November 19, 2022 / VOLUME NO. 236

Culture Clash

By the early 1980s, Edmond Safra had built a uniquely successful global banking enterprise. Through Republic National Bank of New York and Geneva-based Trade Development Bank — which combined exceeded $12 billion in assets in 1981 — Safra leveraged a growing deposit base to fund low-risk loans to international governments and central banks in the United Kingdom, Western Europe, Canada and Latin America.

That, explains author Daniel Gross, had Safra worried. “[I]n pursuit of growth, the banks had placed a lot of their eggs in a few major baskets,” Gross writes in his biography of Safra, "A Banker’s Journey." The global economy at the time was characterized by high interest rates, deregulation and “occasionally reckless” banking practices. The 1981-82 economic downturn saw the failure of Penn Square Bank, among others; the Latin American debt crisis kicked off when Mexico announced it could no longer pay interest on $80 billion in loans.

Amid this maelstrom, Safra sold TDB to American Express, which paid $550 million for its “pristine balance sheet, and the reputation and skill of Edmond Safra,” who would join the board and head American Express’s international banking operation. The deal closed in 1983.

The two companies couldn’t have been more different. Safra made loan decisions based on character and familiarity with the client. He had an informal management style and cultivated a team of skilled executives who were “allergic to corporate hierarchies.” In contrast, American Express thrived on bureaucracy.

“At TDB, people were expected and empowered to go the extra mile for clients, no questions asked,” writes Gross. “At American Express, the organization chart reigned, and people needed to seek permission from a host of managers to travel or call on clients.”

Acquirers ignore culture at their own peril. Bank Director’s 2023 Bank M&A Survey, sponsored by Crowe LLP, affirms this remains true today. Among bank executives and directors representing prospective acquirers, 81% cite cultural integration as a key concern. And 57% seek a complementary culture in a target.

For American Express and TDB, the deal quickly soured. 

Safra negotiated his departure in October 1984, buying back TDB’s division in France, its banknotes business in London and its headquarters building in Geneva — an eventual launching pad for another bank. For its part, American Express sold TDB just five years later for $1 billion.  

“Safra and Amexco joining forces was never going to work,” a former TDB banker told the publication EuroMoney in 1988. “Amexco thought Safra would fertilize the bank. But Safra could not work with rigid, defined organizational and management charts.”

Emily McCormick, vice president of research for Bank Director

2023 Bank M&A Survey Results: Can Buyers and Sellers Come to Terms? 

The 2023 Bank M&A Survey explores the expectations of prospective buyers and sellers amid economic uncertainty and rising rates. 

"Prospective buyers, it seems, are having a tough time making the M&A math work. And prospective sellers express a preference for continued independence if they can’t garner the price they feel they deserve in a deal."

Emily McCormick, vice president of research for Bank Director

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