Defining a business partner

A true business partner displays certain characteristics that define the relationship more tightly than the usual vendor-customer connection.

True business partners will:

• Become your biggest supporter – and at times they may also be a constructive critic
• Strive to maximize the value of the relationship for every entity involved in a strategic initiative
• Think independently while collaborating for mutual success
• Realize that just because something has never been tried a certain way does not mean that it shouldn’t be attempted

With bank mergers and acquisitions booming, the value of strong partnerships between financial institutions and their core technology providers has never been more relevant.  A strong partnership can ensure transaction synergy goals are met and position the combined enterprises for long-term success.

Continuing to merge

Success in bank mergers is not necessarily guaranteed, even as the industry continues to combine. The value of M&A across the financial services sector, which includes banking, capital markets and insurance, more than doubled to $1.15 trillion in 2021, according to Timothy Johnson, a partner in transaction services at KPMG.

And according to the research firm Fitch, banks are expected to continue to pursue growth through acquisitions into 2022, driven by a desire for increased scale and enhanced franchise strength – either through new geographies or by growing market share within their existing footprint.

As mergers are both significant and disruptive initiatives, bankers may seek to establish a relationship with close partners to help ensure successful programs. To create true business partnerships, as defined previously, bankers must establish foundational trust, understand and realize potential synergies, and ease concerns of senior executives and board members regarding how and when identified synergies will be delivered.

Establishing a foundation of mutual trust

Mutual trust is the oil that keeps a relationship engine operating at maximum power and efficiency.

Acquisitive bankers can help their primary technology partner prepare and best support their merger transactions by sharing their plans as early as possible.

Information-sharing between partners should work both ways. Non-Disclosure Agreements (NDAs) pave the way for strategic discussions with the bank’s senior staff as well as the sharing of realistic future product plans by their technology partner.

Both parties can maximize the value of the overall relationship with in-depth meetings that align a bank’s strategy with the technology partner’s product, support, and resource investments.

Realizing synergies together

M&A transactions must deliver on the anticipated synergies (both savings and growth) derived from the deal. The traditional savings in the areas of staff functions such as Legal, Finance, and Marketing are easy to identify.

Bank technology partners can assist in defining and developing technology synergies that add value to the transaction and/or help keep customer satisfaction high. With the foundation of mutual trust, bankers can ask partners to help them ask the correct questions during technology assessments – both in the due diligence and initial planning stages of the merger transaction.

Senior executives at the technology partner should serve as a sounding board to help in the vetting process and, most importantly, give a realistic appraisal of the timeline for the M&A consolidation process to occur.

Technology partners can then share their timelines and resource/support plans with the bank to share with their internal staff (and if needed) their Board of Directors. The technology partner’s ability to scale becomes especially critical when a transaction could double or triple the size of the new organization.

In some instances, the technology partner can help a newly merged institution that goes over $10 billion in asset size navigate the regulatory requirements that await a financial institution of that scope.