Shinhan Financial Group (a)

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Shinhan Financial Group (A)

1. Why did SFG want to buy Chohung? Was this part of a reasonable strategy, in light of the state of the two banks and the Korean banking industry? For example, having received immediate visible employee resistance, should they have gone forward?

Following the Asian financial crisis in the late 1990’s, the South Korean banking industry became less fragmented as firms frequently engaged in M&A. The number of commercial banks in South Korea dropped 35% after the financial crisis and the marketplace left SHB (Shinhan Bank, Shinhan Financial Group’s name prior to acquiring Chohung Bank) to either compete with the industry’s leader--which held more than 30% market share--or with peers, which SHB’s
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This committee comprised of equal representation from each bank and was the decision-making body for the transition. 21 task force teams were assembled to address challenges that routinely surface during an acquisition as well as those that were specific to the banking sector. These teams were comprised of 97 volunteers from each bank representing all levels of the organization. Senior management met with these teams on a weekly basis to get feedback and increase engagement. Because the teams were made from volunteers, each participant had an altruistic motivation or higher purpose for spending their time in this effort.

Relationship-building events were held to assimilate the two cultures and to attempt to cleanse the negative sentiment that manifested by pervading SFG’s headquarters with piles of hair. Counterparts at each bank were brought together to climb and hike a mountain, have lunch together at a scenic outdoor location, or assemble into smaller groups of and sing and dance together. Impromptu sessions were also offered to support additional emotional integration.

At the time of merger, the areas of greatest difference include Control and Create. CHB demonstrated negative characteristics of a firm that is too controlled: habitual perpetuation and ironbound tradition. SFG’s culture included positive Create traits that would benefit CHB to adapt. Being a younger organization, SFG was more adaptive to

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