When a bank takes on the task of integrating another entity due to merger or acquisitions, there are myriad decisions that must be made. How many employees do we need or operational sites should the 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.

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 CCG 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.

CCG Catalyst helps banks improve their chances of successful M&A through an integrated, battle-tested approach that links acquisition strategy, diligence and merger integration.

M&A Due Diligence
M&A Planning
Merger Integration