Leaving The Tarmac: Buying A Bank In Africa

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Augustine Isioma Iwelu

Leaving the tarmac; buying a bank in Africa by Aigboje Aig Imoukhuede is a story in risk taking, enterprenuerialship, genuine business partnership, strategic international alliance and passion for a professional career in banking.
The book highlighted the issues encountered during the bank’s mergers and acquisitions processes in Nigeria and some of the banks acquisition in Africa. It also situated the growth of Access Bank in the complex process of growth and strategies to manage each challenge as they occur.
Written in simple language, explains the dynamics of Access Bank growth under his watch as the Group Managing Director.
The seventeen-chapter book touched on major regulatory policies and development in Nigerian financial market.

In the beginning.
Armed with a Law degree from University of Benin and after a year stint at Continental Merchant Bank as a legal officer, which he started in 1988, Aigboje Aig Imoukhuede moved to Prime Merchant Bank.
Some professionals who were at Continental Merchant Bank left to set up Prime Merchant bank. He was called upon to join the bank.
Aigboje was Inspired by the zeal and success story of Otunba Subomi Balogun who is the first Nigerian to promote a bank without government or foreign support.

Subomi Balogun, in 1979, applied for a merchant banking license to establish First City Merchant Bank. Otunba Balogun on his part was inspired by the pedigree and entrepreneurial drive of London based investment banker , Sir Siegmund George Warburg, who co-founded S.G. Warburg, he visited Warburg in London prior to establishing his merchant bank. Sir Warburg passed in Oct 1982 while Otumba moved on with the operations of his new bank in 1983.
Balogun started a new model of owner managed bank in contrast to the government owned banks at the time.

In the book, Aig equally appreciated the career trajectory of Jim Ovia, Fola Adeola, Atedo Peterside and Keem Belo Osagie.
As he was nursing the idea of acquiring a bank in year 2000, he needed a partner and he found one in Herbert Wigwe and this formed “four eyes “of leadership instead of two according to Aig on his choice of a business partner.

Banking in the 1990s…
The fragile Nigerian economy had some 140 commercial and merchant banks in business in 1991.
This was in response to the economic liberalization policy of the General Ibrahim Babangida.
Two banking ownership models held sway then. It was either the bank was promoted by some godfathers and a professional Managing Director would be hired to drive the growth or some professionals obtained the banking license and manage it themselves.

While formal was easier to promote because of funding, the end results are usually not heathy. Aigboje opted for the second model. The owner manager.
” the owner/managers were insulated from the need to depend on a godfather, free to express their entrepreneurial and managerial visions and they then worked hard to bring them to function” he mentioned in his book.
Access Bank Group is a commercial bank with leveraged buyout, private equity, mergers and acquisitions themed expansion drive. This has played out severally in their growth strategy locally and internationally from year 2002 till date.

Influenced by two great books
A lover of books, Aigboje was partly influenced by the classic work of Rick Rickersten and Robert Gunther. Aig had read the book and internalized the outlines enumerated by the authors.
Rickersten had identified key stages of a standard. Management Buy Out. These stages were equally separated and treated in each chapter. They are as follows; have a dream and be bold, find or create an opportunity, develop a business plan, strike an agreement with the seller and make a deal with the equity investor, arrange bank financing, compete due diligence and close the deal. Build the company and exit, then take the money and do it again.

Released in March 2001, titled Buy out; the insider’s guide to building your company. Rickersten s books is a standard text for Private Equity practitioners globally. Coincidentally, the acquisition of Access Bank was made 12 months after the official of Rickerstens Buy Out.

Another great book which influenced Aigboje was written by Andrew Grove, titled Only the paranoid survive. In that book, Andrew Grove wrote that;” the things I tend to be paranoid about vary. I worry about products not getting screwed up, and I worry about products getting introduced prematurely. I worry about hiring the right people and I worry about morale slacking off. And, of course, I worry about competitors. I worry about other people figuring out how to do what we do better or cheaper, and displacing us with our customers:”
Andrew Grove was at a time, President at Intel. In his book, Grove advocated that a leader must be restless and constantly paranoid.

In the book, Grove also maintained that his new way of measuring the nightmare moment every leader dread when change occurs is through the Strategic Inflection Points. According to Grove, Strategic Inflection Point can be set off by almost anything; mega competition, regulation, or technology.
“When strategic inflection point hits, ordinary rules of business go out of the window”

Access Bank Acquisition
In the late 90s Access Bank Plc like most banks operating in Nigerian financial market then had regulatory challenges. The Central Bank of Nigeria had initiated an investigation with respect to foreign exchanges infractions. This affected their operations, customers perception and morale to do more business.
In year 2001, Access Bank embarked on capital raising through public offer, the strategy was to raise about One billion naira(N1,000,000,000.00) (USD 9 million) at an exchange rate of N110 to one USD then.

