Preparing a bank merger : actual case study, Bank of Beirut & Transorient Bank

Abstract

As Lebanon's larger banks tap the international markets to increase their capital and long - term resources, the gap between small group of internationally active institutions and the general run of small, mainly family - owned banks continue to grow. Like their larger competitors, Lebanon's smaller banks need to raise capital resources to survive in an increasingly competitive market. In the last few years the Central Bank has encouraged mergers between smaller institutions and the acquisitions of small banks by larger ones. It has put pressure on smaller institutions by raising minimum capital requirements, and has extended facilities to larger banks acquiring smaller players. Initially, conservative attitudes among smaller bank's shareholders posed a major obstacle to self liquidation, mergers or absorption into bigger firms. The Banque du Liban, recognizing this structure and weakness, has done its utmost to encourage bank mergers. This has involved both a carrot (very attractive soft loans to those that choose to merge) as well as a stick (annual limit on new branch openings to two per bank). Among larger institutions, Central Bank regulations limiting new branch openings to two per year have created incentives to buy smaller players for their branch networks, or for larger banks to buy branches from each other. It also means that local banks seeking to expand their customer base now increasingly try to buy smaller players and their clients. The growing presence of foreign banks has increased pressure to merge and restructure the banking industry in Lebanon. It is essential to know how to prepare a bank merger or acquisition in Lebanon which is discussed in this project with a main focus on the pre and post merger phases leading to the set - up of an actual guide through the analysis of the case study of" Bank of Beirut and Transorient Bank" merger.