“You never have mergers without a lot of pain and a lot of dogs sniffing around the bottom of the lamp post.”
(Lord Keith, British banker and industrialist)
For some manager, merger is like scary ghost. Most merger result in failure, inefficiency, and inability to enhance corporate value. In fact, hundreds of studies suggest that most merger and acquisition (M&A) are failures. With a failure percentage rate between 50% and 80%.
The merger process of Bank X and Bank Y will be fail if we don’t consider critical factor for successful merger. Both bank have different customer segment, system, culture, and network architecture. Indeed, merging two or more companies implies not only merging their core businesses, but also creating a new and efficiently integrated IT organization.
Accenture Outlook has pinpoint the critical factor for successful merger process. In 2006, Accenture and the Economist Intelligence Unit surveyed more than 600 C-suite executives who had recently been involved in a large merger or acquisition. These executives attributed “success key” in mastering merger process: conducting due diligence, understanding cultural integration issues, and most critically, planning and executing the merger integration process.
In applying the success key, there are always obstacle and cultural resistant. Some people will feel threats, because they think they will loose their power, or they feel inferior in mastering the new skills for the future system. A person resisting the system through benign neglect would say nothing against the system but would take no positive action to improve its change in success.
The merger process tend to be chaotic phase, volatile culture, structure, system technology, and behavior. Organizing merger needs time for building competent people, department, and process. To succeed merger process, and minimize all of obstacle, we can apply SCC model in three steps:
Sharing. Connecting. Collaborating.
(SCC Model is model and a “rule of thumb” for successful merger that I invented. After reading a lot of study case from merger process. I really appreciate for your critique, suggestion, or just comment about this model)
First of all, both of party should share their value, due diligence data, vision, and target. “What’s the next XY Bank value?”, “What’s our target?”, “What’s our priority?”. This is essential process to build the trust among merger process. Business is about trust. And there will not be trust if there are no mutual vision, transparency and clear information. Sharing phase needs intense communication. With sharing phase, we can calculate our strength, weakness, opportunity, and threat in the future.
Failure in sharing phase will result in mistrustfully, suspicious, and asymmetric information merger process. There are no long term relationship without mutual understanding and trust among party. Most of failure case in merger began with asymmetric understanding among the merger stakeholder.
After mutual respect and shared value has been established, both bank should “connect” their system. Everyone must seat down together and focus on facts and synergy goal. Forget about self ego and vested interest. Rather think about difference, both of Bank X and Y should connect their value and goals. It include designing the new information system that can link up the bank X and Y information system.
We should not destroy the different, but “connect the different”. Bank X is a strong corporate market player whereas Bank Y focus more on the consumer and commercial markets. Bank X has legacy of card issuing system, whether Bank Y has merchant acquiring system. Both bank have different network hub and spoke topology.
The connecting phase will result in integration road map and target operational model. It should answer such a question like: “what Is the best system for the next XY Bank?”. “How do we connect the legacy information system?”. “Should we create new virtual database, or just compiling the old one?”. “What about human resources? How many IT professional do we needs? Can we outsource it?”.
The final phase is collaborating: creating and implementing it’s new value and system. Building synergy among stakeholder from both Bank X and Bank Y. Accenture and Economist Intelligence Unit survey said that the most critical element to M&A transaction success was orchestrating and executing the integration process.
The collaborating phase resulting declared vision, target, structure, human resource, and integrated roadmap information system. Both party are ready to deploy the integration road map, list the key performance index, and bring the synergy into real positive action.
To Do List
SCC model talked about philosophical background. For technical, we need to establish steering committee that responsible for merger process. The committee represent both bank, X and Y, including its CIO, human resource manager, and operational manager. The task of the committee is to planning the grand design for information system of merger process.
With SSC model, we can overcome the resistant, rejection, and obstacle. The first step of sharing is analyzing the process in legacy IT department, then redefine the new definition and process of IT organization. The connecting begin with harmonization the IT process and migration concept. Then the collaborating phase will result of nomination of person responsible for IT management, and assignment of the IT employees to the new organizational unit.
Using SCC model, we can manage the merger process even better. From synergizing two large bank to marriage of two peoples😀. A great merger can only be established with great shared vision, target, operation, people, and architecture system. Don’t bother our mind with sophisticated model. Let’s get back to basic:
Sharing – Connecting – Collaborating.
*)Written for Accenture University Student Business Competition.
Albayrak, Adam and Andreas Gadatsch. 2009. Managing Mergers and Acquisitions or Post-Merger Cookbook for CIOs and IT Management. Working paper for Proceedings of the European Conference on Information Management & Evaluation pp 1-9
Alter, Steven. 1992. Information System: A Management Perspective. Addison-Wesley Publishing Company, Inc.
Dailey, Jill S and Donna L. Peters. 2009. The Growth Machine. Accenture publication
Ficery, Kristin et al. 2008. Merger & Acquisitions in a Downturn: Buying Low Can be a Major Driver of High Performance. Accenture Publication
Gordon, Noel and Edwin Van der Ouderaa. 2009. Accenture Banking 2012 Research Findings: Time for Bold Moves. Accenture publication
Harvard Business Review on Mergers and Acquisitions. 2001. Harvard Business School Press.
Stacey, Nicholas. 1970. Merger in Modern Business. London: Hutchinson & Co Ltd.
Turban, Efraim and Linda Volonino. 2010. Information Technology for Management. John Wiley & Sons (Asia) Pte Ltd.
Yoo, Youngjin., Kalle Lyytinen, and Dongcheol Heo. 2007. Closing the Gap: Towards a Process Model of Post-Merger Knowledge Sharing. Info System Journal pp 321-347