Case Study on Finansbank Essays

Case Study on Finansbank Essays Case Study on Finansbank Essay Case Study on Finansbank Essay Finansbank 2006 Case Study â€Å"It gives us great pride that Finansbank, with its unique approach to banking, is recognized by an international bank and as a demonstration of this faith the executive management team of Finansbank is requested to continue in their current positions. Our new partner will further expand the scope of our stakeholders and customers, especially with its strong presence in the Southeastern European region. † – Husnu Ozyegin It gives us great pride that Finansbank, with its unique approach to banking, is recognized by an international bank and as a demonstration of this faith the executive management team of Finansbank is requested to continue in their current positions. Our new partner will further expand the scope of our stakeholders and customers, especially with its strong presence in the Southeastern European region. † – Husnu Ozyegin Executive Summery During almost 19 years of its history Finansbank earned an image of successful and unique bank in Turkey and across its boarders. Founder and owner of the bank Husnu Ozyegin is now faced with the crucial decision that will influence operations of the bank for the years to come. In 2005 he decided to consult with Morgan Stanley to evaluate bank for possible sale. National Bank of Greece (NBG) has the highest of three available offers. Now Ozyegin needs to decided whether he will accept this offer or not, and what impact it will have on all of the stakeholders involved. This is what we will try to investigate in this paper. Fact Sheet Purpose| Amount| FIBAs entire ownership stake in Finansbank|   | $ 2. 74 billion| For 46% of the ordinary shares of the bank| $ 2. 323 billion|   | Groups 100% stake in the founders shares of the bank| $ 451 million|   | Buying back international subsidiaries |   | $ 580 million| Summary of the NBG Offer * Turkish law required NBG to offer all minority shareholders an equivalent price per share ($5. 32/share) for their common share in a tender offer. * Branding remains the same, and the international operations will rebrand * Ozyegin would have to agree to a non-compete clause of three years starting from the date of the closing. Ozyegin is asked to stay on as Chairman for at least two years and is given a right to appoint at least two others to the ten-person board, after deal is completed. Valuation of the FInansbank and its international subsidiaries Deutsche Bank Group, NBG, YF Securities and others, results are below: Agency| Estimated Value| Deutsche Bank Group| $ 5. 467 billion| NBG | $ 5. 937 billion| YF Securities | $ 5. 702 billion| Figure 2. Valuation Results Figure 2. Valuation Results The Problem The problem that Ozyegin is facing now is to decide what the future of the bank should be. Why there is a need to sell the bank at all? Whether accepting the NGB offer is a good option? What will be impact on the stakeholders involved? Analysis In order to decide on the future of the company, this is a good point to analyze first the past experience of the bank, to look what drives its growth and success. Below are factors that helped to survive financial crisis in Turkey and to expand client database, without cutting any single job. Success factors * Cooperation of founders of the Finansbank, Ozyegin and Aras, was one of the thing that made it possible to implement all the innovative strategies that Finansbank had. Bank was primarily focused on the financial sector, it was like â€Å"banker’s bank† * It has innovative management style, focused on teams cooperation * Bank also invested heavily in the professional and personal development of its employees. So what had made Ozyegin decide to value the business and consider selling it to the foreign investor? Reasons to sell * Finansbank will benefit econo mically by diversification of risk capital after becoming a part of well diversified international financial system * It will give Finansbank opportunity to share experience and best practices with the other financial institution. It will give both banks opportunity to combine their major strengths in different financial products. * New players on the market, meaning more and more Turkish banks are acquired by international financial institutions Valuation Analyzing valuations done for this deal we can point out few things. First of all it seems to be crucial to analyze how NBG, potential buyer, valuated Finasbank. * Method used for valuation was based on approach to discount future profits from cash flows available. And based on the capital adequacy ratio it is in the range of 10% of cash. Projections for the cash flows were done in USD and were divided into three parts: * First 5 years estimates were derived from an income/cost analysis and capital investment levels * Next 20 year s were based on the assumption that the Turkish market is pursuing a path of gradual maturity and its features are converging with those of developed market * Afterwards it was assumed that constant growth rate will be dominant Valuation done by the NBG seems to be reasonable and price offered is also a good one, assuming only the information available in the specific case. So what about international subsidiaries? From the point about Turkish market future development expectations, and also taking into consideration the fact that NBG wanted to expand its business in the Turkey market, it is not surprising that NBG wanted to sell international subsidiaries back. And from the Ozyegin point of view, price offered was good deal, and it was not confusing with other issues of the agreement. And it gives him opportunity to continue developing of the company in the new markets. Corporate Governance Last point in the analysis should be evaluating structural consequences of the deal. Here we can once again point out the trust of NBG in the local management. The trust we see in the offer to Ozyegin and Aras to stay in the company and to continue being a big part of the running the business. But it is not only top management that is effective by the deal; we need not forget minority shareholders. And there are two options for them after deal is closed: * First scenario is that NBG is successful in obtaining majority of the share, either from buying additional 4. 01% of shares, or from purchasing reaming stake of Ozyegin 9. 68%. In this case nothing would really change for them much. They would still have to go to the court in case they want to object decisions made by NBG. * Second scenario is more favorable for them. In case NBG fails to obtain controlling stake of shares, minority shareholders can have more influence on the company. They can make decisions in case they are able to unite. Recommendation After all said above it is logical to recommend to Ozyegin to accept the offer. IN the fast changing environment, it is crucial to be able to adjust. And the opportunity that is offered by NBG seems to be beneficial for all related stakeholders.