As we can see from this news on JP Morgan's takeover of WaMu, hardly a day has gone by over recent weeks without a new banking takeover being announced. The ability of the acquiring banks to merge, integrate and leverage their new purchases has now become
strategic to their future success. Even if they have made their purchase at a heavily discounted price – Nomura reportedly paid the princely sum of $2 for Lehman’s European business - the challenges they face in making the deal an economic success are still
varied and difficult. This is an area where we have experience and have recently done some research in response to market demand. So what are some of the challenges we have found?
Firstly, there is the task of bringing the two organisations together from a risk and regulatory reporting perspective from day one as required by the regulators. Since the main processes and systems will not be combined by this stage, this is often a heavily
manual process. Next is typically the task of reconfirming the business model of which products, departments and locations to keep. In the case of the recent distressed takeovers, there will have been little time to do this prior to agreeing the transaction.
Then there are the softer aspects of keeping the best staff and clients – often the first to want to, and be able to move – with the new organisation and putting a new management structure in place. There is also the potential for culture clashes, as several
of the transactions are welding investment bankers onto a commercial banking firm, or indeed adding the staff from a US driven firm to an Asian headquartered bank. In addition to the soft aspects are then the myriad technical integrations and migrations, including
systems, transaction data, clients, accounts and staff. As reported in this news item, this is likely to be at least a two year programme. It is often during the latter parts of this phase that focus and energy levels flag, and so the ultimate integration
benefits are not fully realised.
Last but not least the firm must do all this and simultaneously continue to compete for business as usual in these confused times. The demands on management and project staff are high, and not all are as experienced as Jamie Dimon is reported here. Also
these functions within banks are not typically geared up to take on these types of project, certainly not on this unprecedented scale. There is always the possibility of getting outside help, but with the large number of similar projects getting underway,
good external help may be in short supply.