Dec 05 2016

Steps for Ensuring a Smooth Financial Merger

Devising a solid IT plan and working with the right partners can make transitions easier for financial firms.

Whether they’re consolidating or expanding, banks, insurance firms and financial services organizations share common challenges in meeting their merger and acquisition commitments. After providing input during due diligence and plotting the systems roadmap, CIOs should prepare key IT staff to start integration work as soon as a deal closes.

The complexity of the work IT teams face depends on several factors. These include: the type of merger, acquisition or divestiture; the IT personnel retained as part of the agreement, their domain skill sets and experience working on M&A projects; and the scope of work involved.

If a bank is acquiring another firm to move into a new line of business, and the target’s systems are in good shape, IT staff may need only to connect local area networks and wide area networks, email and other communications systems at the domain level.

If a transaction calls for merging two larger banks to expand operations for customer growth — and the combined portfolio includes a large number of disparate systems — the IT teams tasked with integration need sophisticated skills and experience. Their work plans will be based on who owns which assets, whose IT services model best delivers on current needs, and the systems required for the new business to function. Organizations focused on transformation will move to centralize operations on a unified infrastructure, but first, IT teams will re-engineer business processes; integrate or migrate core systems, applications, and data; and eliminate redundancies.

Large acquisitive firms with M&A experience and dedicated integration teams can likely handle these complex tasks in-house, but first-timers and smaller firms usually rely on outside help for some facet of their work. With their IT staff already taxed by day-to-day responsibilities, more CIOs bring in trusted service providers with financial-sector expertise to help them navigate specific project phases or take over the entire transaction process, from developing a project roadmap to integrating all infrastructure components.

Delivering Financial Services Expertise

CIOs may need to make a case for bringing project expertise on board, but with the high percentage of documented failures, they have plenty of evidence to support their request. Many organizations decide they would prefer to turn to a partner to finish IT project phases and realize value from their new assets as quickly as possible.

As they determine whether to bring on a partner, firms should consider their transaction services agreement: If the agreement costs $150,000 per month, and bringing in help accelerates the time frame by four months, a firm not only frees up that $600,000, but its CIO benefits from expert guidance.

Some firms engage with providers to contract for IT services that cover the M&A lifecycle, while others opt for services that focus on IT infrastructure integration and optimization. Depending on their core IT competencies, firms sometimes opt to sign a comprehensive managed services contract to ensure that they not only have a roadmap and services for the M&A, but to manage the data center infrastructure, banking systems, applications and licensing.

CDW’s financial services portfolio, for instance, includes end-to-end offerings designed to help firms see value from their M&A activity. The portfolio integrates CDW’s expertise across multiple solution domains — including networking, computing, storage and applications — with upfront assessment and planning.

M&A System Checklist

A managed services provider such as CDW takes a holistic view of the two IT environments involved in the transaction. This approach can save major time and effort down the road. Once an M&A deal is signed, CDW can work with IT decision-makers to help them assess the scope of the project, break it into various phases and build a comprehensive roadmap that ensures project completion in a timely fashion.

The roadmap plots what needs to happen on Day 1 and all activities through the six-, 12- and 18-month mark, for example. It includes a task-by-task analysis, identifying everything that goes into each activity, the time frame and whether internal IT staff or the consulting team will handle it.

Common challenges and related tasks that IT teams face during M&A transactions include:

IT asset discovery Site surveys Active Directory integration Network integration Application migration Data center build-out

Dive Deeper

Want to learn more about these challenges? Download the free white paper, "How Financial Institutions Can Ease IT Transitions," to get the details. You'll also score access to BizTech's entire library of free, downloadable white papers by signing up just once.