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Persephone Pomeegrade Credit Agricole And Emporiki Case Solution

Solution Id Length Case Author Case Publisher
1671 730 Words (4 Pages) Dante Roscini, Daniela Beyersdorfer, Jerome Lenhardt Harvard Business School : 713055
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2006 in financial history marks as the year when Credit Agricole, France’s largest bank acquired Emporiki bank of Greece for €2.2billion. Credit Agricole acquiring Emporiki bank back in June 2006 was in opinion a good idea because of various reasons: Greek bank had a considerably good market share (Exhibit 6) and therefore, could offer a good entry point in the sector. It had a loan portfolio which was growing by 10%, capital ratios were aligned with the sector (p.3) and did not seem to have a problem. 

Case Analysis for Persephone Pomeegrade Credit Agricole And Emporiki Case Solution

Even after making a loss in 2006 it was still funded deposits with surpassed loans in five previous years (Exhibit 5). Credit Agricole also had a successful record of turnarounds and was sure it could apply its skill and expertise to this turnaround as well. They also appointed a CEO who came with a good history of change management. The news of forceful reformation and development strategy, supported by good investment seemed a good idea.    

No doubt the acquisition seemed a sound one and offered some opening doors for Agricole to Southeastern European market (p.4) but the price that Agricole paid for acquisition was unreasonably high as they overlooked upcoming adverse effects. They paid 3 times of the book value of Emporiki which if compared to other Greek banks was double their average value (Exhibit 8). Emporiki’s shares were operating at 20 times of expected earnings in 2006 (p.4) that was more than two times the earnings multiple of European banking sector index (p.4) though it could have been because of the expected news of acquisition. Agricole was so intensely interested that they placed a bid against their own as this acquisition to Agricolo looked like the only possible door to Southeastern European market and Agricole didn’t want to lose it. By the end, when Emporiki’s loan loss were adjusted to align with Credit Agricole’s estimation practices, acquisition multiple seemed to have increased to 4.4 times of the book value (Exhibit. 8)

During the Greek crisis, Emporiki bank with €21.7 billion of total assets underwent a significant total loss of €4.4 billion; these losses eventually affected the restructuring plan set in 2007, Emporiki had to minimize its staff from 6271 employees in 2006 to 5100 in 2011. Even after facing all the losses Emporiki wasn’t eligible for ECB loans as it was part of a Euro area company now.

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