natasha Kingery who is considering furthering her education and is seeking financial advice. Determine the interest rate she is currently earning on her inheritance by going to Yahoo!

  Identify the relevant facts of the case study

Imagine you are the financial controller of XYZ Ltd a corporation that is a very large donor to HOHO. You have recently become aware that its TV advertising has resulted in the charity violating the 25% expenditure ratio for its charity drive.    Id..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd