Post-Merger Integration Services

Successful mergers are about breaking new ground together, not turf wars

For mergers to be a cause of celebration rather than hangovers, the emphasis has to be on successful implementation

Financial services mergers continue at pace. The primary drivers include consolidating structures, reducing and eliminating costs, expansion into new markets and acquistion of a new customer base. The reasons for Merger Day 1 are sound. The realities of Day 2 can be somewhat more challenging.

The End Game should be the beginning of a productive new chapter
The objective is creation of a fully integrated entity that delivers new value and innovative service to its customers, leverages increased scale at reduced cost and is supported by a strong and future proofed business and operating model.

So why do 2 + 2 so often = 3, rather than 5?
If the acquiring company adopts a default setting - imposing its own systems automatically, moving to immediate cost cutting, failing to take adequate time to understand exactly what it has acquired from a detailed operational perspective - the initial promise can fail to be realized.

The real winners take a longer and more balanced view. They have a rounded post-merger integration (PMI) strategy. They look beyond Day 2 cost-cutting and redundancies, to develop an appreciation of the skills they already have, as well as those they will need. They identify and define strategic opportunities and they assign owners to exploit them.

Above all, they adopt a robust, informed and implementation-driven approach that recognizes three key phases.

Three steps to true value
The most effective PMI strategy starts pre-merger, and encompasses three phases: acquisition, integration and optimization.

Step one - Acquisition
The acquisition phase focuses on new operational, financial and regulatory parameters and design of a target operating model (TOM), to enable a new entity to take full advantage of new opportunities. By completion, a strong design for a high level enterprise should be in place.

Step two - Integration
The integration phase identifies major changes required to make a successful transition to the TOM. These will include sales objectives, rules for regulatory compliance, cost reduction and financial performance targets. By completion, the new entity should benefit from a TOM driven by a defined business strategy and supported by a detailed technical infrastructure that utilizes proven Architect Design and Plan - ADP - capabilities and tested experience of Transition to Live - TTL. Indeed, TTL is a key issue, with the pressure on to migrate to a new, lower cost and measurably more productive state.

Step three - Optimization
In the optimization phase, as the real capabilities of each merger element emerge, the TOM will be revised and refined. The true potential for realizing deeper benefits will become clearer. This may include additional business or product development scenarios, further cost-reduction opportunities, and migration of operating activities to more appropriate technology platforms. It will also become clearer just how much operational mis-alignment there is between previously separate systems and processes.

Day 3 and beyond - Realizing long-term strategic value through effective implementation
During each phase, merger-seasoned Capco practitioners work alongside senior client executives. They identify the most effective routes to capitalizing on the opportunities created by successful integration. They draw on deep experience and detailed understanding of the asset classes being migrated, the processes involved and the regulatory boundaries that apply. To help them deliver rapid and effective service, they utilize architect, design and plan - ADP - techniques, together with proven Capco tools and templates that accelerate the implementation journey and support effective focus on the unique implementation challenges of each individual merger.

We don’t claim to make mergers “easy”. They will always be complex challenges, not least because of the risk such profound change inevitably gives rise to. But the clients of our Post Merger Integration team see a clear and positive difference in the returns their merger achieves.