Solution Services
Merger: Acquisition & Integration
“The greatest impediments to our merger were cultural differences, IT and operational integration. A solid plan for executing this integration was a best practice much too important to ignore."
The Challenge
When an institution takes on the task of integrating another entity due to merger or acquisitions, there are myriad decisions that must be made. How many call centers or data-processing sites should the new bank keep? Which bank’s loan processing or teller platform system is superior? Which institution has the best staffing model? Who has the best technology platform? Should the acquiring bank attempt to accommodate the functionality of the acquired bank’s technology platform—saving, for example, a unique feature that its own system lacks? Or should the acquirer simply move all the acquired bank’s customers to its various banking systems in an effort to rationalize the combined technology infrastructure as quickly as possible and cut costs?
These are some of the common issues that have to be addressed when entering into the planning phase of the integration. Many integration projects drag on as a result of poor planning, a lack of strategic objectives and a methodology tainted by politics.
Catalyst Response
The pace of banking industry consolidation has slowed considerably in recent years, but is expected to move to the forefront in 2009.
A successful merger is one that delivers a higher rate of return to the acquirer’s shareholders within a reasonable period of time. Paying too high a takeover premium usually forces the acquirer to rush the integration process to quickly eliminate excess costs, thereby avoiding any negative impact on its own shareholders. And in this particular undertaking, haste frequently leads to costly mistakes.
But the integration challenge remains; there is a myriad of decisions that must be made during a post-merger integration project. How many call centers or data-processing sites should the new bank keep? Which bank’s loan processing or teller platform system is superior? In most cases, the acquirer has a strong preference for its own technology infrastructure, because that’s what it knows best. Should it try to accommodate the functionality of the acquired bank’s technology platform—saving, for example, a unique Internet Banking feature that its own system lacks? Or should the acquirer simply move all the acquired bank’s customers to its various banking systems in an effort to rationalize the combined technology infrastructure as quickly as possible and cut costs?
Planning and forethought is the single most important ingredients in a successful post-merger integration. The planning process must start during the due-diligence phase, which is when the acquirer needs to take a close look at the target’s entire technological architecture, products, services, locations and decide how the combined bank will operate.
At Catalyst we state the most difficult aspect of post-merger integration is not the technical requirements of migrating Bank A’s branch customers to Bank B’s retail deposit system—it’s project management. Creating and executing a highly detailed plan to combine the technology infrastructures of two banks is an exercise in process management. It’s the complexity of the undertaking itself—with thousands of separate tasks that must be performed by people working under pressure to meet tight deadlines—rather than the underlying technology that makes post-merger integration so challenging.
Catalyst Deliverables
Road Map Document
Documenting and communicating new strategies and business objectives based on the original rationale for the transaction is the key first step towards developing an effective integration plan. We prepare detailed integration workplans and performance milestones that will track integration progress. We focus attention exclusively on what is best for the financial institution, rather than on issues surrounding hierarchy and turf battles.
Communications Plan
When a merger transaction fails to achieve desired results, poor communication, more than any other factor, is often to blame. We assist with the structuring of the communications plan that will announce the transaction and, over time, its transition details to key stakeholders, including investors, customers, suppliers, employees, the media and industry analysts. We utilize a proven and effective communications methodology that can be tailored based on the specifics of the transaction.
Human Resources Plan
We assist with planning for the retention and integration of human resources after a merger or acquisition, including the board, senior management, middle management, technical, clerical and front line employees spanning all functional areas. We work closely with management to define the optimal organizational design based on revised business objectives. We help to create new organization charts and rationalize disparate titles, benefits plans, and compensation schemes. When appropriate, we assist with "reduction in force" initiatives to achieve cost savings driven by post-transaction redundancies in human resources.
Management Information Systems Integration Plan
Integrating two different technological systems, while continuing to run each institution can be a massive challenge. It requires proper planning for phased transitions, extensive preparation, intensive testing and training and more training. We work with other members of the integration team to define workable implementation plans as to what needs to be integrated, when it should happen, and how it can be done successfully.
Product and Service Integration Plan
We work to define the go-forward product and service mix and ensure that product teams understand and support the new plan. We help set priorities for new product development and we define feedback mechanism to track progress and obstacles. We identify and pursue product synergies.
Operations Integration Plan
We prepare a detailed integration plan for operations, including all functional areas, such as accounting, loan servicing, item processing, day 2 operations, marketing, purchasing, and branches. We establish a detailed vision of how things are going to work in the future and what steps need to be taken to get there. We create a forum for issue identification and resolution (e.g. a customer say it will stop doing business with us unless we commit to continued support for an old product line).
Project Management
"When we considered the importance of the project, we realized we needed a resource that specialized in the solution as well as one who could dedicate more time to the project."
The Challenge
In today's dynamic business environment, many institutions often find themselves perpetually in multiple, active projects. Resources move from one project to the next, attempting to complete the task on time and within budget. Some institutions have even created Project Management departments as a resource pool for the institutions many projects.
In either environment, the resources assigned to the project typically have little to no specific experience or expertise with the solution being implemented. The resources simply apply standard project management methods to the project and are expected to "learn as you go". This type of approach lends to itself to project delays and change requests that increase the time and cost of the overall project.
Catalyst Response
Catalyst understands the myriad responsibilities associated with managing a project conversion and/or implementation. Our project management methodology results in projects being implemented with more speed, accuracy and efficiency. We manage communication between your staff, vendors and consulting services to create unwavering support from senior management. Catalyst also provides concise, consolidated reporting and tracking methods that will ensure commitment from all interested parties within your enterprise.
Our experienced, PMI-certified senior project managers and business/operational professionals bring an enhanced sense of focus and consistent management to every project. Our knowledge of banking applications and product functionality bring hands-on knowledge to your project. Our objective recommendations reduce risk, improve efficiency, and create a quality of work which consistently exceeds the expectations of our clients.
Benefits
Catalyst’s value comes from the combination of project management skills, hands-on banking experience and specific vendor/solution expertise. To capitalize on this experience, our clients have utilized our PM resources for everything from fully spearheading the project to a limited advisory role. Depending on your institutions specific needs, Catalyst will augment your resources where it makes sense.
Vendor Evaluation
"When it came to choosing a vendor solution, we needed to ensure that we were making the right decision based upon the best fit for us now and our future business objectives"
The Challenge
In order for financial institutions to provide services to their customers, reliance on third party vendors is a given. Depending on the desired solution, there are potentially several vendors that could provide the services required by your institution. However, many institutions have difficulty in selecting the best vendor for their needs. Some of the common reasons for this are:
- Unclear or incomplete selection criteria
- Lack of “buy-in” from affected departments
- Inability to distinguish fact from fiction regarding vendor’s stated capabilities
- Disconnect between what the institution thinks they are getting and what the vendor plans on delivering
This often leads to a lengthy, unorganized vendor selection process that oftentimes results in the institution choosing the wrong solution. This creates a domino effect on the implementation of the solution that leads to confusion, infighting and ultimately to a waste of resources and capital.
Catalyst Response
Catalyst understands the complexities associated with a thorough, organized and focused vendor evaluation. Catalyst is an expert in the financial services industry and possesses a deep knowledge of the vendors, both their strengths and weaknesses. Catalyst combines this marketplace knowledge with our proven methodology to guide your institution through the spin and hype that causes confusion, level set the proposed solutions and assist you with selecting the vendor that best meets your expectations and budget.
Benefits
Catalyst’s value comes from our extensive knowledge of the vendors and a process that will minimize management distraction, document the decision process, reduce time to decision, satisfy due diligence requirements and create buy-in among the stakeholders within your institution. This will lead to much more effective implementation of the solution and ultimately to a better long-term relationship with the selected vendor.
Contract Negotiation
"We only dealt with these contracts once every few years... we needed help to ensure we were getting the best terms at a fair price"
The Challenge
The contract your institution executes with the vendor is an extremely important component of the success of your chosen solution. It becomes the basis for your relationship with the vendor and your one, true opportunity to bridge the gap between your expectations and the vendor's deliverables. It is also your only recourse when unexpected events take place and things don't go as planned.
However, most institutions only enter into major contracts once every few years. This places them at a distinct disadvantage when negotiating the contract with the vendor, who negotiates dozens of contracts every year. As a result, most institutions enter into contracts that are one-sided, in favor of the vendor, and rely upon the "word" of the vendor's sales team to resolve all conflicts and misunderstandings.
