The banking sector has seen its fair share of mergers since the financial crisis, but Citic Securities’ recently completed acquisition of CLSA raises a unique set of cultural challenges for management and staff at both firms.
The deal marks the first major takeover by a Chinese broker of a foreign peer: Citic is China’s leading investment bank, while Hong Kong-based CLSA, a brokerage and investment group, was set up by two Western financial journalists and was previously owned by French firm Credit Agricole.
The process to integrate the two companies has already begun, with Citic Securities chairman Wang Dongming saying in a statement that his firm will “maintain CLSA's independent perspectives and vibrant corporate culture”. Nevertheless, integrating a stuffy government-backed bank like Citi with a smaller firm known for its quirkiness and extravagant office parties is unlikely to be straightforward.
Tips for Citic
1) Make it a "merger", not a takeover
Citic must avoid a big-brother managerial approach. “I would make sure that all senior members of the entity being taken over should look at it as a merger of equals,” said Jens Soderlund, managing partner at Hong Kong search firm Sirius Partners. “This message must be clear and sincere from the acquiring company.”
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2) Promote from both sides
The fastest way to breed discontent in the CLSA ranks is to parachute in too many Citic people into senior roles, said an investment-banking headhunter in Hong Kong, who asked not to be named. “The strongest leaders from both sides of the table must be promoted. As an example from another takeover, Christopher Howe, Nomura’s head of credit products for Asia Pacific, came from Lehman Brothers side,” he added.
3) Keep up the performance culture
Bankers from mature financial markets like Hong Kong love ruthless performance objectives, or at least, they are more accustomed to them that their mainland counterparts are. “If a Chinese firm takes over a Western-owned company, they still need to maintain a similar business methodology, setting clear target for employees,” said Stephen He, managing consultant at recruitment agency Kelly Services.
4) Don’t mess with bonuses and benefits
Headhunters warn that rival banks will target CLSA staff if they catch a whiff that Citic is cutting their compensation. “If possible, keep existing salaries, especially for high performers, and maintain the bonus culture on a performance basis,” said Alistair Ramsbottom, managing director of Shanghai search firm The Blacklock Group. “Don’t trim benefits too much and be careful changing travel and expense policies. Once employees perceive there’s no threat, they are likely to relax more and focus on doing a good job.”
5) Seek out strengths
Citic should be especially careful not to meddle too much with the strongest parts of the CLSA business, such as global equity research. “If the acquired company’s existing brand personality is tightly tied to its corporate culture in these areas, it would be in the parent company’s best interest to retain staff by minimising changes to the existing internal procedures,” said Laura Yu, manager of banking and finance at recruiters Robert Walters Shanghai.
Tips for CLSA
1) Don’t boss your boss
If you’re used to getting feisty with managers, keep your temper in check if your superior is now a big cheese from Citic. And whatever you do, don’t challenge them in a group meeting – your boss will lose “face” and your career could end up in tatters. “If you absolutely need to disagree, it’s always best to wait until you’re alone,” said Sean Upton-McLaughlin, a Shanghai-based consultant at learnchinesebusiness.com.
2) Don’t make assumptions
Cultural differences are often the root cause of misunderstandings when two firms from different countries are integrating, said Vivian Ng, managing director for China at recruiters Morgan McKinley. So rather than assuming they understand a managerial decree, CLSA staff should seek clarification.
3) Mandarin’s a must
Citic is likely to favour CLSA staff who speak Mandarin, which could bode ill for the promotion prospects of Western managers at the newly acquired firm. Meetings with Citic bosses will be held in Chinese. “If you can, any use of Mandarin is likely to be appreciated,” Ramsbottom from The Blacklock Group said.
4) Get set for slower meetings
By the standards of Western banks, Chinese firms have a reputation for indulging in long and often inconclusive internal meetings. CLSA staff will probably have to become more patient and get used to their calendars clogging up. “Decisions are likely to be reached slower and with less transparency,” Ramsbottom said.
5) Prepare for less power
Upper management generally wields even more power at a Chinese bank than at a Western one. “You may be used to a slightly flatter organisational structure, with more operational decisions left to the discretion of front-line managers. Knowing and adapting to this difference will save you many unnecessary mistakes during the transition period,” Yu from Robert Walters said.