Merger and acquisition strategy are very important to maximize the benefit out of a merger deal. Since Hong Leong Bank Berhad had the experience of merging with another bank previously, this merging process with EON cap is not hard for them. Hong Leong Bank Berhad just needs to follow the golden rules through the market survey and analysis of the target company, which is EON cap. The market position is required to be examined so that Hong Leong Bank Berhad can negotiate with EON cap with the right price. The both companies has almost the same product as banking services, these increase the growth potential of the companies. The workplace environment and culture of the target company is under consider for ensure that no potential problem occur especially laborers of the target company.
The two major shareholders of EON Capital Berhad were started negotiation the sale of their stake with Hong Leong's banking group after they deceived the green light from Bank Negara. They are analysts had believed both of the major shareholders would be the main factor of this acquisition. And his merger and acquisition may turn to be a win-win situation for both companies if they can hammer out an agreeable price.
Hong Leong Bank Berhad making this potential acquisition for expansion of the internal growth. That is more quick with acquire another company for internal expansion. This is a horizontal merge since both companies are the same business line, used to be competitors as well. The horizontal integration increase the Hong Leong Bank Berhad's market share and market power. These two companies merge to one have a better operating synergy and financial synergy as well, helps generates more profitable than individual and more competitive in the banking industry in Malaysia. Possibility lowers the cost of capital of the companies too.
B) PE ratio of Hong Leong Bank- 9.27/0.682=13.592
The Best price to deal for the transaction
13.592 = P/0.492
P=13.592*0.492
P=6.687
The two major shareholders of EON cap, Singaporean businessman Rin Kei Mei and Sarawak millionaire Tiong family had issued a statement that they denied to selling their share at RM8.20 per share to Hong Leong Bank as speculated by a stock analyst. Rin Kei Mei owns 15.4% of the share under name Kualapura and Lintang Emas, and Tiong family own 16.3% under RH development Corp. "Although they denied of the report, they are willing to sell their share if the price is relatively enticing." said OSK.
EON cap's share price is RM6.96 end to 6 December while Hong Leong Bank Berhad share price is fell to RM9.27 per share.
C) Whenever a merger complete, there is impact for the both companies, especially adverse impact on the employees or workers. A well known fact, there are bounds to be lays off whenever a merger or an acquisition. Since the companies form into one, they needs less labor power in the management or product line in the same tasks, for the efficient business wise. So, the company will require less man power and the company would attempt to downsize the labor force. Therefore, those employees who not played important role in the companies maybe affected and facing the problem of fired under the new set up of the company. These workers need to face to re employment or have to satisfy with lesser pay compare with previous company. Employees have to compromise with these. Come to the working culture, there might different culture among two companies, this affect to their working performance or emotion and job satisfaction. The employees from two companies maybe cannot corporate well when doing task with different process or management. Under the new set up of company, there might be some implementation of new strategy and policies, that might affected too. They have to waste time to make it right of working experience and culture, and this might bring bad performance on job, which leads to low job satisfaction.
D) There are a lot pros and cons for the finance industry in Malaysia if the deal is done. Hong Leong Bank Berhad merge with EON cap will create the Malaysia's forth largest bank, behind the Maybank, CIMB, Public Bank Sdn. Bhd. The finance industry in Malaysia will become more competitive in the market since the merger or acquisition has made Hong Leong Bank stronger to stand the fight in market. Customer will like to see that competitive in the market because it leads to a better quality of service and better product offer by bank, so it does bring benefits to the Malaysia banking industry. Since the two bank merged, the customers of the bank can share the service such as ATM machine or bank outlet. This merger generating cost efficiency through the implementation of economies of scale. Hong Leong Bank Berhad through this merging process both companies also leads to tax gain and even an enhancement of revenue. It do affect to the economy in Malaysia when these two companies are playing significant role in the banking industry. It does lead cons to the Malaysia's banking industry too. The company will lose focuses since they are different mission and vision at the first place. When the companies' size is getting larger, it's easy to leads to monopoly the market, and operational efficiency is not high to the company itself.
E) "EON Bank can stand alone with or without merger or acquisition offer". Says group Chief Executive Officer Michael Lor. He also said that they are in a strong position to grow whether there is an offer or not. And he think that Hong Leong Bank Berhad was underestimated the value of EON cap, since those growth analysis of the year. I agree with Lor said because the EON bank group is growing steadily last 12 months as a result of its transformation program, promotions and marketing strategy. But, it will greater if the merger of these two main commercial banks in the Malaysia to be done.
