Most Mergers Under-Achieve. Make Sure Yours Is a Happy Exception.
Two powerful truths about mergers and acquisitions: They are an important route to sustainable and profitable growth. Most of them fail to achieve their financial targets.
If your bank’s strategy includes M&A, that means you are inevitably courting high risk. When you undertake other risks – credit risk, fraud risk, rate risk – how do you mitigate them? By proactively applying expertise and objectivity. That’s why BSG belongs on your M&A team.
Why do many mergers fail?
Even when the deal is a good one – a fair price paid for valuable assets – acquirers often fail to realize the deal’s potential.
- Management, under pressure to demonstrate to analysts and shareholders the wisdom of the deal, focuses on quickly capturing synergies and avoiding major technology disasters, but often lose sight of customers.
- Customers defect if the acquirer is not ready, from the moment the deal is announced, with a full-fledged customer retention strategy, with competitors often targeting them.
- Unanticipated cultural differences impede integration, leading to culturally biased rather than objective decisions that best serve the institution’s goals.
- Inexperience in merger dynamics can leave the integration teams poorly prepared for the complexities involved and unskilled in operationalizing the integration plan.
How can you avert these pitfalls? With experienced, objective leadership.
- Keep your employees focused on customers during this vulnerable time. Make customer retention, not merger integration, a top priority for your employees.
- Address these pitfalls sooner. Don’t wait until the deal is closed to plan the integration. Otherwise your dealmakers can miss operational or technology aspects that can affect the value of the deal.
- Rely on experience. Don’t expect executives inexperienced in merger nuances, no matter how talented, to extract the full potential of one of the costliest investments you’ll ever make
- Recognize the cultural implications and other differences. Manage them by engaging objective leaders who can bridge differences with decisions that are best for the bank.
BSG’s Business, Strategy, Operations and Technology consultants have helped hundreds of financial institutions execute successful mergers. We can help you accelerate the value of your purchase while smoothly integrating functions, process, systems, and cultures, maintaining your business momentum, and operating within regulatory compliance. Our multi-step Guide assists you in Pre-planning, and includes a Communication Plan, Detailed Integration Planning, Cultural Integration, Merger Integration Implementation and Post-Merger Process Optimization.