Abstract
In 1993, Chemical Bank and Hanover Corporation concluded a merging process. The new larger banking company was better-positioned to compete with other major players in the market. Michael Hegarty, the head of the Retail Bank Division of Chemical Banking Corporation, wanted to transform the bank into a market-focused organization that would be the financial service provider of choice to targeted customer groups.
This strategy needs major investments to understand customer needs and to identify attractive customer segments. The bank also had to develop and tailor new products to meet customer needs in the targeted segments. For the new larger banking it was a dramatic and extensive strategic change.
Michael Hegarty's biggest problem was communicating and reinforcing the strategy. The balanced scorecard was introduced to define strategic priorities and provide a structure to link strategy, budgeting and results. In other words, the balanced scorecard is one of a set of tools used for strategy formulation and communication. Hegarty's expectations from the scorecard were to give them measures to stay focused on performance, while enabling to clarify and communicate vision, and focus energies for change.
Before analyzing the merger between Chemical Bank and Hanover Corporation, we start by presenting the context in the 90's. Then, we analyze the implementation of the Balanced Scorecard, and the impact of the merger. Finally, in order to compare the merger of Chemical bank with Manufactures Hanover Corporation we treat the merger of two French banks.
Our study is based on this following problematic:
How can we develop a more relevant BCS and improve the running of the company?
External Context
In order to introduce Chemical Bank in its environment, and identify the causal links and drivers playing in the BSC, we are going to centralize and choose indicators of the external environment which are not analyzed in the BSC
To analyze the environment of Chemical Bank, it is important to situate it in time, and to discuss the main themes of the era, including the political and economical aspect.
The 90s in the USA registered the end of the recession, and the beginning of the longest growth of the US economy.
Major events of the 90s:
-The collapse of the USSR
-The war in Kuwait
-The war in Yugoslavia
-The war in Rwanda
We also witnessed the birth of the Internet, and new telecommunications networks (improving the ATM). The management software was deployed in enterprises. More generally, the 90s were discovering the beginnings of a computerized society, where information needed to circulate faster. This was the case of Chemical Bank: ATM, BSC...
Personal incomes doubled from the recession in 1990, and there was higher productivity overall. The North American Free Trade Agreement (NAFTA), which phased out trade barriers between the United States, Mexico and Canada, was signed into law in 1994.
The following graph illustrates the main waves which took place since 1898.
Competition:
The competition was very intense in the 90's when we witnessed the fourth wave of mergers. After the acquisition of Manufacturers Hanover Corporation in 1991, Chemical Bank became the second biggest bank in the US, behind Citycorp, which was the main competitor of Chemical Bank.
We emphasize five keys to success in an M&A. Two are focused on activities which directly impact the financial performance – the hard keys; and three issues relate to people aspects – the soft keys. We focused on the correlation between the pre-deal and the success of an M&A in order to know if those keys were taken into consideration in this case.
