“Part of the idea behind this partnership was that GE would invest both financial and intellectual capital,” says Frank Newman, SDB’s chairman and CEO. “There were plenty of people who wanted to invest financially in the bank. But GE wanted to bring in experienced people to help.”
Certainly, GE’s $100 million investment would also help, given the bank’s financial condition. But a year and a half after GE agreed to buy 7 percent of the bank, it has been unable to close the deal. In order for the shares to be released for sale, the bank has to complete a reform of its shareholder structure, which would convert nontradable shares into tradable stock. Shareholders voted down a reform plan last July, apparently because they wanted more compensation for allowing their nontradable shares to float freely. Bill Stacey, a China banking analyst with CS First Boston, expects this to be resolved soon. “I assume that at this point it’s just a question of price,” he says.
Until then, GE and SDB have devised a way around the problem: GE Money will be a consultant to the bank but treat the partnership like any other, which is to say that it is moving ahead with its postdeal integration process.
The GE Way
Barrett has acted quickly. Besides introducing the Wal-Mart project, GE has helped SDB launch another card with French hypermarket retailer Auchan in February and a mortgage product last year.
For the Wal-Mart project, GE’s experts worked closely with the bank on the customer-support function. That’s significant, because Chinese banks don’t pamper their customers. “There’s a great opportunity for the first Western investor who can improve customer service at the Chinese banks,” comments Stacey.
GE has placed its managers in SDB’s offices to work alongside their local counterparts. They have run Lean/Six Sigma workout sessions with SDB employees to get new credit cards out faster. GE has set up a high-tech customer-service support center that is run by GE managers but has SDB employees working alongside them. It has sent SDB customer-service managers to its operations in India so that they can learn how card operations are run elsewhere. And the company has measured the results of such efforts carefully.
In miniature, that effort mirrors the tactics GE takes to all of its partnerships. Although many of these practices have become standard among frequent dealmakers, several features distinguish the GE approach. These include the intensity of the effort it devotes to getting the companies to work together, the speed of integration, a pragmatic way of addressing cultural gaps, and adaptability.
1. Emphasis on integration. Entering the Chinese market via an alliance or acquisition is notoriously hard. Jeffrey Blount, a partner with Fulbright & Jaworski in Beijing, estimates that 60 percent of tie-ups involving Chinese and Western companies fail to meet even the lowest expectations of the partners. (And that’s an improvement — Blount suggests that a few years ago the number was closer to 90 percent.)