Dogus Group: Weighing Partners for Garanti Bank Merger and Acquisition Harvard Case Solution & Analysis

 Dogus Group: Weighing Partners for Garanti Bank  Merger and Acquisition Case Solution

Turkey banking Industry:    

Turkey was founded in 1932, its population is approximately 72 million citizens,of which 99.8% are Muslims and the remaining 0.2% are Christians and Jews. Turkey isa member of IMF, NATO, OECD, OIC, OSCE and in 1999, the country decided to join EU, the main reason of joining the EU is to boost the Turkish economy and to payoff all its debt to IMF, but there are chances that Turkish economy may go down because of the opposition from Europe.In 2002, the Turkish currency depreciated by 40% and the economy went into as ever recession. The GDP of the country was also expected to go down by 5%.Thus in 2005, in order to support the Turkish economic and financial stabilized programs, the IMF (international monetary fund) approved $10 billion in fresh financing. Along with this,the country introduced new economic policies to establish a free market economy, so that competition could increase to boost the efficiency of the financial system. During this period, the banking industry of Turkey was going down;thus,the country permitted new entrants to come into its banking industry. Turkey’s banking sector saw a number of mergers and acquisitions (M&A) in order to provide the loan to many industries that helped increase the GDP of the country and enhanced the economy of Turkey.

Garanti Bank:

Garanti Bank was established in 1946, it was the second largest private bank in Turkey with US$104.1 billion in revenue as of 31 march 2013. It is a deposit-taking bank that serves in the Turkish market, it is acquired by Dogus. Along with this, the company operates two subsidiary banks, Garanti is a combined financial services group because it is operating in every segment of the banking sector, such as SME, corporate, commercial, retail, private, insurance, leasing, assets management, and investment banking.In early 2000s, the bank enhanced its business by launching online banking, Acik credit card and within few years, 10% of the bank’s transaction processed online.Moreover,it was Turkey’s leading bank in trade financing, foreign currency loan, cash management, commercial loan, and online banking. Moreover in 2005, the bank boasted a leading franchise in both retail customers banking and business banking. The bank’s 64% of loan were collateralize, which meantthat default risk for it was low.

Dogus Group:

Dogus Group was established in 1951;in order to expand its business, the company acquired Garanti Bank and entered the automotive import and distribution business. The group was a corporate leader in the region, it operated in financial services, real estate, energy, and entertainment sector. In addition, the group is sustaining its growth with new investments in the areas of technology, sport, entertainment, hotel, and food. In 2005, the Group controlled 108 companies under six major business lines. The group is serving customers in more than 30 countries. Dogus Group is one of the top three private sector companies operating in Turkey and more than half of the group’s revenue comes from banking and financial services.However in 2001, the Turkish economy was facing a difficult period at that time.The group decided to focus on two or three business sectors and as the competition increased, most of the foreign companies started to coming into Turkey. These foreign companies gave loan to Turkish people at a higher rate and got higher return.

Problem statement:

In 2001, Turkish economy was suffering and the currency of the country depreciated by 4%. It was also expected that GDP of the country would go down by 5%. During this period, most of the foreign companies started coming to Turkey in order to conduct business and enhance their profitability by capturing the Turkish economy. As the banking industry started playing a main role in development of the country, most of the banks decided to merge with the other banks.This enhanced the performance of the banks, such as it minimized the cost, increased profit, and increased market share by creating synergies.................

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