Geeman Yip, Founder & CEO The banking industry has suffered notable negative economic consequences, despite showing agility and resilience in response to the pandemic. In addition to the financial impacts, COVID-19 is altering the global banking industry on several fronts, including a new competitive landscape, limited growth in some established product areas, and digitization in nearly every sector of banking and capital markets.
In this challenging environment, “excess capital and liquidity and a shift in the mortgage industry could increase M&A activity over the next 12 months,” according to
PwC's US Banking & Capital Markets Deals Leader, Scott Carmelitano. Of the 200 global banking executives surveyed by Deloitte for their
2021 Banking and Capital Markets Outlook, 57 percent of respondents from smaller banks (annual revenues between US$1 billion and US$5 billion) said their institutions could pursue M&A opportunities this year. At the same time, more than one-third of respondents to the
Bank Director 2021 Bank M&A Survey say “their institution is likely to purchase a bank by the end of 2021.”
Consolidating IT infrastructure is a vital step in the M&A process, as the acquiring company can realize immediate gains through decreased IT overhead and expenses. Unfortunately, it’s common for companies to take longer to realize the ROI on mergers and acquisitions due to failed or extended integration of operations and technologies. According to
PwC’s 2020 M&A Integration Survey,“ only 34 percent of financial institutions assign full-time resources to post-deal tech integration [while] nearly twice as many firms assign full-time resources to financial integration.”
Banking clients’ have an ever-growing need for seamless and secure transactions, so it’s critical that leaders develop a plan for successful IT integration, especially since technology is now mission-critical to business operations. Properly analyzing, combining, or consolidating systems, can eliminate redundancies, centralize security practices, prevent data loss, and save money.
Companies that succeed in maximizing their combined potential during an M&A take a systematic, disciplined, and rigorous approach to merging their operations and IT infrastructure. Technology is a key asset and value driver in payments company mergers and acquisitions—in some cases, technology acquisition is what prompted the deal in the first place. This means involving IT and operations executives early in the due-diligence process and securing their input on how efficiencies might be realized.
To maximize value and streamline IT, executives should do three things:
First, they must prioritize planning to ensure a smooth, well-considered migration. This includes strategic decisions about the systems to keep and those to consolidate, from supply chains, ERP, payroll systems, cloud solutions, and more. When well planned,
cloud migrations save on average around 15% of IT spending.
As executives consider the integration of data and critical communications such as email and calendars, they should also keep in mind that there are reliable tools, such as MigrationWiz, that can streamline the migration process during an M&A, making it safe, secure, fast, and easy.
As recently suggested on this site, “Big data technology can help banks make informed decisions, enhance improvement, and focus on their resources better.” The fact that many IT shops don’t have the capacity or expertise to address the complexities of a migration is one issue; however, the consequences of data loss during a poorly executed IT merger and migration could be catastrophic.
Second, the acquiring company can use the opportunity to do some IT housekeeping. Not all data should be migrated or kept, and organizations should use this time to determine what should be migrated and what can be archived. Very little electronic data is purged today due to the storage space available across systems. Old data can be irrelevant and keeping it around can make it harder to locate the right files, or worse, create a liability during a legal discovery process. If you don’t already have them, create retention policies for different types of data.
Finally, once the merger is complete, IT teams need to govern and monitor the new combined infrastructure. Third-party tools and IT automation solutions, like BitTitan’s Voleer, can automate usage assessments and cost analysis, and help identify where training might be needed, or software and cloud storage spending could be pared back.
Since companies in the banking industry, rely on IT infrastructure for nearly every aspect of their operations, the role of technology in mergers is more crucial than ever. Companies that devote the time and resources upfront to consider the impact of IT on mergers and acquisitions will be more likely to succeed over those who don’t.