Some institutions have even created a "procurement" or "contracts" department in an attempt to address this problem. While this is typically better than enlisting the department heads or managers to negotiate the contract, these departments are typically contract "generalists" and lack the knowledge of a "specialist" that comes from negotiating these contracts many times per year.
Catalyst Response
Catalyst understands the complexities associated with negotiating a thorough contract. Catalyst will collectively review the legal language, terms and conditions, service level agreements and price. None of these exist in a vacuum, nor can they be taken out of the context of the contract as a whole. Catalyst will review all issues with your institution, identify priority objectives, make recommendations, and then guide you through the negotiation process.
The Catalyst process is designed to ensure all interested parties are represented throughout the negotiation process. This acts as an effective deterrent to last minute "roadblocks" many institutions encounter when the contract reaches the execution phase.
Benefits
Catalyst's value comes from our extensive knowledge of the vendors, their contracts and a proven negotiation process that will provide your institution with the most complete, fair contract possible. Our methodology will ensure that your institution's goals and objectives are accurately translated into the contract and that adequate recourse is in place. This also leads to a more effective implementation of the solution and ultimately to a better long-term relationship with the selected vendor.
Contract Servicing
"We never paid close enough attention to the invoices... Once we engaged Catalyst, we discovered we had overpaid by a significant amount"
The Challenge
Most institutions have large contracts with technology providers that are complex. To make matters worse, these contracts vary depending from vendor to vendor. Each contract contains differing components such as;
- Term
- Service Level Agreements
- Activity Based Pricing
- Maintenance Rates
- Termination Clauses
- Hourly Services Charges
Keeping up with the intricacies of these contracts often proves too cumbersome and in many cases the institution simply trusts that the vendor is billing them according to the contract. However, most vendors use automated billing that does not account for special contract provisions.
Some institutions have created departments to handle this issue, but these are rarely staffed with individuals who understand how to decipher a complex bill (i.e. core processing, online banking, etc.) or to recognize when a term of the complicated contract is not being followed.
Catalyst Response
Catalyst understands the complexities of large, complicated and in-depth contracts. We rely upon our hands-on experience gained from negotiating these contracts as well as auditing them. Catalyst not only reviews your monthly, quarterly and/or annual bills, we will also audit all relevant components that present a challenge (listed in above section). Through contract servicing, Catalyst has found discrepancies as high as hundreds of thousand of dollars for a single client and discovered hundreds of terms and SLA's that were not in force.
Benefits
Catalyst’s value comes from our extensive knowledge of the vendors and familiarity with their contracts and billing methods. Catalyst will ensure that your institution is being charged in accordance with all contractual terms and provide you with ample notice when key contracts are set for renewal. This will save your institution a great deal of time and money and will ultimately create a greater amount of trust with your vendors.
Business Process Improvement (BPI)
"Although the implementation itself was successful, our bank did not realize the operational and financial efficiencies it had expected. We engaged Catalyst to aggressively identify, quantify, and pursue any and all post implementation inefficiencies."
The Challenge
Organizations need to optimize their business process, but seldom do. Using our proven methodology, we deliver key business results in a timely fashion. We help you achieve improved operational efficiencies, customer service and cost reductions.
Catalyst Response
Catalyst Business Process Improvement services are designed to position your organization to take advantage of the opportunities and quickly address the challenges. Our solutions are able to seamlessly cross the department and operational boundaries within your bank. Our focus is to ensure that participants within a process are all working off the same vision and driving toward the same goals. We act as your lead liaison to your team and we take responsibility for ensuring that system designs, workflow enhancements and procedures meet your business and technology requirements.
Our solutions are customized to your specific needs. We leverage our experience in order to rapidly deliver best practices that have proven to be important to many of the organizations that we have worked with.
Benefit
Our focus is on delivering solutions that will be effective in your unique environment. Your organization has invested a lot of time, effort, and financial resources into the systems, applications and workflows that run your bank. Catalyst Business Process Improvement services are designed to maximize those investments by identifying and simplifying the processes that support the bank, giving your organization a strong competitive advantage.
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