Case #18 Cibc – Barclays: Should Their Caribbean Operations Be Merged?

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Submitted By avril1990
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CASE #18 CIBC – Barclays: Should their Caribbean Operations be merged? Recommendation:
CIBC and Barclays should proceed with a merger of their retail, corporate and offshore banking operations in the Caribbean because of :
1. The need for economies of scale and scope.
2. The need to be more competitive in the light-globalization in the overall industry.

Rationale:

If CIBC and Barclays decide to merge their operations the new merged entity would be able to serve a more diverse region in the Caribbean. For example some areas currently served by CIBC are not served by Barclays, and vice versa. The merger would give both the companies an opportunity to increase their scope and access to more countries, since currently CIBC only serves 8 Caribbean countries where as Barclay’s serves 14 countries but together they could cover most of the Caribbean. CIBC has the newest technology in the region but the full efficiencies cannot be realized at the current market size. The existing ICBS system could be fully used with lower marginal cost through the merger. On the other hand Barclay’ BRAINS system which is currently outdated could be replaced with CIBC’s modern banking system at much lower costs.

Although some would argue that merger has some disadvantages such as potential reduced employee morale due to layoffs/restructuring, and reduced customer satisfaction as a result of the reduction in employee moral or that the merger is costly to integrate the operations, including management resources. We can’t ignore the fact the merger also creates great synergy as both these companies have complementary strengths for example CIBC has strong brand image, excellent relationships with governments and important business players where as Barclay has strong customer relationships. CIBC specializes in retail, small business and merchant service where as Barclay specializes…...

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