The offer for subscription was grossly under subscribed as the deadline of the offer beckoned. This was a major issue for the advisers, promoters, board and management of Access Bank Plc; this unfortunate development on the side of the bank provided a golden opportunity for Aigboje and Herbert Wigwe to strike.
With the assistance of the frontline investment banker, deceased Albert Okumagba, they charted a course, defined strategy and mopped up the unsubscribed shares.
The acquisition and approval from regulatory were easy, the complex part was driving the business and presenting a unique value proposition to customers already being serviced by leading banks.

Value Chain Banking Business Model
Chapter Four is the most interesting aspect of the book because it explained a unique market entry strategy deployed by Aig and Herbert, given the banks limited resources at its embryonic acquisition.
They opted for Value Chain Model. They pitched to manufacturers, distributors, ware house operators, retailers and major dealers of global system for mobile communications service providers in Nigeria.
Value Chain model in banking reviews the entire production and distribution chains from source of materials to consumers business mechanism. It identifies the gaps and proffers solutions on how to either improve revenue or reduce cost drastically. It required a detailed thought process and seamless execution. Not many banks want to ply that route then.

Access School of Banking Excellence
Running a forward-looking bank with clearly defined growth paths need human resource who will buy into the vision. This led to the idea of operating the most advance training school ever in the history of Nigerian banks.
Chapter Seven narrate the rationale behind Access School of Banking Excellence. A four-month training programme, it is also a mini MBA module with local and foreign faculty selected from the best schools around. The MBA module has some of the banks policies and credit focus embedded in it.
Estimated at Two million naira (N2,000,000.00) (USD 15,000) per candidate, the programme comprise 15 examinations and case studies. Candidates must pass all. Pass mark is 65 percent.

Pan African Expansion
The Pan African Expansion of Access Bank Group birthed in The Gambia in 2006 as the first subsidiary to open shop, soon Sierra Leone, Zambia and Rwanda in quick succession.
Chapter 13 is basically on international expansion.
The high point of this chapter is the experience encountered with the acquisition of Omini Finance in Cotedivoire in year 2008.
From 2008 to 2013 when the bank exited, Access banks presence in Cotedivoire was characterized with regulatory challenges, staff’s connivance and poor performance, serious efforts were made to revive the bank but it was grossly resisted. “we experience first hand problems that cultural differences can cause a business and I must say I am yet to fully understand the logic behind Coted ivoires law” Aig mentioned.

Banking regulation in French speaking West African countries can be tasking while the labour law / country employment terms of engagement is highly staff protective especially when such senior professionals work under the Contrat a duree indeterminee; permanent contract (CDI) terms.
The complex regulatory structure and composition coupled with country specific laws contributed in no small measure to the banks exit.

Intercontinental Bank Acquisition
A major local acquisition that tested Aig’s leadership capacity is the Intercontinental Bank.
The transaction attracted big attention. Chapter fourteen is dedicated to the entire activity. Intercontinental Bank merged in 2005 with three other banks where its shared similar shareholders. They are Equity Bank, Global bank and Gateway Bank. The post-merger integration was not a smooth sail despite initial similarities communicated or assumed to the outside world.

Integrating culture, people and technology
Acquiring banks to scale their growth was the easier part for Access Bank, integrating people to align with processes, culture and policies is the most complex aspect of mergers.
Integration cost and its consequences partly account for the major reasons why many banks shy away from mergers and acquisition. The Intercontinental bank merger with three other banks in 2005 still continue to play some negative developments until 2012.
“to accommodate its different 2005 merger partners, Intercontinental Bank adopted a decentralized approach to decision making, which exposed the bank to significant operational risks. Its operations were quite inefficient and uncompetitive’’.
Access Bank inherited this abnormal development and the bank suffered a major setback post integration.
Chapter eleven and twelve practically concentrated on governance structures deployed by the bank, qualities they look out for when appointing directors, risk management strategies and the banks numerous executions in sustainability and responsible banking practices.

Minor gaps
The author did not mention the promoters who contributed the balance eight hundred million naira (N800,000,000) (USD7,300,000) for the purchase of Access Bank shares on offer in year 2001. 20 percent of the required amount was raised by Aig and Herbert, who are the individuals, family, friends and investors who raised the balance 80 percent of the required amount?
The investors and promoters of Access bank are at liberty to disclose or not to disclose.
On page 158, precisely in the second paragraph and second sentence, it was written that Intercontinental bank merged with three other banks in 1995.The merger occurred in 2005. However, this was corrected in page 170, second paragraph and also, in the second sentence when it stated that Intercontinental Bank merged with three other banks in 2005.

Recommendations
The book is recommended for business owners, entrepreneurs and top executives who are at various stages of their career.
It is a must read for businesses thinking of regional expansion in Africa especially in French speaking West Africa countries.
The books will be valuable for consultants who train management on strategy and market entry models and those who facilitates sessions on company retreats and year end panning period.

Above all, the books will be ideal for specific Africa themed business cases especially for the popular Harvard Business School course: Doing Business in Africa and the Lagos Business School adaptation of same.
––Augustine is the CEO of ZDMS Advisory. ZDMS is an economics consulting and Strategy firm in Lagos. Augustine has qualifications in Economics, Managerial Psychology and Corporate Governance and has consulted widely for financial service companies.