April 1, 2019, is a date that will secure the merger of Access and Diamond banks a notable place in the annals of Africa and Nigeria’s banking industry. These banks are expected to start operating as a single entity that day.
No doubt this merger will spur a new culture, as an entirely new brand will emerge. But there are mixed feelings on what shape the merger will take. Will there be an umbrella name that captures a little bit of both banks for this new brand? These two banks have said “No.” They have adopted the ‘Backing the Stronger Horse’ rebranding strategy. Diamond Bank will take the personality of Access Bank. The latter’s name will prevail even though both banks have truly great names but varying brand equity.
Mr. Herbert Wigwe, managing director of Access Bank, and his Diamond Bank counterpart, Mr. Uzoma Dozie, disclosed this recently in a joint statement to customers.
“The resulting entity, which will maintain the brand name Access Bank, but with Diamond Bank colours, will have more than 29 million customers, 13 million of which are mobile customers.
“We are delighted that shareholders of both companies supported the merger. It is a testament to what we have said before: together we are stronger and can offer more opportunities for our employees, more products and services for you, our customers, and more benefits for all our stakeholders.
“This approval puts us a step closer to becoming bigger, better and stronger Access Bank, one of Africa’s largest banks by number of customers,” the statement further explained.
Mergers are complex transitions which focus on aligning equity, shifting perceptions and migrating customers from one brand to another. They require surgical precision and exceptional attention to detail, particularly as regards branding the merged entity, revisiting customer touch-points and refining the experience for everyone that connects with the brand.
Access Bank is not new to mergers and acquisitions. In 2012, after over a year of fusion transaction, it successfully took possession of the defunct Intercontinental Bank Plc. Though the merging resulted in layoffs that was a devastating experience for over 1,000 staff of Intercontinental Bank, as alleged by reports, the bank emerged stronger and bigger after the acquisition.
With the new merger, Access and Diamond banks hope to leverage on their distinct potential to build a stronger bank. Wigwe said both banks have complementary operations and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, could accelerate Access’ strategy as a significant corporate and retail bank in Nigeria and a pan-African financial services champion.
The merger, the banks hope, will create Africa’s largest retail bank.
It is important to note that, upon completion of the merger, Diamond Bank would be absorbed into Access Bank and it would cease to exist under Nigerian law. The current listing of Diamond Bank’s shares on the Nigerian Stock Exchange and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will be cancelled, upon the merger becoming effective.
As the term implies, the ‘backing the stronger horse’ strategy for company mergers involves elevating one better-known brand over the other. Generally, this occurs when one of the companies in the merger has better equity, potential or a stronger customer base. In most cases, the stronger horse merger or acquisition will elevate the company responsible for purchasing the other brand to the top of the branding manifesto.
Nonetheless, the ‘backing the stronger horse’ rebranding decision has its propects and constraints. Perhaps most notably, it sends a strong message that the merger has a winner and a loser. Deciding to eliminate Diamond Bank over Access Bank can convey the message that the former was the loser, which risks alienating customers that were loyal to the bank that was eliminated. Furthermore, although the strategy is relatively straightforward to execute, the equity of Diamond Bank will be difficult to write off completely, particularly because its asset is what made the acquisition so attractive in the first place.
The appeal of this approach is its relative simplicity: the merged entity has basically adopted Access Bank’s name. After the transaction, the acquiring company, Access, will take charge.
In addition to simplicity and expediency, the ‘backing the stronger horse’ strategy has other potential advantages. The retained employees of Diamond Bank may also view the merger as an enhancer of their career opportunities, while the customers might perceive certain advantages of dealing with a larger bank. Market watchers have avowed that Diamond Bank’s merger with Access will create one of Africa’s undisputed leaders in the banking industry.
But there is also a likelihood that the merger strategy may severely damage the morale of Diamond Bank’s employees, who must not only adjust to the disappearance of their firm but also adapt to Access Bank’s corporate culture. Not surprisingly, such workers typically report that they feel less valued and more vulnerable after the merger. And customers are also affected. A recent national study revealed that half of all mergers still generate significant dissatisfaction from customers even two years after the transaction. Because customers of the acquired company never voluntarily chose to switch, they often experience a perceived loss of control and fear that they will have no voice in the new company. They might also worry that their history and relationship with their former company will be appreciated.
However, both banks’ managing directors have disclosed that a team of brand experts has been working to create a fusion of both banks, adding that the new brand would reflect both banks’ shared purpose to help people achieve their dreams and, in doing so, for Africa to take its place on the world stage.
Wigwe and Dozie noted that the whole merger process was expected to be completed in the first half of 2019.
If effectively handled, a corporate re-branding will undoubtedly play a critical role in communicating strategic intent and ensuring that a productive relationship is maintained and enhanced with the three constituencies: employees, customers and the investment community (shareholders, investors and analysts).