Market Entry Strategies Case Study

Sanpaolo: Establishing its Footprint in Serbia

OR

Abstract:

On 28 July 2006, the third-largest Italian bank, Sanpaolo IMI SpA, signed an agreement with the Serbian Government to acquire an 87.39% stake in Serbia's sixth largest state bank, Panonska Banka AD Novi Sad. In a three-round bidding process, Sanpaolo outbid all the other contenders to emerge as the winner, to purchase an 87.39% stake and the right to bid for the remaining 12.61% stake at the same price. Sanpaolo had agreed to pay 122 million euros or 178 euros per share, which was 15% more than the market price and 4.8 times the bank's assets. The Serbian bank was listed on the Belgrade Stock Exchange and had a network of 65 branches in and around Serbia with a market share of 3.4% and a market capitalisation of about 118 million euros in June 2006. Both Panonska Banka and Sanpaolo together, would gain the number two spot in Serbia, as they had a combined total of over a million clients. Along with Panonska and Banca Intesa's existing Serbian business, Sanpaolo could capture a market share of 14%, and the number of branches could reach 215. The transaction with Sanpaolo would effectively enhance the development of the Serbian economy through providing regional growth opportunities in and around Serbia. The capital generated through this high-profile transaction would benefit the Serbian bank in particular, to strengthen its position in the country. Analysts felt that Serbia would be able to attract more foreign investors in the process, which would set the pace for the country's economic development. Analysts opined that the Serbian bank had scope for expanding its business activities both quantitatively and qualitatively and take advantage of ongoing economic development. They also anticipated that the deal would not only help the markets to expand globally, but would also benefit the upcoming Serbian economy to become more and more competitive with the rest of the world. On the other hand, critics anticipated that the rising overseas expansion strategy of Sanpaolo might not turn out to be a fruitful business proposition for the Serbian bank in the long run. At the same time, they were also of the opinion that the Sanpaolo-Panonska Banka deal would send very strong signals to the Serbian banking sector. It was to be seen whether the acquisition proved to be a blessing in disguise for the Serbian bank, and in particular for Panonska Banka, to enable them to turn back amid inclement business situations.. This case is intended for MBA/PGDBM students and was designed to be part of the strategic management curriculum.

Pedagogical Objectives:

• To eunderstand the role of mergers and acquisitions in the growth strategy of Sanpaolo.
• To analyse the benefits and drawbacks of mergers and acquisitions associated with banking companies.
• To study the impact of the acquisition on the Serbian banking sector.
• To understand the potential synergies of the acquisition.
• To understand the pros and cons of the Serbian banking sector reforms.

Keywords :  Serbia; Sanpaolo; Panonska; Europe; Italy; Assets; Market share; CAR (capital adequacy ratio); Loans; Deposits; GDP (gross domestic product); Banking sector; Banca Intesa; Economy; Deal

Contents : 
Panonska Banka Ad Novi Sad
Industry Overview
Expected Synergy
The Road Ahead
Geographic Location of Serbia
Contenders for Panonska Banka
Performance Ratios of Sanpaolo IMI S.p.A