Top managers needed

Greek business expansion abroad has neglected managerial aptitude

By Dimitris Kontogiannis - Kathimerini English Edition

Greek banks and other companies are expanding abroad to take advantage of perceived growth opportunities, but they may be lacking something crucial to the success of their M&A drive. Experienced managers who know the foreign markets first hand, have the ability to deal with all the integration problems inherent in acquisitions and can bridge the cultural gap.

The press and the investment community, namely analysts and fund managers, usually spend quite some time commenting on and analyzing the financial aspects of cross-border deals, but devote very little if any time to other factors, most importantly concerning the people who will be called upon to run the new acquisitions. In most cases, the corporate acquisition is judged on the basis of the amount of money spent by the acquirer compared to what others paid for companies in the same sector in the same or neighboring countries before.

A case in point is National Bank’s agreement to acquire a majority stake in Turkish Finansbank a couple of weeks ago. Opinions for and against the deal were centered on the amount of money paid, Greek-Turkish relations and whether the state will control the bank after its planned 3-billion-euro rights issue to finance the Turkish and other deals in Southeast Europe and perhaps the Middle East.

Although much was written about the deal and its significance, most commentators failed to mention the importance of having National Bank appoint some competent people to help integrate Finansbank in the Greek group in addition to its current management. 

Luckily enough, the issue did not escape the attention of National Bank’s top management. According to sources close to the negotiations, the bank’s top echelon expressed its wish that Husnu Ozyegin, the founder of Finansbank, stay on as chairman even after the acquisition, along with the current management. Of course, the executives in charge of Finansbank’s international banking operations, which were sold to FIBA Holding, controlled by Ozeygin, will leave the bank to join the other entity after the completion of the acquisition. 

The issue has been discussed in international investment banking circles as well, given the size of Finansbank in the National Bank Group after the acquisition and the Greek bank’s first entry into the unknown, and very large, Turkish market. The Turkish bank is estimated to account for about one third of the Group’s market capitalization and the top management of the Greek bank has never had experience with running a bank in the neighboring market, unlike other markets in Southeast Europe. The deputy CEO of National Bank, Yiannis Pehlivanidis, ran a bank in Romania before joining Greece’s largest commercial bank and has had hands-on experience from other Balkan banking markets as well — but not Turkey. Perhaps his international experience explains why he rushed to Turkey early last week to meet top and middle management executives at Finansbank and discuss issues of common importance. 

Although Pehlivanidis and National Bank’s CEO Takis Arapoglou understand they will have to rely on local talent to get the job done, they are fully aware that they will also have to depend on some “envoys” who will shoulder the burden of integration alongside the Turkish bank’s executives. But they also know that National Bank’s human resources for this kind of project and other missions are limited and already stretched. This will show even more in the future, given the Group’s other international aspirations. It is not a secret that National Bank will bid for Serbia’s Vojvodanska Banka and will participate in the privatization process for Romania’s CEC, and perhaps bid for Egypt’s Bank of Alexandria.

National Bank may be an example but by no means it is unique. Other Greek banks and corporations face the same human resources problem. Of course, things are much better than a few years ago, when they could not find a local to go work and live in the Balkan countries. Even the few who did agree demanded that they return to Greece after a couple of years, be promoted and given special perks. For bankers and businessmen the problem is less acute in the last three to four years, thanks to the improvement of living standards in the neighboring countries and unemployment in the Greek market. Even so, it is still not easy to find qualified individuals who are willing to transfer to a subsidiary or go work in the region. To cope with the problem, some have resorted to headhunters, hiring even foreign nationals with managerial experience in southeastern and central Europe. OTE has been an example and a successful one. After years of poor management, it finally hired an experienced executive in telecoms to run RomTelecom, its Romanian subsidiary. RomTelecom is regarded nowadays as a successful turnaround story, contributing to OTE’s bottom line.

All major Greek companies with international ambitions either have faced or will face the problem of putting competent managers with local experience at the helm of their newly or to-be-acquired assets in the Balkans and elsewhere. Scanning the international markets for such individuals irrespective of their nationality may be a way out, given the scarcity of proper human resources at home. Nevertheless, no one can deny that this is a risk one should take seriously into account when judging their investments in emerging markets abroad and one most outsiders seem not to have taken notice of.