Mergers and acquisitions in financial services can be painful. I have felt the pain from all sides…
As a banker, I recall how a competitive bank’s disastrous merger led to one of the biggest new customer and deposit inflow windfalls our bank ever had. Then, I was assigned to manage our bank’s own acquisition of another. It was a very tight deposit retention goal with client risks identified, key talent retained, products rationalized, non-strategic businesses divested, and systems converted. Stressful.
As a fintecher, I recall cranking out pro-forma analysis of deposit and delivery overlaps in two banks followed by the steering committee reviews of system conversions, timelines and resources. Strong coffee recommended.
As an advisor, I have seen the acquisition of a bank for its commercial business only to have key lenders, treasury, and finance talent difficult to retain. And I have witnessed the changing pressures of an entire industry going from the scale-sensitivity of back-office capabilities like IT and finance/accounting to the scale-sensitivity of everything, including growth capabilities like digital delivery and marketing/outreach. To quote Bob Dylan, “I’ve still got the scars that the sun didn’t heal”.
Getting high value growth in M&A
Whether it’s expanding within products/markets or entering new products and markets, there is a playbook for significant value from mergers and acquisitions. Historically, most of that value was from scale and cost take-out’s. Increasingly, however, high bidders are also bringing more revenue synergies to their value creation equation. Cost take-out’s have always been considered more reliably controllable, but strong leaders point to – and get – revenue synergies in retail and commercial.
Three rules to protect deal value
Regardless of deal rationale – revenue, cost, or both – needless amounts of deal value have been lost due to “winging it” through the intense people, process, and technology demands of successful post-deal integration. Or even confusing the tactical process of project management with the strategic process of program leadership.
As a veteran banker and merger and acquisition leader, Cornerstone Advisors M&A practice leader Mary Eyre points to the success of banks and credit unions using strong program leadership to mitigate risk factors in deals. Touching on a few highlights of her eight non-negotiables to keep attrition on the low end of the common historical range.
- Stabilize pricing and systems: with consumer banking clients, two common risk factors to mitigate are product pricing and system conversion missteps.
- Move the cheese lightly: with business and wealth clients, two common risk factors to mitigate are relationship manager retention and branch moves.
- Leadership & management accountability: during and after the deals, success comes down to leadership. Eyre points to making retention someone’s day job with segment-level targets, incentive alignment, and daily monitoring including early warning indicators.
Monitor digital, retain human intelligence
Digital interaction is often the first impression and digital often dominates ongoing impressions. So, beyond wait times, abandonment and other transactional and interactional digital activities are important to manage as early warning indicators.
Eyre emphasizes the importance of responsiveness and plain-language visual communications across apps, FAQ’s, mapping, and even banner communications.
Over the years of mergers and acquisitions as a banker, fintecher, and advisor, I have come to appreciate trading notes with others who have repeatedly lived to tell about it, like Mary Eyre. Leaders with the scars of human intelligence and experiences which complement the artificial intelligence, playbooks, and other tools to create successful outcomes.
